Tesla rival Rivian hit a tipping point this week with the unveiling of its latest model, the R2 SUV. Judging by the soaring shares, things were going well.
Since Thursday’s event, the Amazon-backed electric vehicle maker’s market value has jumped more than $1.7 billion. It remains to be seen whether it will fall again when investors reconsider, but the initial reaction meant a much-needed boost for the struggling electric vehicle maker.
Last month, Rivian announced a disappointing quarter and outlook and said it would cut its workforce by about 10%. Its market capitalization has fallen from a peak of $153 billion in 2021 to $12.5 billion today.
Gene Munster, managing partner at Deepwater Asset Management, recently mulled buying Apple’s Rivian, noting the company’s low valuation and the tech giant’s need to do “something big” after shutting down its own electric vehicle project.
Tesla CEO Elon Musk said last month that Rivian’s product design is “pretty good” but added that “the hardest part of being a car company is achieving volume production with positive cash flow.” He suggested his rival would go bankrupt in six quarters without radical changes, saying it needed to make “significant cost cuts.”
On Thursday, Rivian showed its willingness to do just that, announcing, to the surprise of many, that it was delaying plans to build a $5 billion plant in Georgia. Instead, the company will produce the new models at its existing plant in Illinois, allowing it to save more than $2.25 billion in capital costs.
Deutsche Bank analyst Emmanuel Rosner said According to Reuters, he believes the move will “relieve significant pressure to raise capital in the near future” as it appears Rivian will have enough cash to see it through to production of the R2.
Rivian surprised investors with other news, and unexpectedly presenting another modelis a smaller and cheaper compact SUV, the R3, which will be produced after the R2. He also showed off the more powerful and durable R3X.
“You didn’t expect there to be ‘one more thing,'” joked CEO Robert “RJ” Scaringe, referring to late Apple co-founder Steve Jobs’ penchant for making last-minute product announcements after his keynotes.
In a post Friday, Scaringe wrote that in less than 24 hours the company had taken more than 68,000 orders for the R2, which will start at $45,000. He added that the company was “overwhelmed” by the response to the new cars.
But the fact remains that Rivian has never turned a profit, it still loses money on every vehicle it makes, and EV sales overall are growing slower than the industry expected.
After a long period of difficult months, Rivian had a good Thursday and Friday. Whether this will be a breakthrough or a turning point remains to be seen.