Rivian Cancels Least-Expensive Version of Electric Pickup Truck and SUV

[PungoteagueDave]

Well, no rational business model. Bezos could always swoop in and keep them afloat just to compete with Tesla.

Never underestimate people with far too much money and petty rivalries.

Yeah, I do not predict they will disappear - just that they cannot survive under the current business plan. One of their big investors like Amazon or another auto manufacturer will wait until the 11th hour and squeeze out the other investors, buy the company through a debt infusion, with warrants or some other structure that takes out existing equity holders and forces current debt holders to take a significant haircut. There is huge value in the tech for the next owner - and current Rivian owners should see that as comfort.

Many of us early Tesla owners had the a similar calculus in the early years - their losses were massive and they almost ran out of cash, but we reasoned that the cars were so great that SOMEONE would want them if they failed, which almost happened twice. In Spring 2013 Tesla was going under for the second time and Elon Musk cut a deal to sell the company to google, but the Models S proved so successful and TSLA shares rallied, so he was able to raise some very expensive interim debt instead, and keep the company independent. However, it was almost game over - the main difference being that Tesla already had huge positive margins on the vehicles they were selling at the time, while Rivian does not.

As a non-engineer finance guy, I don't have the vision for a solution to Rivian's price/cost/margin problem, but perhaps if they had a clean slate, some value-engineering on the design, and a much deeper pocket backing the entity, with a refocus almost exclusively on the commercial delivery truck side of things, where price sensitivity is less, maybe...

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[Ford Senior Master]

Yeah, I do not predict they will disappear - just that they cannot survive under the current business plan. One of their big investors like Amazon or another auto manufacturer will wait until the 11th hour and squeeze out the other investors, buy the company through a debt infusion, with warrants or some other structure that takes out existing equity holders and forces current debt holders to take a significant haircut. There is huge value in the tech for the next owner - and current Rivian owners should see that as comfort.

Many of us early Tesla owners had the a similar calculus in the early years - their losses were massive and they almost ran out of cash, but we reasoned that the cars were so great that SOMEONE would want them if they failed, which almost happened twice. In Spring 2013 Tesla was going under for the second time and Elon Musk cut a deal to sell the company to google, but the Models S proved so successful and TSLA shares rallied, so he was able to raise some very expensive interim debt instead, and keep the company independent. However, it was almost game over - the main difference being that Tesla already had huge positive margins on the vehicles they were selling at the time, while Rivian does not.

As a non-engineer finance guy, I don't have the vision for a solution to Rivian's price/cost/margin problem, but perhaps if they had a clean slate, some value-engineering on the design, and a much deeper pocket backing the entity, with a refocus almost exclusively on the commercial delivery truck side of things, where price sensitivity is less, maybe...

As a non finance guy.. how does Ford selling 15 million of its shares in May affect Rivian. If Ford still owns 10% after the sale do they have any fiduciary responsibility to Ford Shareholders in helping sustain Rivian? Aside from having to report losses in value (Ford reported a huge loss as did Amazon based on Rivian shares) what are the justifications for continuing to hold the stock?

 

[Tbrou16]

As a non finance guy.. how does Ford selling 15 million of its shares in May affect Rivian. If Ford still owns 10% after the sale do they have any fiduciary responsibility to Ford Shareholders in helping sustain Rivian? Aside from having to report losses in value (Ford reported a huge loss as did Amazon based on Rivian shares) what are the justifications for continuing to hold the stock?

I wonder if it’s enough of a controlling share to peek behind the curtain at proprietary software and hardware tech. Rivian does the experimental initial launch of a feature, then Ford copies it, makes some sensible tweaks, then releases it on their new models or with an OTA update.

 

[Ford Senior Master]

I wonder if it’s enough of a controlling share to peek behind the curtain at proprietary software and hardware tech. Rivian does the experimental initial launch of a feature, then Ford copies it, makes some sensible tweaks, then releases it on their new models or with an OTA update.

