Daily Management Review

Supply Challenges Will Hit Its 2021 Production, Warns EV Maker Rivian


Supply Challenges Will Hit Its 2021 Production, Warns EV Maker Rivian
The electric pickup truck maker Rivian Automotive Inc revealed the difficulties it will face in ramping up production to compete with the leader in the electric vehicle industry Tesla Inc. this was communicated by the company in its maiden earnings report as a public company. The production warning pushed down shares of the company by 10 per cent in premarket trading on Friday.
However, the company also revealed its intentions to construct a $5 billion factory to increase capacity. It however also warned about the manufacturing issues and challenges it was likely to face even through it has been receiving pre-orders for 2,000 of its electric vehicles every week.
"We don't want to read too much into near-term issues ... but it does highlight the risk that Rivian has a lot on its plate," RBC Capital Markets analyst Joseph Spak said.
Due to issues and clogging in its supply chain, the company expects to experience a drop of "a few hundred vehicles short" compared to its target of making 1,200 vehicle for 2021.
The company’s Chief Executive Officer RJ Scaringe said that ramping up production of its R1T truck, R1S SUV, and Amazon delivery vans within just the next few months would be like "a really complex orchestra."
Work on building the company’s new Georgia facility is slated to start next summer and the company expects to be able to begin production at the facility only in 2024. The business also wants to ramp up manufacturing of electric vehicles at its Normal, Illinois, plant, which started in September, by 50,000 vehicles annually.
"The strong order book provides support for the production ramp, though does add pressure to get vehicles to customers that may get impatient as current R1 orders won't be ready until the end of 2023," Wells Fargo analyst Colin Langan said.
Rivian is confronting new obstacles in production with a constant growth in demand for its vehicles, as well as in dispelling questions and doubts about whether a new electric vehicle firm can endure "production hell," as Tesla CEO Elon Musk put it.
Soon after Rivian's IPO, Musk stated that the "real test" for Rivian would be high output and breakeven cash flow.
After Tesla Inc (TSLA.O), shares in the world's most valuable automaker have risen 40 per cent since their explosive IPO in November.