Rivian Automotive (RIVN -3%) faced a setback today as it paused its Amazon (AMZN, Financial) delivery truck production due to part shortages. This issue does not affect the production of its R1T truck and R1S SUV. AMZN noted that the impact should be minimal, but this marks another hurdle for RIVN as a publicly traded company.
- RIVN recently reported a decent quarterly performance. Although it missed earnings estimates, it reiterated its FY24 guidance, aiming to produce 57,000 vehicles and achieve low-single-digit delivery growth year-over-year. However, expenses remain a significant issue, with the company losing money on each vehicle produced.
- Production pauses are not new for RIVN. The company halted production at its Normal, IL facility in April and plans another pause for over a month in 2H25 to upgrade equipment for its 1H26 R2 launch. These interruptions, including those affecting AMZN delivery vans, worsen the company's margin challenges.
- On a positive note, RIVN's joint venture with Volkswagen (VWAGY, Financial) is a source of optimism. Volkswagen has invested $1.0 billion in RIVN, with up to $4.0 billion in additional planned investments. However, RIVN must meet specific agreements, milestones, and regulatory approvals to secure the total $5.0 billion, adding uncertainty to its financial future. Production issues only heighten this uncertainty.
RIVN shares have risen from 2024 lows but are still down about 35% this year, reflecting bearish sentiment. The company's reiterated FY24 production and delivery guidance is encouraging, as is its goal of achieving around 25% gross margins and high-teens adjusted EBITDA margins in the long term. We appreciate its focus on reducing expenses and expanding its market with the upcoming lower-cost R2 model. However, production interruptions and an unfavorable macroeconomic environment present significant challenges for RIVN to secure Volkswagen's full investment and reach its long-term financial goals.
