Tesla rival Rivian faced a defining moment this week when it unveiled its latest model, the R2 SUV. Judging by the surge in stocks, things have been going well.
Since Thursday’s event, the Amazon-backed electric vehicle maker’s market value has risen by more than $1.7 billion. Whether it will sink again due to investor reconsideration remains to be seen, but the initial reaction meant a much-needed boost for the beleaguered electric vehicle maker.
Last month, Rivian announced a disappointing quarter and outlook and said it would cut its salaried workforce by about 10%. Its market capitalization has plummeted from a peak of $153 billion in 2021 to $12.5 billion today.
Gene Munster, managing partner at Deepwater Asset Management, recently mused about the possibility of Apple buying Rivian, noting the tech giant’s low valuation and need to do “something big” after killing its own electric vehicle project.
Tesla CEO Elon Musk said last month that Rivian’s product design was “not bad,” but added, “the really hard part about running a car company is achieving volume production with a positive cash flow”. He suggested his rival would go bankrupt in six quarters without drastic change, saying it was necessary to “massively cut costs.”
On Thursday, Rivian showed that it is willing to do just that, announcing, to the surprise of many, that it is delaying plans to build a $5 billion factory in Georgia. Instead, it will produce the new lei models at its existing plant in Illinois, saving it more than $2.25 billion in capital expenditures.
Deutsche Bank analyst Emmanuel Rosner told Reuters he sees the move “relieving considerable pressure to raise capital in the near term” as it appears Rivian will have enough cash on hand to push ahead with production of the R2.
Rivian also surprised investors with other news, unexpectedly revealing another model, the smaller and cheaper R3 compact SUV, which will be produced after the R2. It also showed off a sturdier and more robust R3X.
“You didn’t expect that ‘other thing’ here,” joked CEO Robert “RJ” Scaringe, referring to the late Apple co-founder Steve Jobs’ tendency to make last-minute product announcements after his keynotes.
In an X post on Friday, Scaringe wrote that in less than 24 hours the company received more than 68,000 reservations for the R2, which will start at $45,000. He added that the company has been “overwhelmed” by the response to the new vehicles.
But the fact remains that Rivian has never turned a profit, continues to lose money on every vehicle it produces, and EV sales in general are growing at a slower pace than the industry expected.
After a long stretch of difficult months, Rivian had a good Thursday and Friday. Whether this will prove to be an inconvenience or a game-changer remains to be seen.