Rivian Stock – Rivian Unveils Profitability Plan Following $5 Billion VW Partnership

Rivian Stock – Rivian Unveils Profitability Plan Following $5 Billion VW Partnership

Electric vehicle manufacturer Rivian has unveiled its strategy to achieve profitability within three years, bolstered by a critical $5 billion (£3bn) joint-venture deal with Volkswagen that provided much-needed financial support.

During its inaugural investor day, Rivian revealed that design modifications, decreasing lithium prices, and renegotiated supplier contracts would enable it to reduce its bill of materials by approximately 20% in the fourth quarter of 2024 compared to the first quarter.

This reduction is expected to bring the company to a profitable gross-margin level, addressing the current negative margin situation that exacerbates Rivian’s losses with each electric vehicle sold.

The upcoming R2 line of pickup trucks and SUVs, slated for a 2026 release, is projected to further slash material costs by 45% compared to the second-generation R1 models recently introduced.

‘Sense of Urgency’

The R2 line is designed to be more affordable, with a price point of $45,000, positioning it as a direct competitor to Tesla’s Model Y crossover SUV.

As Rivian ramps up production of the R2 vehicles, it anticipates becoming profitable on an adjusted earnings before interest, taxes, depreciation, and amortization basis by 2027.

Rivian CEO RJ Scaringe emphasized the urgency driving these efforts, stating, “Everything that you’re hearing from us, around our product, around how we’re running the business, around how we’re driving toward profitability, my hope is that you’re seeing really an extreme sense of urgency. We’re moving very, very quickly towards the necessary improvements to achieve positive free cash flow and, before that, positive margins this year.”

The company has set long-term financial targets of approximately 25% gross margin, 10% free cash flow, and an adjusted profit margin in the “high teens,” though it did not specify a timeline for these goals.

VW Deal

Despite the outlined plans, Rivian stock did not see a significant boost beyond the 25% increase following the announcement of its partnership with VW earlier in the week.

Rivian’s shares have declined about 36% this year, currently trading around $13, significantly lower than the IPO price of $78 per share, amidst challenges like a slowdown in EV sales and competition from Chinese EV manufacturers.

The VW deal grants the German automaker access to Rivian’s software and other EV technologies, and the two companies will form a joint venture to develop next-generation EV products.

Scaringe clarified that the venture would exclude battery technologies, vehicle propulsion platforms, high-voltage systems, or autonomy and electrical hardware.