Rivian does not seem to be in trouble — not quite yet, at least. But the earnings made clear what electric-vehicle observers have known for a long time: Either the company will emerge from this year poised to be a winner in the EV transition, or it will find itself up against the wall.
That’s partially because Rivian has a stomach-turning number of corporate milestones coming up. Over the next 11 months, it plans to unveil an entirely new line of vehicles, shut down its factory for several weeks for cost-saving upgrades, break ground on a new $5 billion facility in Georgia, and — most importantly — turn a profit for the first time. It also expects to manufacture and deliver roughly another 60,000 vehicles to customers.
Any one of these goals would be difficult to achieve in any environment. But Rivian is going to have to execute all of them during a time defined by “economic and geopolitical uncertainties” and especially high interest rates, its CEO R.J. Scaringe told investors on Wednesday. Since 2021, Rivian’s once robust stockpile of cash has been cut in half to about $7 billion; at its current burn rate, the company will run out of money in a little more than two years.
Although Rivian’s situation is dire, it’s not experiencing anything out of the ordinary. As I’ve written before, the electric truck maker is crossing what commentators sometimes call “the EV valley of death.” This is the challenging point in a company’s life cycle where it has developed a product and scaled it up to production — thereby raising its operating expenses to eye-watering levels — but where its revenue has not yet increased too.
During this vulnerable period, a company essentially burns through its cash on hand in the hope that more customers and serious revenue will soon show up. If those customers don’t arrive, then it either needs to raise more cash … or it runs out of money and goes bankrupt.
It’s a frightening time, but once a company crosses the valley of death, it can reach an idyll. Not so long ago, Tesla found itself in something like Rivian’s position as it prepared to launch the Model 3. Seven years later, it is the most valuable automaker in the world.
Rivan impressed in late 2021 when it brought the first electric pickup to market. Now the upstart is impressing even more. The 2023 Rivian R1T just earned the highest ranking the J.D. Power Electric Vehicle Experience study has ever bestowed.
The study ranks EVs, getting its insights directly from people who have purchased them. Ranking criteria include 10 factors such as driving enjoyment, battery range (actual and accuracy of stated), cost of ownership, reliability, and ease of charging.
Even OEM-specific apps are part of the study. J.D. Power said, “these key behaviors and insights into current EV ownership will help OEMs assess where they rank, who is doing it best, and why.”
In its first year, the Rivian R1T pickup earned a satisfaction score of 794 out of 1,000. That outranked the Mini Cooper SE in second place with 782. (The compact EV did register the highest score in the Mass Market EV segment.)
Second place in the Premium EV segment was the Tesla Model 3, with a score of 759. Second in the Mass Market category was the Kia EV6 with 762. The Ford F-150 Lightning, the other electric truck, was in the Mass Market category and got a score of 723 — which ranked below the segment average.
Geez, I remember a lot of this from tech startups that I was in or adjacent to. My husband called this stage “lighting the solid fuel rocket” which includes a commitment to burn through a lot of investment money or “shoot the moon”. You can’t play with cost-cutting or feature-cutting or anything else because you have to have a complete and working product on the market at the end of it all: not vaporware, not press releases because the primary investors aren’t going to be fooled (unless you’re running a scam like Ramaswamy did).