Rivian Falls Apart
Rivian, the electric vehicle (EV) maker, has said its best years are ahead of it. Yet, it announced a new set of layoffs, which means management worries that this outlook is not true. As its slow production mostly keeps its vehicles out of the market, it has to contend with price decreases by Ford and Tesla that may signal the start of an industrywide price war.
Rivian announced it would throw 6% of its 14,000 workers under the bus. The chief executive officer did not resign because of the company’s problems. Bumbling R.J. Scaringe wrote in a letter, reported on by The Wall Street Journal, that the company had to concentrate on production and profitability. Like many tech executives, he had overbuilt the company. (Click here for the least reliable cars in America.)
Rivian has said one of its strengths is its cash position. That begs the question of why it has to cut costs. In the most recent quarter, Rivian posted a $1.7 billion loss on revenue of $536 million. For the first nine months of the year, it lost $5 billion on revenue of $995 million. Perhaps its $13.3 billion in cash is not enough to survive to the point where it is profitable.
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Rivian has two distinct disadvantages. The first is that it is a tiny producer. It has tried to dodge that by saying it has about 100,000 backorders. That is misleading, given that these could be canceled at any time. Amazon has ordered 100,000 Rivian vehicles. That could go away as well.
Rivian is in an industry racked by production competition and price cuts. No global company has a chance to catch Tesla soon. It will sell as many as 2 million cars this year, and it already has cut prices to do so. Ford has answered with a price cut of its own, which will ripple across the EV market. Rivian may need to come to market with vehicles that carry lower prices as well.
Rivian’s future was always difficult. The latest news shows it is even worse than that.
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