Rivian ( (RIVN) – Get Rivian Automotive Inc. Report) is preparing for the tough times ahead.
The young manufacturer of electric vehicles, considered one of Tesla’s ( (TSLA) – Get Tesla Inc. Report) great rivals, wants to prevent a possible recession from disrupting its projects.
The company is currently increasing production rates to meet significant demand. The order book as of May 9 was over 90,000 vehicles, the company said when publishing its first-quarter results in May. This phase of increasing production rates, one of the most crucial in the life and survival of an automotive company, is taking place during a turbulent period for the entire automotive industry.
Supply chains have been deeply disrupted by the covid-19 pandemic, which penalizes suppliers. Shortages of chips and soaring prices of raw materials such as nickel, palladium, and cobalt add to the challenges of assembling cars. All of these hurdles only drive up costs, further widening the losses for young automakers like Rivian.
“Supply chain continues to be the bottleneck of our production. This challenge has continued across a small handful of technical components such as semiconductors, as well as a few non-semiconductor components,” Rivian wrote in a letter to its shareholders in May.
The net loss was $1.6 billion in the first quarter compared to a loss of $414 million for the same period in 2021. The increased losses were due primarily to higher operating losses, the company said.
Rivian Plans to Reduce Its Workforce by 5%
Rivian expects to use $2.6 billion for capital expenditures in the second quarter ending this month. The company said that it had $17 billion in cash as of March 31, and assured that this money will be enough to cover its spending through the launch of its next model, a lower-cost vehicle called R2, at a planned new factory in Georgia in 2025.
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However, the company would like to control its costs. According to Bloomberg News, Rivian plans to cut hundreds of jobs. These layoffs would only apply to non-manufacturing roles, including teams with duplicate functions.
In total Rivian plans to lay off 5% of its 14,000 employees, says Bloomberg, which quotes anonymous people familiar with the matter. Rivian was founded in 2009 and went public in 2021. It produces three electric vehicles (the R1T pickup truck, the R1S SUV, and the RCV commercial van), and has operations in Irvine, California, Normal, Illinois, and Plymouth, Michigan. It’s also present in the U.K. and in Canada.
This information affected Tesla shares, which lost 6.44% at $29.93 during the July 11 session. Year-to-date, Rivian shares are down 71.1%.
Rivian declined to comment.
If Rivian confirms these job cuts, the announcements of which are expected in the coming weeks, the company will follow in Tesla’s footsteps. Last month, Elon Musk’s group laid off around 200 workers in a California office focused on its auto pilot system.
In a company-wide email sent in June, Musk warned of a “”super bad” feeling about the global economy and cautioned on impending job cuts.
The tech tycoon also warned that: “Tesla will be reducing salaried headcount by 10% as we have become overstaffed in many areas.