Q3 2024 Earnings Summary
- Rivian is resolving supply chain constraints, particularly the Enduro motor shortage, which is expected to be over in the next few weeks, enabling increased production volumes.
- Rivian is making significant progress in reducing costs, with material costs expected to be 20% lower in Q4 compared to Q1, and aiming for positive gross margins in Q4, demonstrating a path towards profitability.
- The partnership with Volkswagen is advancing, with Rivian's technology to be utilized across many Volkswagen Group brands and products, potentially generating significant revenue and scale benefits.
- Supply constraints with the Enduro motor are impacting production volumes, as Rivian is experiencing a "specific constraint" which they are working to resolve but may affect their ability to meet production guidance.
- High lease penetration of 42% exposes Rivian to residual value risk, as Rivian "together with Chase shares in the residual values" and adjusts reserves "according to what we're seeing in the broader market backdrop", potentially leading to financial losses if residual values decline in a challenging consumer environment.
- Rivian plans a production shutdown of over a month in 2025, which could negatively impact production volumes and financial results, as they need to "do a number of... work on many of the shared shops, and specifically our paint shop to make sure that we're ready for R2 start of production".
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Production | FY 2024 | 57,000 units | 47,000–49,000 units | lowered |
Delivery outlook | FY 2024 | Low single-digit growth | 50,500–52,000 vehicles (low single-digit growth) | no change |
Adjusted EBITDA | FY 2024 | -$2.7 billion | -$2.825 billion to -$2.875 billion | lowered |
Capital expenditures (CapEx) | FY 2024 | $1.2 billion | $1.2 billion | no change |
Regulatory credit sales | FY 2024 | no prior guidance | $300 million | no prior guidance |
Gross profit | Q4 2024 | no prior guidance | Modest GAAP gross profit | no prior guidance |
Material cost reduction for R1 vehicles | Q4 2024 | no prior guidance | 20% reduction (Q1 2024 vs. Q4 2024) | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Enduro motor supply chain constraints and production volumes | No specific mention in Q2 2024, Q1 2024, or Q4 2023. | Short-term constraint significantly impacted Q3 2024 production volumes. | New topic |
Ongoing material and cost reduction initiatives | Discussed in Q4 2023, Q1 2024, and Q2 2024 as part of ongoing design changes, negotiations, and manufacturing efficiencies. | Emphasized a 20% reduction in material costs for second-generation R1 and improved plant efficiency. | Consistently recurring |
Positive gross margin objectives and profitability timeline | Mentioned in Q4 2023, Q1 2024, and Q2 2024, targeting modest positive gross profit by Q4 2024 and long-term margin goals. | Now aiming for positive gross profit in 2025, with regulatory credits as a key contributor. | Continued focus with updated targets |
Partnership with Volkswagen Group | Introduced in Q2 2024 (joint venture formation); not mentioned in Q1 2024 or Q4 2023. | Joint venture expected to close by end of 2024; focus on electrical architecture and software integration. | Ongoing collaboration |
Production shutdown for retooling and R2 launch | Discussed in Q4 2023, Q1 2024, and Q2 2024 regarding multiweek shutdowns for cost reductions and preparing for R2. | Second-half 2025 retooling planned before R2 production starts in 2026. | Continued updates |
High lease penetration and residual value risk | No prior mention in Q4 2023, Q1 2024, or Q2 2024. | 42% lease penetration in Q3 2024; actively managing residual values. | New mention |
Reliance on regulatory credit sales | Cited in Q4 2023, Q1 2024, and Q2 2024 as a significant revenue driver. | Increased to $300 million in 2024; recognition can be “lumpy,” remains crucial for margins. | Consistent, still key to profitability |
Demand generation efforts and brand recognition | Mentioned in Q4 2023, Q1 2024, and Q2 2024, including demo drives, new retail spaces, and strong brand rankings. | 20% increase in demo drives QoQ; focusing on brand awareness to drive orders. | Ongoing expansion |
Expansion into sub-$45,000 EV market with R2 (and R3) | Discussed in Q4 2023, Q1 2024, and Q2 2024, with the R2 starting at $45,000 and major volume potential. | R2 remains on track for first-half 2026; no new mention of R3 in Q3 2024. | Continued focus, no new R3 details |
Execution risk with new suppliers and plant retooling | Addressed in Q4 2023, Q1 2024, and Q2 2024 regarding supplier transitions and production downtime challenges. | Gen 2 rollout affected by supply disruptions from one key supplier, impacting Q3 production. | Ongoing concern |
Additional supplier contract costs | Mentioned in Q4 2023, Q1 2024, and Q2 2024 linked to contract amendments and re-sourcing costs. | No direct mention of added contract costs in Q3 2024. | Previously highlighted, not discussed |
R3 platform development | Discussed only in Q1 2024 as part of midsize crossover plans; no mention in Q4 2023 or Q2 2024. | Not mentioned in Q3 2024. | Not addressed |
Cash burn and high operating expenses | Repeatedly noted in Q4 2023, Q1 2024, and Q2 2024 with focus on cost containment and funding runway. | Operating costs down to $599 million in Q3 2024; still investing in R2 ramp. | Slight improvement but still critical |
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2025 Gross Profit Expectations
Q: Will Rivian achieve positive gross profit in 2025?
