Joseph White

NORMAL (Reuters) – Rivian Automotive Inc CEO R.J. Scaringe must sell more pickup trucks and vans to increase its stock price, and to fund ambitious long-term growth plans. However, the startup has difficulty buying parts. 

Scaringe is unable to obtain all of the semiconductors Rivian requires for its Normal, Illinois factory. The young company is not expected to produce the promised numbers of electric vehicles, according to chip suppliers. Scaringe stated that they are allocating more chips for established customers on the basis of how many vehicles they’ve built over the years.

“I have to call up semiconductor supplier Y and say this is how many Supplier X gave us, and get everybody comfortable because the system’s unproven,” Scaringe said while piloting a golf cart through the factory.

Scaringe suspects that suppliers are not responding to orders and is wondering if Rivian might be using shortages of semiconductors as an excuse for more serious production problems. He said, “It is really frustrating.”

Rivian isn’t the only automaker in this supply chain slam zone.

According to Dan Hearsch of AlixPartners, Dan Hearsch is the managing director for AlixPartners’ automotive practice. Manufacturers with low volumes are skeptical of this – “Are they really serious?” He stated that bigger players might not be willing or able to buy a whole year of chips in one transaction.

Hearsch stated that large automakers are attractive because of their volume and reliability.

Rivian is now dead. It counts Ford Motor (NYSE) Co and Amazon.com Inc. (NASDAQ:) as its major shareholders.

Rivian shares are now down 60% from the peak price of $179.47 in March 2021. This was shortly before their initial public offering, which took place in November 2021. Rivian cut its 2022 production forecast in half and reduced it to just 25.000 vehicles in March, which caused Rivian shares to plunge.

Rival Tesla (NASDAQ:) Inc Chief Executive Elon Musk has taken jabs at Rivian, tweeting “I’d recommend they get their first plant working. It’s insanely difficult to reach volume production at affordable unit cost.”

The rising cost of raw materials is putting more pressure. Rivian attempted to increase prices by as high as 20% in March for cars already ordered. Scaringe apologized after customers protested.

Scaringe, along with other Rivian executives, is now focusing on convincing suppliers executives that Normal’s plant and its workers are ready for acceleration. Rivian opened its Normal factory to media and supplier executives as part of this effort.

Rivian has nearly completely renovated and retooled this facility. The row of tall metal stamping presses that once belonged to Mitsubishi Automaker, Japan now produces huge aluminum panels. These are used for Rivian’s delivery vans as well as off-road electric trucks or SUVs.

Rivian has two distinct vehicle production lines within the Normal plant. The other is responsible for building electric delivery vans that Amazon orders in two sizes. Rivian’s R1 Series electric pickup trucks, SUVs and SUVs sell for anywhere from $67500 to $95,000. The other is responsible for Rivian. The most costly Rivian vehicle before the increase in price was $83,000.

Rivian will now be building R1 trucks, SUVs, and vans for customers. Executives stated that factory workers stop producing when they run out of parts. Rivian produced an average of 40 vehicles each weekday during the first quarter — less than half the output, if the plant was running at full speed.

Scaringe stated, “I would love to work a five-day shift.” Scaringe said Rivian vehicles are made up of approximately 2,000 components. He said, “One-half of one percent” of these are being challenged.

Scaringe stated to Reuters that more price rises are likely at Rivian due to the rising cost of raw materials and scarce parts.

He said that prices will likely remain high and continue to rise over the long-term. No doubt, we did not succeed in how that was done last time. But as we look at going forward we expect further price increases much like we’ve seen from essentially the entirety of the auto industry.”

Rivian was cash-rich at $18 billion by 2021. Scaringe stated that the company won’t need additional capital in the near future. However, the cost rise and simultaneous production crunch could slow down Rivian’s ability to improve gross margins as well as cash flow.

This is a must if the company wants to begin self-funding significant capital expenditures.

They include the construction of a Georgian assembly plant for the R2 series of affordable, compact trucks. Rivian plans to produce its own batteries and expand its network of suppliers.

“Long term, we envision a world where we will make some of our own cells, (and) we’ll purchase cells from great partnerships we have,” Scaringe said. They aren’t mutually exclusive.