Tesla rival Rivian posts losses of $1.7b, with worse to come Electric carmaker Rivian is reporting more trouble – this time it's the loss of $1.7 billion in Q3 alone, although the biz said it has enough cash on hand for three more years of business. In its Q3 earnings report, Rivian said its losses primarily stemmed from material costs increasing due to inflation, the termination of …
And there were plenty of moments in time during which many thought Tesla was done for, although that might just be analysts being analysts. However, it did take Tesla seven years to get to the Model S and 13 years to get to the Model 3, with high volume production even later than that.
Setting up a car company turns out to be pretty tricky!
Cars are insanely difficult to sell. There are costly destructive tests, certifications, warranties, recall tracking, parts suppliers, repair manuals, service centers, deliveries, showrooms, test drives, financing, advertising, configuration and customization, ...
It all makes software seem easy. My crashes, stalls, and destructive tests cost nothing while they're in a development environment.
"The one bright spot for Rivian came in the form of the 1,000 electric delivery vans it has shipped to Amazon which are now making deliveries in 100 US cities. Amazon also announced plans to buy an additional 100,000 of the vehicles, but at current production pace it'll take some time for all of those to be built.
Rivian and Mercedes-Benz also recently announced a partnership to produce commercial and private electric vans, which Rivian said in a press release would involve the pair producing electric vans on common assembly lines. Amazon electric delivery vehicles weren't mentioned in connection to the Mercedes-Benz deal.
But could the Mercedes-Benz partnership actually end up harming Rivian? It all depends on whether it can find a path to profitability, or at least a path to appearing as an attractive acquisition."
How should one read one these paragraphs, and not end up convinces that there's a massive delusion going on?
So, they have a potential customer for vans, which they are currently not able to be producing. That's heading into vapour-ware territory in my mind.
On the other hand, they have an actual car manufacturer as a partner for producing vans. How could this possibly be a bad thing for Rivian?
If anything, I would see risk of badness for the Mercedes.
Maybe, I'm just to old, grumpy and grey to make sense of today's news anymore.
RIvian and Mercedes Benz working together sounds odd. Mercedes already makes the "eVito" and the "eSprinter", so it's not as if they're trying to fill a gap in the range of vehicles they sell. It could be that they're planning a re-vamp of one or both of those designs to fully take advantage of the electric powertrain.
Maybe Amazon wants to buy "american made" (or wants to avoid the PR created by buying "Mercedes" branded vans, so they made a marketing deal where Amazon buys Rivian branded eVito's or eSprinters and where the "american made bit is them screwing on the Rivian badge after shipping the vans to the US?
The Chinese EV market is crucial for any of these companies (Tesla's "profitability" depends heavily on carbon credits). Unfortunately for both Tesla and Rivian, the market isn't that hot at the moment but, more importantly, the battery makers and car manufacturers have largely caught up in the engineering, battery tech (actually, they probably lead there already) and software.
Tesla does not rely on regulatory credits for their profitability at all. In Q3 of this year, Tesla’s revenue for the quarter was $21.4 billion, of which $286 million was from regulatory credit sales. That’s about 1 percent of their revenue that they brought in for the quarter. They also turned a profit of $3.6 billion, so if you want to only apply regulatory credit sales to their profitability, it only makes up 8 percent of Q3 profit.
Even if you take away that $286 million in credit sales, Tesla was still more profitable than Toyota and many other legacy automakers. I think you should actually look at a balance sheet from Tesla’s recent quarters, as you wouldn’t have made the mistake to believe that they rely on regulatory credit sales for profit. It’s an outdated argument against Tesla that is completely invalid.
Also, the “car manufacturers” have not largely caught up to Tesla. Tesla’s automotive margins are industry leading at almost 30 percent, while say, Ford’s gross margins on their BEVs are in the single digits or even negative. If Tesla cuts prices, they’d have a lot of margin to work with. But if Ford had to, then do the math and you’d understand how crazy things are. It makes sense when you acknowledge that Tesla has been doing nothing but BEVs for the past 19 years, while legacy automakers like Toyota have downplayed BEVs for many, many years and focused mainly on ICE vehicles.
No one is touching Tesla in software, save for a couple of Chinese BEV makers like NIO. Toyota, the largest automaker by volume, is garbage at software and is quite literally scrambling right now, eyeing how Tesla has brought their cost to produce BEVs down so much to the point that Tesla is the most profitable mass producer of vehicles, ICE or BEVs. Chinese EV makers are following Tesla’s manufacturing techniques and design language, putting further pressure on legacy automakers. Jeep just went bankrupt in China. This is because they don’t sell any BEVs, and Chinese consumers that bought Jeeps in the past are now buying EVs from NIO, Tesla and other BEV makers.
They seem to actually be really good at making cars, and selling cars.
What they're terrible at is doing so profitably. They started at the upper end of the market, with relatively small purchases of raw material for their batteries and a high profile executive exit because of disagreements about their ability to turn a profit... then the pandemic hit. Commodity mineral prices are still WAY above normal, and I suspect they're slow-walking ramp-up of production (and further price hikes) in order to try and wait out price drops in the mineral market.
Icon's for the leadership that appears to be drinking on the job (or should be, if they aren't!).
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