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Rivian Trims Workforce, Misses Production Targets Amid EV Market Headwinds
Ticker Tea
February 22, 2024
📝 SUMMARY: Rivian Automotive Inc. ($RIVN), in a move indicative of the challenges facing the electric vehicle (EV) industry, disclosed plans to cut 10% of its salaried staff due to stagnant demand and economic headwinds. The company's production outlook for the year remains flat compared to 2023, with an anticipated output of 57,000 vehicles, a figure that falls significantly short of Wall Street analysts' expectations, who had forecasted production to exceed 80,000 units in 2024. This announcement led to a sharp 16% decline in Rivian's share price, exacerbating a 34% drop already witnessed this year.
CEO RJ Scaringe cited the adverse impact of high interest rates on consumer demand, highlighting the broader economic and geopolitical uncertainties affecting the business. Rivian, which aims to compete with EV leader Tesla Inc., has encountered numerous hurdles since its high-profile IPO in 2021, including supply chain disruptions and scaling production challenges. The company's financial outlook reflects these struggles, with an expected adjusted EBITDA loss of $2.7 billion for the year, despite efforts to enhance production efficiency and reduce capital expenditures, which are projected to rise to more than $1.7 billion.
The layoffs mark another phase in Rivian's cost-cutting measures, following previous job reductions in 2022 and last year. Despite these challenges, Rivian continues to invest in its future, with plans for a new factory near Atlanta aimed at producing a mass-market, lower-priced EV by 2026. The company's financial results for the fourth quarter showed a narrow beat on revenue expectations but a substantial per-vehicle loss, attributed in part to the delivery of fewer lower-cost vans to Amazon.com ($AMZN).
In comparison, Lucid Group Inc. ($LCID), another EV market entrant, expects a modest increase in its vehicle production for the year but also experienced a postmarket stock decline. Rivian's situation underscores the tightrope new EV makers must walk between expanding their production capabilities and managing the financial intricacies of operating in a nascent, highly competitive market.
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