Rivian, the electric vehicle (EV) manufacturer, has announced a series of layoffs as it grapples with the challenges of a tough market for EVs. The company plans to cut 10% of its salaried workforce in an effort to reduce costs and alleviate pressure on its upcoming affordable EV model, the R2. Additionally, a limited number of non-manufacturing hourly employees will also be affected by the layoffs. This marks the third round of job cuts for Rivian since July 2022 when it reduced its workforce by 6%, followed by another 6% reduction in February 2023.
Despite doubling the number of EVs produced and shipped in 2023 compared to the previous year, Rivian still incurred a loss of over $5.4 billion for the year. Furthermore, the company recently announced that it expects to build only 57,000 electric vehicles in 2024, the same number as in the previous year. To improve production rates, Rivian plans to temporarily shut down its sole factory in Normal, Illinois midyear for necessary upgrades to its manufacturing line, with an anticipated 30% increase in efficiency.
As a result of these developments, Rivian predicts an adjusted loss of approximately $2.7 billion in 2024 and has decided to implement a company-wide cost transformation program. This program includes modifications to vehicle design and engineering to enhance manufacturing efficiency, as well as further employee layoffs. The company also foresees an increase in capital expenditures, with projected spending reaching $1.75 billion in 2024 compared to $1.03 billion in the previous year. This additional investment will be directed towards next-generation technologies, the future Georgia factory, and go-to-market operations.
The news of the layoffs and revised financial expectations had a significant impact on Rivian’s stock value, causing shares to plummet by more than 15.6% during after-hours trading. In response to these challenges, Rivian’s founder and CEO, RJ Scaringe, emphasized the need for strategic prioritization of growth areas, particularly the launch of the Peregrine and R2 models, as well as investments in go-to-market capabilities. Scaringe acknowledged the challenging macroeconomic environment, citing historically high interest rates and geopolitical uncertainty as factors influencing the company’s decision to implement changes.
Despite the financial setbacks, Rivian reported positive revenue growth in the fourth quarter of 2023, generating $1.3 billion compared to $663 million in the same period of 2022. On an annual basis, the company’s revenue rose to $4.4 billion, a significant increase from $1.66 billion in 2022. The majority of this revenue came from EV sales, supplemented by $39 million in the fourth quarter and $73 million for the full year from the sale of regulatory credits.
While Rivian’s net loss in the fourth quarter amounted to $1.5 billion, there was a slight improvement compared to the $1.72 billion loss reported in Q4 2022. On an adjusted basis, the loss was $1.1 billion, down from $1.5 billion in the same period the previous year. Although Rivian has made progress in reducing its loss per vehicle, it still has a considerable way to go before reaching profitability. In Q4 2023, the company reported a loss of $43,372 per unit delivered, a significant improvement from the $124,162 loss per unit in Q4 2022.
During an earnings call, Scaringe highlighted the steps taken to drive greater efficiency, resulting in an approximate $81,000 improvement in gross profit per vehicle when comparing Q4 2023 to Q4 2022. He emphasized the team’s continued sense of urgency and ownership mindset in driving further efficiency throughout the organization as they enter 2024.
Rivian’s recent announcement of layoffs reflects the challenges faced by the EV manufacturer in a competitive market. However, the company remains committed to its growth areas and the launch of its upcoming models. With strategic cost-cutting measures and improvements in production efficiency, Rivian aims to navigate the difficult market landscape and secure a promising future in the EV industry.