Rivian Eyes Profit In Q4 With Upgraded EVs And Billions In Cash
Rivian R1S CM
We also discuss Toyota’s self-driving plans in China and why some experts think $25,000 is a tough target for the electric Jeep Renegade.
Volkswagen's recent announcement of a $5 billion investment in Rivian was a vote of confidence for the California-based electric vehicle startup. But it will be some years before we see the fruits of that partnership for either automaker. In the meantime, Rivian has to get to a point where it doesn't incur substantial losses on each vehicle sold. But that may happen sooner than you think.
This kicks off the Friday edition of Critical Materials, your daily digest of key news and events shaping up the world of EVs, autonomous-driving technology and software-defined cars.
Also in today’s newsletter: Toyota and its joint venture partner in China will introduce their first EV equipped with self-driving technology and why some car experts think the $25,000 price tag for the next Jeep Renegade is a tough target.
30%: Why Rivian Thinks It Will Be Profitable By Q4 2024
2025 Rivian R1S towing
Early Rivian R1T and R1S models were plagued with issues. To name a few, owners reported malfunctioning navigation systems, inconsistent DC fast charging speeds and poor service experience.
But with the launch of the second-generation R1 models, the brand made big improvements under the skin. Now as it emerges as one of the leaders in things like zonal architecture and highly advanced electrical systems, it expects huge cost savings and at last, has profitability in sight. Specifically, gross profit per vehicle by Q4 of this year.
Here’s what Reuters said this morning:
[CEO RJ Scaringe] also said the material cost for its less expensive and smaller R2 vehicles will be 45% lower than its flagship R1 vehicles.
"Incredible focus and discipline around electronics in the vehicle will represent one of the biggest cost savings in R2 relative to R1," Scaringe said at the company's first investor day since going public in November 2021.
Rivian shut down its plant at Normal, Illinois for three weeks in April to make the changes, including simplifying processes and removing equipment at the facility, as well as eliminating over 500 parts from the vehicles in an effort to make them cheaper to build.
A similar exercise last year helped Rivian cut 35% in material costs from its electric vans, Scaringe told Reuters last week.
I’m more bullish on Rivian than any other EV start-up. The brand is taking logical steps to address the flaws in its cars. That includes heavily upgraded second-gen R1 models, and proactive measures at its factory in Illinois, such as simplifying the production line.
As a result, we’re already seeing positive outcomes. Its per-vehicle losses have declined from over $60,000 in the first quarter of 2023 to under $40,000 in Q1 2024. At the end of March, Rivian was sitting on $6 billion worth of cash. Now it has the backing of one of the world’s largest car companies. Things are looking up.
Of course, there are doubts regarding its future models. We don’t know yet if the R2 and R3 would ever become a reality. Fisker also showcased cool concepts last year. Ten months later, it filed for bankruptcy. But Rivian seems in a far stronger position in pretty much every single way. Unless anything terrible happens, the start-up should be able to power through this decade.
60%: Toyota Enters The Autonomy Race With GAC's Help
Toyota bZ3x China
Toyota's self-driving tech would also be available on the bZ3X in China, a model it showcased at the Beijing Auto Show this year.
Thanks to Google's Waymo and other companies, the U.S. might seem like the leader in self-driving cars. But China doesn’t seem to be far off. In fact, after spearheading the global electric vehicle transition, it has somewhat emerged as a breeding ground for autonomous vehicle (AV) testing. BYD, SAIC, Geely and many others are already developing their AV programs. Now Toyota doesn’t want to be left out.
The Japanese automaker, along with its state-owned joint venture partner Guangzhou Automobile Group (GAC), is planning to launch an electric SUV next year equipped with advanced automated driving features.
GAC Toyota posted a photo of the China-only bZ3x SUV on the Chinese social network platform Weibo this week. It said that it had joined hands with autonomous driving start-up Momenta Global “to launch end-to-end full-scenario intelligent driving.” This involves driving “on roads, avoiding obstacles, and parking in parking spaces,” the JV said.
Reuters has some insight on the same:
GAC Toyota said it would launch the Bozhi 3X SUV next year as the first model to be equipped with the system that would enable advanced driving assistance for parking and navigation on highways and urban traffic. This would ensure its leadership in autonomous driving technology offerings among all foreign brands in China, it said.
It also works with Huawei to use the latter's in-vehicle operating software starting with an electric sedan to be launched in 2025 for China.
At least one Chinese local media outlet has reported that this system won’t be restricted to China. Some of Toyota’s global models will also be equipped with similar tech. My guess is that's a ways off from coming to the U.S. market, but we'll see.
90%: $25,000 Target For Jeep Renegade EV Is Difficult
Jeep Renegade 4xe
As far as developing affordable EVs is concerned, automakers seem to be in panic mode. Consumers have made it loud and clear that there’s little appetite for expensive EVs. Stellantis’ solution to this is a $25,000 Jeep Renegade, powered by batteries and electric motors. But some industry experts think that’s a tough target to achieve.
Here’s more from Automotive News:
AutoForecast Solutions doesn't expect the Renegade EV to be produced in North America and believes that price point will be difficult to achieve.
"The way it's laid out right now, it's either going to come from Poland, which is most likely, or Brazil," said Sam Fiorani, vice president of global vehicle forecasting for the company. "In either case, it would not get IRA incentives on it, which makes it a wholly $25,000 vehicle, and that seems very difficult."
Fiorani said Stellantis will have to cut corners in areas such as the interior to get under $25,000 without a tax credit. The previous Renegade, which was discontinued for the U.S. after the 2023 model year, "should be the floor" for interior quality. If the cabin quality is less "than a Renegade or a Compass, then Jeep's going to have problems with perception on their brand."
I don’t entirely agree with that. The electric Renegade isn’t coming until 2027. We’ve seen how fast lithium prices are dropping and by that time, we’re also expecting a bunch of other EVs in the $25,000 price bracket, including Ford’s “skunkworks” EV and Tesla’s next-gen affordable model among others.
Even if it ends up missing that target by a bit, a sub-$30,000 cool-looking zero emissions off-roader that doesn’t intimidate you isn’t anything to balk at. That’s if the range and charging speeds don’t disappoint.
100%: How Does Rivian Cross The 'Valley Of Death'?
Rivian R3X
My eyes sparkled with excitement when Rivian showcased the R2, R3 and R3X early this year. I'm sure some of you also felt the same. But it's still got a tough road ahead, as any EV startup does.
What do you see as Rivian's path to victory? Is it doing the right things so far, or does it need to do more to ensure survival and profitability?
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