A conventional EV startup playbook won’t cut it anymore.
This was a bad week for Rivian. The Irvine, Calif.-based EV manufacturer said on Wednesday that it expects to produce about the same number of vehicles this year as it did in 2023, about 57,000, rattling analysts’ expectations. It also announced a 10% reduction of its salaried workforce. Downgrades ensued. In the following days, the stock price cratered, falling to almost $10 on Friday on very high volume from about $16 a week earlier. And it continues to lose gobs of money per vehicle. “The company lost $43,373 for every unit it delivered to customers in the fourth quarter, worse than the $30,648-per-vehicle it lost in the third quarter,” according to a report in the Wall Street Journal.
Old EV master plan won’t work today: copying the old Tesla playbook is not a viable plan today. The plan seems to be: sell the pricey R1T pickup and R1S SUV (think: Model S price) for five years then hit pay dirt with a future high-volume, lower-cost vehicle, namely the future R2 (think: Model 3). The problem is, Rivian pricing currently starts at about $70,000 for the R1T and $75,000 for the R1S in an extremely price sensitive market. And the R2 isn’t expected until 2026.
I asked Ivan Drury, Edmunds’ director of insights, late last year about Rivian’s strategy. “While it may seem like manufacturing vehicles for the upper echelon of consumers can drive brand visibility and offer more production-budget flexibility, perhaps this approach would have been better suited for the early EV adoption phase,” Drury said.
And market conditions are not going to get better for Rivian. EV prices are collapsing in real time. Tesla cut Model Y lease prices in late January to $379 a month, Alex Bernstein, Senior Manager, Content & Website Ops at CarsDirect.com, told me in an email. “The SUV already seemed like a great deal with inventory discounts of up to $8,000 that made it cheaper than the new Model 3,” he said. And, last week, Ford matched that with up to an $8,500 incentive in some regions and with lower MSRPs, Bernstein said. “The market for EVs has made a sharp turn towards affordability. While there is a limited market for $80K+ EVs — and vehicles in general — there are millions more hand-raisers at the $40K price point,” Edmunds’ Drury said.
Finally, it should be noted that a lot of people are rooting for Rivian to survive — and thrive. The Rivian R1T and R1S are amazing cars. I test drove each for a week. They’re brimming with technology, well built, rugged, and easy on the eye. It’s equally amazing that the company can produce such great vehicles at volume after only a couple of years (the first R1T was shipped in October 2021). But sooner or later you’re going to deplete that pool of elite buyers who can drop $80K on a car. Or at least hit a wall on large numbers of those buyers. “Staying at the upper boundaries of what most consumers can pay caps the potential for seeing these units on the road at high volumes,” Drury said. Let’s hope Rivian survives and is still around to make the R2.
