Rivian CEO Says Chip Shortage Issues Will Ease This Year

Electric Vehicle Startup Rivian Automotive Inc.

RIVN -9.61%

it maintained its 2022 production forecast, with executives saying supply chain issues that have stifled output from its factory in recent months are expected to ease later this year.

Rivian, which reported quarterly results after the market closed on Wednesday, said first-quarter revenue was $95 million, below Wall Street expectations.

The company’s net loss nearly quadrupled to $1.6 billion for the January-March period, compared with $414 million in the prior year quarter, as the company continued to spend heavily on research and development and manufacturing of its first vehicles.

Rivian said higher logistics costs also hurt results, due in part to increased spending on expedited shipping as a solution to supply chain disruptions. Since the end of March, the company has stopped assembly lines for longer periods than planned, causing it to lose about a quarter of its planned output due to supply constraints, Rivian said.

Chief Executive Officer RJ Scaringe said he has been working with suppliers to secure more parts and believes the company is overcoming previous hurdles it had with sourcing semiconductors. He said Rivian plans to add a second factory shift in the second half of this year.

“We really have seen the worst, or kind of a valley, if you will, of supply constraints,” Scaringe said, referring to the computer chip shortage.

Rivian executives said the company’s losses should narrow as it begins to make full use of its factory in Normal, Illinois, a facility that can produce 150,000 vehicles a year. The company built 2,553 vehicles and delivered 1,227 of them to customers during the three-month period.

The quarterly report follows a multi-week slide in Rivian’s share price, which hit an all-time low this week and is trading at nearly a quarter of its initial offering price of $78 a share.

Following the results, Rivian shares rose 7% in after-hours trading. Before that, the stock fell 9.6% during the regular session, closing at $20.60 a share.

The Irvine, California-based automaker was among a handful of electric-vehicle-focused startups that went public last year at sky-high valuations, capitalizing on Wall Street’s enthusiasm for the auto industry’s transition to electric ones. But this year has been a challenge for the young company, which has struggled to ramp up production of its first two models, the R1T pickup and the R1S sport utility vehicle. Both went on sale last fall.

Like other automakers, Rivian is grappling with rising costs for raw materials, particularly the ingredients needed to make batteries, and problems securing enough semiconductors and other parts to fully run the assembly line.

In March, Rivian lowered its 2022 production forecast to 25,000 vehicles, citing supply chain and logistical difficulties. The company said it would otherwise have produced 50,000 trucks and SUVs.

Rivian reported an adjusted loss of $1.43 per share in the first quarter, compared with analyst expectations for a loss of $1.37 per share.

The hurdles facing the broader global auto industry are coming down hard on startups like Rivian, which have yet to build the kind of clout with suppliers that some of its well-established competitors have amassed over decades, executives and analysts say. This spring, the auto company raised prices for vehicle orders placed after March 1, reflecting the toll rising raw material costs are taking on its business.

Rivian shares have been in steep decline since its successful IPO in November, a listing that at the time was among the largest US debuts since 2014. General Motors Co.

and Ford Motor Co.

F -3.90%

Shares sank to a record low on Monday, after reports that Ford, an early investor in Rivian, sold about 8% of its shares, following the expiration of a post-IPO lock-up period. Ford has since confirmed the share sale in a regulatory filing.

Stocks continued to fall this week ahead of the quarterly report and are down more than 80% since the start of the year. As of Wednesday’s close, Rivian’s market value stood at $17.9 billion, according to FactSet.

The drop in the company’s share price has hit profits for both Ford, which owned about 102 million shares before the recent sale, and Amazon.com. INC.,

AMZN -3.20%

another early investor, with a roughly 18% stake in Rivian. Both Ford and Amazon posted losses in the first quarter as a result of the drop in the market value of their Rivian holdings.

The stock declines also reflect a broader chill on Wall Street for auto startups that burst onto the scene last year with big promises and little or no revenue.

Rival electric vehicle startup Lucid Group INC.,

which makes luxury sedans that compete directly with Tesla INC.,

it has also cut production forecasts and raised prices in recent months.

Rivian executives have highlighted that there is demand for its models, citing 90,000 reservations as of May 9 and a 100,000-vehicle order from Amazon for electric vans. They also expressed confidence in their manufacturing capabilities and said they are working with suppliers to alleviate bottlenecks.

With gas prices on the rise, many consumers are exploring whether buying an electric vehicle could save them money in the long run. The WSJ’s George Downs discusses four factors to consider when buying a new car. Photo Composition: George Downs

At the end of the first quarter, Rivian had $17 billion in cash and liquidity, a sizeable amount for an electric vehicle startup. About $12 billion was raised through its initial public offering.

In addition to its factory in Normal, Illinois, Rivian has pledged to spend $5 billion to build a new factory in Georgia that would produce a more affordable EV called the R2. Production is expected to start in 2024, and the company said it believed it could achieve this goal with its current cash. Rivian executives said they were cutting research and development spending by simplifying their future vehicle lineup to save cash.

Enterprise supply chain challenges don’t end with electronics. Scaringe also warned of a looming battery shortage, which would limit the auto industry’s ability to hit its electric vehicle sales targets over the next decade.

On Wednesday, Scaringe said he did not foresee an immediate problem with Rivian getting battery supplies, adding that this is a longer-term problem for the auto sector as demand rises.

write to Sean McLain at [email protected]

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