Rivian (RIVN) – Get Free Report can not catch a break.
The electric vehicle manufacturer is letting go of 6% of its workforce to cut back on costs as the company failed to meet production goals.
Preserving cash has become a priority for the EV company who has faced a year of tough losses including the shrinking of its market cap.
CEO RJ Scaringe said Rivian’s focus on efficiency needs to be a “core objective,” according to an email that employees received and was viewed by CNBC.
Rivian is prioritizing an increase in the manufacture of its R1 trucks along with the EDV delivery vans that it produces for Internet giant Amazon (AMZN) – Get Free Report.
Manufacturing jobs at Rivian’s sole factory in Illinois would not be impacted, Scaringe said.
Rivian will report its earnings on Feb. 28.
“We must focus our resources on ramp and our path to profitability,” he said in the email that was first reported by Reuters.
Rivian has not cut prices on its vehicles despite Tesla (TSLA) – Get Free Report and Ford (F) – Get Free Report slashing their prices in an effort to attract consumers as interest rates for car loans remain high.
Ford said it would cut Mustang Mach-E prices across the board with an 8.4% reduction pegged for the extended-range GT version, which is a decrease of $5,900 to $63,995. Extended range battery costs will decline by 18.6% to $7,000.
Tesla lowered prices by 7%-20%.
Outlook Is Troublesome
Rivian’s future appears to be challenging.
Jim Chen, Rivian’s chief lobbyist who worked on state laws to get lawmakers to adopt direct-to-consumer sales by car manufacturers, is leaving the electric vehicle startup, the latest in a string of departures, according to the Wall Street Journal.
Several other senior level executives have also resigned in the past few months, including Rivian’s head of supply chain and general counsel.
Similar to other startups, Rivian is cutting back on costs as it attempts to ramp up production and sales of its trucks and burn through less cash.
Chen started at Rivian in 2018 and focused on selling Rivian’s trucks directly to consumers instead of at dealerships, a hurdle that is common for companies only manufacturing EVs such as Tesla.
He is expected to work through the end of February and is leaving by mutual agreement, a Rivian spokeperson told the WSJ.
Chen had a similar regulatory and policy role at Tesla starting in 2010. He left in 2016 after serving as its vice president of regulatory affairs and deputy general counsel.
Besides Chen, Rivian’s head of manufacturing and chief operating officer also left within the past year.
Rivian’s Financial Problems
Rivian has faced an uphill battle since it started producing trucks in 2021 and went public with a lofty valuation of $86 billion during the first day of trading.
Since the company went public, investors have been less enthusiastic and shares fell by 76%.
Last year was a tough year for the truck company. Rivian nearly missed its production target in 2022 and its shares fell by a whopping 71.6% in the past year.
Cash flow has also shrunk to $13.8 billion at the end of September.
Rivian also laid off 6% of its 14,000 employees last July in an effort to preserve cash.
Scaringe said the company delayed the launch of its cheaper R2 trucks and SUVs until 2026 so that its future plant in Georgia would have sufficient time for production.
Unlike Tesla, which slashed prices to enable its customers to take advantage of the latest tax credit of $7,500 offered by the Biden administration under the Inflation Reduction Act, Rivian’s trucks are more costly and do not qualify.
Both Rivian’s R1T pickup and R1S SUV sell for below the $80,000 limit, but once other features and options are added, the total cost does not meet the threshold, the company said.
Rivian had predicted that it could ramp up production of its vehicles in 2022, but the company was beset by major disruptions related to the supply chain, which led it to halve its initial production target of 50,000 vehicles mid-year.
While Rivian lowered its goal to only produce 25,000 vehicles over the whole year, even this lower bar could not be reached. The group only produced 24,337 vehicles.
The fourth quarter was a turning point as Rivian manufactured 10,020 vehicles at its only plant in Normal, Ill., and delivered 20,332 vehicles for the whole of 2022, including 8,054 in the fourth quarter.
In an email to employees, Scaringe said Rivian could have improved its production figures if supply chain issues had not forced the company to shut down the plant for 20 days and disrupted another 50 days of production.
Bad weather also forced Rivian to shut down the plant for five more days, Scaringe said.