Rivian plans to increase production volumes despite negative gross profits

0

Rivian’s first quarter results are out and it shows a negative gross profit of $502 million. As the manufacturer manufactured 2,553 vehicles, approximately 1,227 units were delivered. It says it expects to improve its production volumes, but the negative gross margin is expected to continue, which is related to labor and overhead.

Image credits – Businessblog

“Furthermore, we saw a drop in costs [sic] or adjustment to net realizable value (“LCNRV”) to reflect the amount we expect to receive upon sale of the vehicle (after taking into account future costs necessary to prepare inventory for sale) and losses on firm purchase commitments. These expenses negatively impacted first quarter 2022 gross profit by $188 million,” Rivian noted in its first quarter 2022 letter to shareholders.

The electric vehicle maker has also faced supply chain issues. It has experienced an increase in logistics costs, leading to limiting factors in production. Despite the constraints, the automaker reaffirmed that its 2022 annual production target would be 25,000 vehicles. He estimates that production can increase twice from current expectations if supply chain issues were to be resolved. Through May 9, 2022, Rivian is known to have produced approximately 5,000 vehicles since production began last year. According to its planned total annual capacity, the two facilities – Normal and Georgia should be able to produce 600,000 units.

Vehicle prices and pre-orders

According to the report, as of May 9, 2022, there are over 90,000 R1 pre-orders in the United States and Canada. This growth happened without any marketing or paid media. Orders continued despite the increase produced in the United States and Canada. Currently, the average price of the R1 vehicle is $93,000.

As stated in the report, “This change ensures that when a release is configured, the customer chooses among the latest features, packages and prices. This new reservation system allows us to better manage a large demand backlog with uncertainties related to inflation, planned content changes and enhancements to ensure customers have the latest product offerings,”

Rivian has updated its reservation system due to supply constraints and rising raw material prices and other production costs. The new pre-order process will separate the booking and setup stages. New customers can reserve their vehicle but can only browse configuration options. Pre-order holders can save specific builds when their build slot date is closer. Despite its slow start and all this price hike disaster, Rivian remains optimistic that it will meet its revised production targets by the end of the year. “These numbers are in line with the company’s expectations, and it believes it is well positioned to meet the 25,000 annual production guidance provided in its fourth quarter earnings call on March 10, 2022.”

Share.

Comments are closed.