Enormous losses are to be anticipated when a brand new automaker grows. Constructing hundreds of thousands of automobiles requires investing billions in tools and workers. Total factories have to be outfitted from scratch. Provide chains laid out. Engineers want money and time to develop automobiles and every part they want, from propulsion to suspension to brakes, from the bottom up. And people engineers want a human sources division.
And in that context, $1.7 billion is not that huge a deal when a brand new automaker has $15.5 billion in money, and a well-liked product, some consultants say. (Rivian has a backlog of practically 100,000 orders.)
“It is a measurement of nothing,” James P. Womack, a fellow on the MIT Mobility Initiative and writer of a extensively cited e-book on auto manufacturing, “The Machine That Modified the World,” stated of Rivian’s losses. “If they may have completely opened the throttle on their Georgia plant they may’ve misplaced much more cash.”
“For Rivian, thus far so good, and too quickly to inform,” Womack stated of its future. “However I do not see any pink flags.” Rivian CEO RJ Scaringe was a scholar of Womack’s at MIT in 2009 shortly earlier than beginning Rivian. Womack stated they nonetheless communicate every now and then, however he isn’t an investor within the firm.
Huge losses aren’t unusual when introducing a brand new know-how, in response to Richard Langlois, a Connecticut professor who has studied the financial historical past of tech.
“Generally large losses are to be anticipated in scaling up,” Langlois advised CNN Enterprise. “Although [Henry] Ford scaled slowly sufficient that he by no means misplaced cash.”
Tesla later raised further funds, an choice that Rivian could have too if its money hoard dwindles. Rivian counts Amazon as an investor, which had its personal lengthy string of losses earlier than producing earnings.
Traders have not reacted negatively to Rivian’s loss. The inventory was up barely Friday following the information.
“We imagine Rivian is in a terrific place to seize the huge inflow of present and future EV demand,” Wedbush analyst Daniel Ives wrote in a word Friday. He pointed to Rivian reiterating that it’s on observe to fulfill its aim of manufacturing 25,000 automobiles this 12 months as proof it is beginning to flip a nook. Whereas 25,000 automobiles produced in a 12 months is way lower than Rivian’s opponents — Tesla, for instance, produced 930,422 automobiles in 2021 — it’s vital progress as Rivian produced only one,015 automobiles in 2021.
Constructing an auto firm is a monumental process because it requires hiring a brand new workforce, creating a brand new administration system and constructing a brand new product in a brand new location.
“You are doing this with a bunch of strangers from totally different industrial administration traditions, and totally different technological expertise,” Womack stated. “It is type of wonderful anyone can do that in any respect.”
If Rivian can hold its momentum up it appears to have pretty much as good an opportunity as any of Tesla’s American rivals.