Tesla Rival Rivian was faced with a decision moment This week the company unveiled its latest model, the R2 SUV. Judging by the rising share prices, things were going well.
Since Thursday’s event, the Amazon-backed electric vehicle maker’s market value has increased by more than $1.7 billion. It remains to be seen whether the price will fall again if investors change their mind, but the initial reaction has given the struggling electric vehicle maker a much-needed boost.
Last month, Rivian announced a disappointing quarter and outlook and said it would reduce its workforce by about 10%. Its market cap has fallen from a high of $153 billion in 2021 to $12.5 billion today.
Gene Munster, managing partner of Deepwater Asset Management, recently pondered the possibility Apple buys Rivianciting the tech giant’s low valuation and need to do “something big” after stalling its own EV project.
Elon Musk, CEO of Tesla said last month that Rivian’s product design was “not bad,” but added, “The real hard part of running an automobile company is achieving mass production with positive cash flow.” He suggested that without a drastic change, his rival could go bankrupt in six quarters would, and said he needed to “cut costs massively.”
On Thursday, Rivian showed it was ready to do just that, announcing, to the surprise of many, that it was delaying its plans to build a $5 billion factory in Georgia. Instead, the company will manufacture its new models at its existing factory in Illinois, saving more than $2.25 billion in capital expenditures.
Deutsche Bank Analyst Emmanuel Rosner told According to Reuters, this move sees “significant pressure to raise capital in the short term” as Rivian appears to have enough cash to carry out production of the R2.
Rivian also unexpectedly surprised investors with other news introduce another model– the smaller, cheaper compact SUV R3 – is to be produced after the R2. A more powerful and robust R3X was also introduced.
“You didn’t expect there to be another thing here,” joked CEO Robert “RJ” Scaringe, referring to recent trends Apple Co-founder Steve Jobs to make last-minute product announcements after his keynotes.
In one (n X In a post Friday, Scaringe wrote that the company had taken more than 68,000 reservations in less than 24 hours for the R2, which will start at $45,000. He added that the company was “overwhelmed” by the response to the new vehicles.
But the fact is that Rivian has never made a profit, the company still makes a loss on every vehicle it produces, and that electric vehicle sales are generally growing more slowly than the industry expected.
After a long period of difficult months, Rivian had a good Thursday and Friday. Whether this proves to be a blip or a turning point remains to be seen.