A: Claire McDonough affirmed that Rivian's goal is to target a positive gross profit for 2025, although she acknowledged operating in a fluid environment and plans to provide additional details during the Q4 earnings call. -
Cost Reductions and COGS Improvement
Q: How will Rivian reduce COGS per unit into 2025?
A: CEO Robert Scaringe highlighted that despite a noisy Q3, Rivian projects material costs in Q4 to be 20% lower than in Q1, showing meaningful progress in cost reduction. He emphasized ongoing efforts to improve operational efficiency and prepare the plant for R2 production. -
Regulatory Credits Upside
Q: What's driving the increase in regulatory credit sales to $300 million in 2024?
A: Claire McDonough explained that the increase is due to a rise in the underlying value of regulatory credits sold to OEM counterparties and deeper opportunities in the credit markets, demonstrating the team's progress. -
Production Guidance and Enduro Motor Supply
Q: How is Rivian addressing the Enduro motor supply constraint affecting production?
A: Javier Varela stated that the team is working urgently with suppliers to ramp up new capacity, expecting the problem to be resolved in the coming weeks, which will enable them to meet production targets. -
Volkswagen Joint Venture Status
Q: What's the current status of the collaboration with Volkswagen, especially regarding Scout?
A: CEO Robert Scaringe expressed excitement about the partnership, noting they have built a demonstrator vehicle using Rivian's electrical architecture and software stack. The technology is expected to be used across many products and brands within the Volkswagen Group. -
Demand Trends and Leasing Mix
Q: How is the challenging consumer environment affecting Rivian's sales and leasing?
A: Claire McDonough noted that lease penetration was 42% in the quarter, with Rivian and Chase sharing residual values. Most customers don't qualify for the $7,500 tax credit on purchases due to vehicle price and income levels, but leased consumers can benefit. -
R2 Pricing and Competitiveness
Q: How competitive will the R2 be at a $45,000 price point in 2026?
A: CEO Robert Scaringe clarified that the $45,000 starting price for R2 includes over 300 miles of range, with the lower price corresponding to a lower performance spec but not reduced range, making it competitive in its segment. -
Operating Expenses Reduction
Q: Are the reductions in operating expenses sustainable into 2025?
A: Claire McDonough stated that they achieved a significant step-down in cash operating expenses, reaching $599 million in Q3. They expect lower expenses in 2024 compared to 2023 due to continued efficiency efforts across the company. -
Commercial Vehicle Sales Expansion
Q: When can we expect additional commercial customers beyond Amazon?
A: CEO Robert Scaringe indicated that they are starting to see efforts in commercial fleet sales materialize and expect to see more of that in 2025, focusing on deploying vans with different fleet operators. -
Revenue Per Unit and ASP Increase
Q: How is Rivian's average selling price trending in Q4?
A: Claire McDonough explained that despite increased sales of commercial vans, which have lower ASPs, they expect an increase in average selling price in Q4 due to selling more Tri-Motor vehicles and ending early preorder pricing. -
Regulatory Credit Revenue Recognition
Q: When does Rivian recognize revenue from regulatory credit sales?
A: Claire McDonough confirmed that revenue is recognized when they transfer the credits to the counterparty, not upon agreement to purchase. -
Amazon Van Deliveries in Q4
Q: Is Rivian increasing van deliveries to Amazon in Q4 despite prior expectations?
A: Claire McDonough stated that they are increasing production and deliveries of vans and Tri-Motor vehicles in Q4, as both variants require only one Enduro motor, optimizing production efficiency. -
Volkswagen Partnership Amid Restructuring
Q: Has Volkswagen's restructuring impacted Rivian's collaboration?
A: CEO Robert Scaringe noted that their partnership provides Volkswagen with efficient technology deployment, aligning with Volkswagen's goals for greater efficiency, and thus remains unaffected. -
Connect+ and Subscription Services
Q: Should investors model revenue from Rivian's Connect+ services?
A: Robert Scaringe explained that while Connect+ includes variable costs for services like data streaming, it's too early to determine if customers prefer upfront payments or subscriptions; thus, it's premature to model this revenue. -
Customer Preferences Amid Demand Challenges
Q: Are customers opting for cheaper options due to demand challenges?
A: Robert Scaringe observed a broad spectrum of customer preferences, with significant excitement for higher-spec Tri-Motor and upcoming Quad Motor variants, indicating strong demand across price points.