Rivian Diverges from Other EV Makers with Strong Q3 2023 Results

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EV Headwinds & Rivian Resilience

The Electric Vehicle (EV) market continues to face a challenging environment due to a series of factors. Elevated inflation pinches consumers and boosts prices of the already more expensive electric cars. Monetary tightening by major central banks has brought interest rates to multi-decade highs, which raises the funding costs for purchasing new cars. Furthermore, economic uncertainty - with large parts of the world at economic slowdown - put off prospective buyers. Adding to the unfavorable mix, is range anxiety, which remains a concern.

This landscape has dented demand for EVs and the king of the market, Tesla Motors Inc, has resorted to aggressive price cuts over the past several month. This strategy has squeezed its profitability though, while being unable to prevent a nearly 7% q/q drop in deliveries in the third quarter – the first in more than a year. The firm's "days of supply" have increased to 15, from 8 a year ago and 6 two years ago [1]. During October's earnings call, Mr Musk appeared "worried" around higher interest rates and its impact on the monthly payments, making Tesla's cars much harder to buy. [2]

Legacy auto giant Ford Motor Company, has seen its EV segment (Model E) losing more than $3 billion in the first nine months of the year (EBIT). Its CFO said during the last earnings call, said the company is adjusting capacity to "better match market demand" and pushed back about $12 billion in investments. [3]

Start-ups are more exposed to this adverse environment, as they are typically unprofitable and need funds to ramp up their production and promote their products to gain market share. Lucid Group delivered 1,457 vehicles in the third quarter (up 3.7% q/q), but slashed its 2023 production guidance by a whopping 2,000-1,500 units, to "prudently align with deliveries". [4]

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After the Q2 results over the summer, I had argued that Rivian Automotive is turning the corner, after the hardships of the past year. Tuesday's results for the third quarter showed further progress and diverging from the recent gloomy mood, CEO RJ Scaringe sounded more upbeat.

Although acknowledging short-term "macroeconomic and geopolitical pressures" and "most notably" increased interest rates during the earnings call, he appeared optimistic and committed to the electric transition. He is "laser focused" on the factors within the firm's control, like production ramp up, like cost efficiency and strong balance sheet. The quarterly report definitely reflected these efforts [5].

Rivian Automotive delivered 15,564 vehicles in Q3, up around 23% q/q. Output rose 16.5% q/q to 16,304 units. More to it, the firm raised its 2023 production guidance again, to 54,000 vehicles, despite a week-long planned shutdown later this month.

Its R1T pickup truck and the R1S SUV are on the high-end spectrum, starting well above the $70K mark, where demand is less flexible and shielding it to an extent from the broader market headwinds. In more good news, its commercial electric delivery vehicles (EDVs) are not exclusive to Amazon any more, opening them up to more companies.

The company is also working on its next gen R2 models, which will be smaller and cheaper. The new generation will be priced at $40,000-$60,000 according to Mr Scaringe's interview with GQ Magazine last month [6], covering a range with not many options. The CFO reaffirmed the plan to start production of the R2 in 2026.

The cost cutting efforts are working, since gross losses per vehicle continued to dwindle, narrowing by around $2,000 from the prior quarter, to $30,648. Overall adjusted losses (EBITDA) widened sequentially in Q3, but the firm trimmed its full year guidance to a loss of $4 billion (from $4.2 bln previously). Revenues soared nearly 150% y/y, to $1.337 billion. The sports-utility vehicle manufacturer ended the third quarter with total liquidity of $10.253, down compared to Q2. However this figure does not include the approximately $1.5 billion it raised by the sale of convertible debt in October, which had then sparked concerns about its cash runway and had caused the stock to plunge.

Overall, Wednesday's results and guidance from Rivian Automotive, showed a continuation in the turnaround efforts, resiliency against the unfavorable environment and divergence from the gloomier reports of other EV makers. Markets reacted positively, as its stock was up in today's pre-market trading. However, the company is not immune to the broader challenges, while Tesla is finally ready to enter the electric pickup truck market with Cybertruck. RIVN.us has managed to stabilize this year, but its performance remains underwhelming. Despite the Q2 and Q3 gains, it dropped in October.

Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 08 Nov 2023 https://digitalassets.tesla.com/tesla-contents/image/upload/IR/TSLA-Q3-2022-Update

2

Retrieved 08 Nov 2023 https://www.youtube.com/watch

3

Retrieved 08 Nov 2023 https://s201.q4cdn.com/693218008/files/doc_events/2023/Oct/26/ford-q3-earnings-transcript.pdf

4

Retrieved 08 Nov 2023 https://ir.lucidmotors.com/news-releases/news-release-details/lucid-announces-third-quarter-2023-financial-results

5

Retrieved 08 Nov 2023 https://rivian.com/investors

6

Retrieved 15 Jul 2024 https://www.gq.com/story/rivian-scaringe-gqclout

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