Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Rivian Automotive Inc (RIVN, Financial) successfully transitioned to its second-generation R1 vehicles, which are expected to significantly reduce material costs and improve production efficiency.
- The company announced a joint venture with Volkswagen Group, validating Rivian's technology platform and expanding market applications for its software and electrical architecture.
- Rivian received the highest score in the J.D. Power APEAL study, indicating strong customer satisfaction and brand strength.
- The company produced 9,612 vehicles and delivered 13,790 vehicles in Q2 2024, generating $1.2 billion in revenue.
- Rivian improved its cash flow from operations by 41% compared to Q1 2024, reflecting greater cost efficiency and working capital management.
Negative Points
- Rivian reported a total gross profit loss of $451 million for Q2 2024, with a gross profit loss per vehicle delivered of approximately $33,000.
- The company expects Q3 2024 deliveries to be below Q2 results due to the continued ramp of production and lower starting finished goods inventory balance.
- Rivian's gross profit loss per vehicle includes significant depreciation, amortization, and stock-based compensation expenses, impacting overall profitability.
- The company anticipates operational disruptions in 2025 due to plant upgrades and integration of new equipment for the R2 launch, which may affect production volumes.
- Rivian's EBITDA guidance for 2024 remains negative at $2.7 billion, indicating ongoing financial challenges as the company drives towards profitability.
Q & A Highlights
Q: Can you talk about your geographic strategy, particularly in Europe in light of the recent VW relationship?
A: As it stands today, the R1 products are being sold throughout the United States and Canada. Our EDV products are primarily focused in the United States, with some deliveries in Europe, specifically Germany. Future products like R2 and R3 are being developed to fit both the US and European markets, capturing demand for midsize SUVs and smaller crossovers.
Q: Is there any update on the potential to transfer some of your OpEx into the VW joint venture?
A: We haven't announced specifics around cost sharing in the joint venture. The relationship is formed to leverage our technical platform, allowing our technology to scale beyond Rivian's product line and achieve global scale. This will also provide sourcing and supply chain benefits.
Q: How is the company tracking toward the target of positive gross margin in the fourth quarter?
A: There are three key drivers: variable cost improvement, fixed cost leverage, and increased revenue per delivered unit. We expect significant material cost reductions, improved production line rates, and increased sales of higher-margin tri-motor R1s and non-vehicle revenue growth from regulatory credits and pre-owned Rivian sales.
Q: Can you share more on the magnitude of potential material cost improvements with the VW partnership?
A: The 20% cost reduction on the bill of materials for a like-for-like vehicle is based on technical changes and supplier negotiations. We expect further cost reductions through the VW partnership and the scale that comes with R2, driving towards our long-term goal of 25% gross margin.
Q: Could you give us an update on how your customer trials for EDV are going and when you might have first customers outside of the Amazon deal?
A: The EDV program has proven robust through our partnership with Amazon. We've been running pilot programs with non-Amazon customers and expect a significant ramp-up in 2025. These pilots help us refine the vehicle and associated software for large fleet operations.
Q: Can you explain the ASP dynamics in the quarter, considering the discounting needed to clear out old inventory?
A: We had attractive pricing on Gen 1 vehicles to clear inventory as we started producing Gen 2 vehicles. This is not a long-term shift in pricing. The introduction of tri-motor and quad-motor configurations allows us to maintain ASP by offering a wide band of pricing from just over $70,000 to over $100,000.
Q: What does the VW investment allow you to do from a product plan or capacity perspective that wasn't possible before?
A: The VW deal eliminates balance sheet risks and allows us to focus on launching R2 in Normal, supporting us through to positive cash flow. It enables us to drive efficiency and profitability while scaling with the launch of R2.
Q: Can you talk about demand trends since the refresh and how you measure brand strength?
A: The Gen 2 R1 products have been received positively, strengthening our brand. We track internal metrics and third-party evaluations like J.D. Power's APEAL Study, where we were rated the number-one brand. This strong brand foundation bodes well for the launch of R2 and R3.
Q: What opportunities are you seeing in the sale of regulatory credits?
A: The regulatory credit environment is strong, reflecting a lack of electrified products from other companies. We have over $200 million of regulatory credits under contract for 2024, with additional contracts for 2025 and beyond.
Q: How do you see the long-term advantage in software with VW accessing your platform?
A: Our vertically integrated software and hardware platform offers significant cost advantages and allows for continuous improvement in vehicle performance and features. The VW partnership will extend these benefits, enabling us to scale and enhance our product offerings while helping the industry transition to software-defined vehicles.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
