Rivian Automotive making progress on cost cutting - Baird expects strong Q3 deliveries and sees 35% opportunity!
California-based electric vehicle manufacturer Rivian Automotive (RIVN) currently offers the R1T, a pickup truck, and the R1S, an SUV. CEO Robert Scaringe has big plans to cut costs with proprietary electric motors, software solutions and driver assistance systems. This is to provide independence from third-party suppliers and a differentiated and improved user experience. Consolidation of the electronic control unit (ECU) architecture, i.e., a smaller number of computers performing control functions, is expected to deliver cost savings of several...
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'post_content' => 'California-based electric vehicle manufacturer Rivian Automotive (RIVN) currently offers the R1T, a pickup truck, and the R1S, an SUV. CEO Robert Scaringe has big plans to cut costs with proprietary electric motors, software solutions and driver assistance systems. This is to provide independence from third-party suppliers and a differentiated and improved user experience. Consolidation of the electronic control unit (ECU) architecture, i.e., a smaller number of computers performing control functions, is expected to deliver cost savings of several thousand dollars. The proprietary Enduro drive unit is already installed in the R1 platform, reducing the cost of base models by about $8,000. Overall, the CEO reported last quarter that gross profit per vehicle increased by about $35,000 and margins increased by 4,400 basis points.
On Sept. 27, Baird analysts called out a $30 price target (Outperform) on the "bullish fresh pick" in anticipation of strong Q3 deliveries. Third-party reporting caused uncertainty from potentially weakening demand, which Baird does not see. After a Q2 revenue triple and increased production and delivery rates of 50% and 60%, respectively, the company is now expected to deliver 52,000 vehicles on an annual basis, doubling from 25,000 in 2022.
Next year, construction is scheduled to begin on the second production facility in Georgia, which is expected to deliver an additional capacity of 400,000 cars on top of the 150,000 ones with a planned production start in 2026. The market launch of the new R2 vehicle is also planned for then. Material costs could also be reduced by 35% for the 100,000 electric delivery vehicles ordered by Amazon. The analyst consensus is for total revenue of $4.29 billion in the current fiscal year 2023, doubling to $7.08 billion the following year. The company will not be in the black for quite some time. The share could now start the breakout attempt.
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