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Who is more desperate here- VW or Rivian? Hmmm.... Interesti..
🕑 Added 2024-11-23 00:14:15 +0000 UTCWho is more desperate here- VW or Rivian? Hmmm.... Interesting video, takeaway notes included below.
https://youtu.be/tZLfwMv9zKc?si=sBfShPimLpBj67Yj
Key takeaway notes:
1. Rivian's Struggles:
- Rivian faces significant financial issues, losing tens of thousands of dollars on every car sold due to high production costs.
- In Q3 2024, Rivian reported a gross loss of $39,000 per vehicle, worsening from Q2.
- The company has burned through nearly $6 billion in negative free cash flow in 2023, with its cash reserves depleting rapidly despite a recent $1.3 billion infusion from Volkswagen.
2. Volkswagen's Challenges:
- Volkswagen is profitable but struggles with its transition to electric vehicles (EVs).
- Its EV software is glitchy and unreliable, leading to customer complaints and shrinking market share.
3. Joint Venture Details:
- In June 2024, Volkswagen agreed to invest up to $5.8 billion in Rivian over four years.
- The deal provides Volkswagen with immediate access to Rivian's advanced software and electrical architecture, considered industry-leading.
4. Investment Conditions:
- Investments are tied to milestones: Volkswagen will only release further funds if Rivian achieves two quarters of positive gross profit.
- Rivian has yet to fulfill these conditions, casting doubt on future funding.
5. Rivian's Optimistic Projections:
- Rivian claims its second-generation vehicles have 20% lower material costs, aiming for positive gross margins by Q4 2024.
- Analysts remain skeptical as production improvements have not reduced losses.
6. Financial Outlook:
- Rivian’s current cash reserves, including Volkswagen's payments, could last until mid-2026 without profitability.
- If it fails to achieve gross profit milestones, it risks bankruptcy, making further investments unlikely.
7. Volkswagen's Strategic Benefits:
- Even if Rivian goes bankrupt, Volkswagen retains licenses for its software and architecture, which it plans to use in future EV models.
- Volkswagen's Scout brand vehicles, debuting in 2028, will leverage Rivian’s technology and compete at lower price points, potentially undermining Rivian further.
8. Market Competition:
- Rivian’s cars face insufficient demand, with high starting prices ($70,000+).
- Volkswagen's cheaper Scout models could exacerbate Rivian's sales struggles if the company survives until 2028.
9. Outlook for Both Companies:
- The partnership addresses critical needs for both companies—capital for Rivian and software for Volkswagen—but neither’s long-term success is guaranteed.
- Rivian’s viability hinges on achieving profitability soon, while Volkswagen must refine its EV strategy to stay competitive.
10. Conclusion:
- Rivian’s financial trajectory appears dire, with high cash burn and no credible path to profitability.
- Volkswagen may emerge stronger with Rivian’s technology, but Rivian’s future as a going concern remains highly uncertain.
