Far from winning a place as the “Tesla of Trucks,” EV startup and one-time Ford partner Rivian is losing approximately $33,000 per vehicle sold despite a robust $80,000 MSRP.
The Wall Street Journal reports Rivian has actually managed to reduce the loss per vehicle as economies of scale kick in with growing production, but it is still burning through roughly $1 billion of its cash reserves quarterly.
Rivian’s troubles stem from several sources. Despite being in business since 2009, the automaker is still running its single factory location at only one-third of its maximum capacity. Consulting firm AlixPartners managing director Mark Wakefield remarked “you should be able to start to make money after three to six months.” However, Rivian has only produced 50,000 vehicles so far.
Further, engineering firms that have taken apart Rivian R1T pickup trucks or R1S SUVs report the vehicle seems to be overengineered. The skateboard chassis is extremely complicated, with major components that nest inside each other in layers. Much of the skateboard needs to be welded twice, first robotically and then by a skilled human welder using a hand-held unit.
Third-party engineers also note that the massive amounts of metal in the front end exceed the necessary amount for safety and structure, though Rivian argues this is needed for the top-tier crash test ratings it seeks and for “supercar-level stiffness.” Manufacturing consultancy firm A2Mac1 CEO Frank Bunte pointed out “the more sophisticated the engineering is from day one, the harder it is to ramp up the manufacturing.”
Rivian also made getting production started as quickly as possible its primary objective, while also, in the words of founder RJ Scaringe, making its models “the best-driving truck or SUV in the world […] because if it’s not, why would somebody pick us over a Ford or over a BMW?”
Accordingly, Rivian engineers made production the main focus and solving problems with the design something to be attended to later. The vehicles are stuffed with systems that only have a single function, because Rivian didn’t take the time to consolidate these parts into multifunctional components.
This adds greatly to the complexity of each unit as well as its cost. Rivian chooses to, or is compelled to, use its own in-house components for everything in its vehicles rather than off-the-shelf third-party systems. Wells Fargo analysis pegs the extra cost per vehicle at $25,000 in components alone.
The GM strategic approach to the EV market stands in strong contrast to that of Rivian. The General developed its GM Ultium batteries, electric GM Ultium Drive motors, its highly scalable BEV3 and BT1 platforms, and related technologies thoroughly first, while keeping production of EV models low. With fully matured and tested technologies to serve as a springboard, it can now ramp up production while likely avoiding most of Rivian’s cost overruns.
With its different strategy, GM expects its EV portfolio to be profitable by 2025. The automaker is also continuing to support its ICE vehicle lineup to fund the EV transition, while Rivian has no profitable internal combustion portfolio to sustain its efforts.