Earlier this year, Irvine, Calif.-based electric vehicle manufacturer Rivian (RIVN) introduced a major update to its range of "adventure" vehicles — the R1S SUV and the R1T pickup truck.
Apart from major changes to the vehicle's electronics, new software developed with the help of Epic Games's Unreal Engine and redesigned batteries for better range, the brand's 'new' R1 series boasted a feature that positions Rivian at an advantage over its EV rivals.
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Beginning last year, Rivian made a valiant effort to rein in costs by producing its own electric drive units. These new units, called the "Enduro," package important components like the gearbox, power inverter, and electric motor into a single unit and helps the company drive down the cost of making each car.
In these new cars, Rivian adapted the Enduro units to be used not just in dual-motor variants of the R1S and R1T, but also triple and quad-motor setups in its high-performance models. But as it reduced its dependence on an outside supplier to solve one problem, another problem arose with it and its negative consequences are seeping into its books.
A speed bump toward Rivian's supplier and financial independence.
On Nov. 7 after the bell, Rivian reported Q3 2024 earnings numbers that missed expectations from Street analysts, as it reported net losses of $1.1 billion and lower Q3 revenue of $874 million, a 35% drop from the $1.3 billion it reported in the same period last year.
While the startup reported slower sales, it placed much of the blame on a key component shortage that has slowed production of its recently overhauled flagship R1S and R1T vehicles, as well as the Rivian Commercial Vans used by Amazon Prime delivery drivers; namely, a vital component that is used in its in-house Enduro motor.
The company pinpointed that the issue is due to a miscommunication with a key supplier: Essex Furukawa, which makes the copper windings inside the motors.
Though the problem with Furukawa began during the quarter, the problem has become so serious that it lowered its annual production guidance from 57,000 vehicles to 47,000 to 49,000.
Given that Rivian's new Enduro motor was designed to build more cars in a cheaper way, Rivian founder and CEO RJ Scaringe said during the earnings call that the issue has limited its ability to produce cars.
“This has been a tough quarter for us because of some of those supply chain or supply ramp challenges, and one of those suppliers in particular has limited our production quite substantially,” Scaringe said.
“And we’re working very, very hard to address that. This is one of our highest priorities in terms of the business, and we’re seeing this is really a short-term issue, but it certainly introduced challenges.”
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Supply issues are lessons learned, says Scaringe
But as the company faces headwinds as a result of the EV component shortage fiasco it faces, Rivian CEO RJ Scaringe says that the challenge is an important lesson that it will take with them when it comes to its next model: the mass-market oriented R2.
Introduced as part of a trio of brand new, compact EVs that include the hatchback-styled R3 and R3x, the R2 is a mid-size electric SUV that looks like a "mini version" of its larger sibling, the R1S.
The R2 and its subsequent models are seen as paramount to Rivian's future success, as it targets a before-incentives base price of around $45,000; around the same price as Tesla's bestselling Model Y once it comes to market around 2026.
"The R2 program is advancing. From a timing point of view, it's on track," he said.
"The product itself is really exciting. It's delivering a level of performance and capability in a package that really looks and feels like Rivian, but it's doing it at a substantial reduction in terms of its overall cost."
Related: Rivian's trio of sleek, compact EVs is its new edge against Tesla
Moreover, in a separate announcement from the earnings, Rivian announced that it secured the partnership of LG Energy Solution Arizona, LG Energy Solution's Arizona-based subsidiary.
As per their statement, LG is slated to provide Rivian with its "next-generation" 4695 cylindrical batteries, which it claims to provide EVs like Rivian's with six times the capacity of its existing 2170 cylindrical cells.
“Due to the dynamic nature of the current EV market, an increasing number of global automakers are demonstrating a strong preference for a diverse range of battery form factors,” LG Energy Solution CEO David Kim said in a statement. “This large-scale order from Rivian for 4695 batteries marks a key milestone for LG Energy Solution in expanding its client base within the cylindrical battery segment.”
As for Rivian, its CEO is banking on sales of its more up-market tri-motor R1S and R1T models to provide some capital and supply chain relief. The new generation tri-motor EVs are slated to have better performance than the quad-motor vehicles it previously made, but are cheaper for Rivian to make.
"We also expect to see an increase in the R1 average selling price, as we improve our sales mix with more meaningful Tri-Motor sales in Q4," Scaringe said.
Rivian Automotive trades on the NASDAQ as RIVN. At the time of writing, Rivian stock was up 2.44%, trading at $10.30 per share.
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