I seriously doubt Rivian has any technical advantages over Ford. Ford probably has 10 times the number of design and test engineers than Rivian. I am not saying the Rivian engineering isn't good. I am saying the positive features of the Rivian could have just as well been implemented in a Ford product. It always comes down to a business decision. Ford chose to stay close to the ICE F150 to cut cost and to offer consistency in the F150 platform. It is similar to the issue between Tesla and Ford hardware design. Ford stubbornly refuses to move in the Tesla direction of having less numbers of controllers and centralizing control in a more powerful processing unit. It's ridiculous to have 30 separate programmable controllers with obsolete processors on 6 different technically obsolete communication busses. It makes for slow software and glitchy bus communications. But... thats a business decision based on dollars not on engineering capabilities.

 

[monsterlag]

Rivian does seem primed for acquisition though. Just like everything else it will soon be owned by Amazon, Google or Apple. The Rivian name may not survive but I do think the product will.

 

[PungoteagueDave]

I seriously doubt Rivian has any technical advantages over Ford. Ford probably has 10 times the number of design and test engineers than Rivian. I am not saying the Rivian engineering isn't good. I am saying the positive features of the Rivian could have just as well been implemented in a Ford product. It always comes down to a business decision. Ford chose to stay close to the ICE F150 to cut cost and to offer consistency in the F150 platform. It is similar to the issue between Tesla and Ford hardware design. Ford stubbornly refuses to move in the Tesla direction of having less numbers of controllers and centralizing control in a more powerful processing unit. It's ridiculous to have 30 separate programmable controllers with obsolete processors on 6 different technically obsolete communication busses. It makes for slow software and glitchy bus communications. But... thats a business decision based on dollars not on engineering capabilities.

Completely agree - I think Ford is stuck with some legacy technology decisions that are embedded in its hardware and firmware strategies, and are very tough to abandon at this stage - pulling that bandaid off would orphan a lot of existing owners. But wow, does it suck compared to Tesla's clean sheet approach to OTA and other software design. On the other hand, Rivan had its design in final form when Ford rolled their frunk - THAT had to be an "Oh wow, we f'd up an opportunity" moment for Rivian. They have that cutesie little tunnel and Ford says "I see your silly pansy crouch-ski thingy and raise you a non-lift-over frunk and eight outlets with bidirectional charger generator capability."

Ford isn't getting left behind by Rivian by much. The Lightning has kick-ass propulsion that I bet is more durable than four in-wheel motors, and has what I believe is the best suspension feel of any pickup I've ever driven, with its first independent rear axle truck suspension, abetted by superduty-level weight, yet kept all the truck stuff like locking hubs. It would be nice to have the adjustable suspension from the Rivian, and that ground clearance is awesome, so maybe some stuff could migrate, but as a model, I don't think there is any place for the Rivian models in Ford's lineup.

Yes, Ford could probably school Rivian on production efficiency and sourcing, but the core issue remains - no one can value engineer the existing Rivian consumer products to make them mass-market affordable. There's just too much expensive content - I don't care who you are - even Ford can't sell a $125k truck for $80k and make it up on volume - the Rivian as designed and currently sold simply cannot be made to sell at a profit for under $100k - by anyone. Wish it weren't so, but the numbers don't lie. Cost accounting is a bitch - when Rivian reports the negative gross margins every quarter - it is telling us what it pays to build the trucks, excluding fluff, R&D, exec comp, marketing, etc. The cost only of direct materials and direct labor comes to substantially more than the sales price. I know this is being repetitive, but Tesla has never sold one vehicle for a margin below 15% (remember those 2013 MS 40's for $39k?) and its average is above 25%, some quarters over 30%. Rivian has never made a gross profit on a single vehicle sale, loses more than 30% on every truck it sells, simply selling price minus the direct costs of building the truck. Unsustainable.

 

[Garyl]

Rivian has 3 choices
Down size there cost structure and sell niche vehicles for 100k plus
Stop selling consumer vehicles and concentrate on B to B vans and skate boards
Totally reengineer their consumer vehicle to a product they can sell under 80K in volume and make money. Thats going to burn another 10-15 billion $.
I'm not sure which option they will choose, but I made my choice. I sold my R1T and rolled it into a Lighting order.

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