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Investors may not fully appreciate what Rivian (RIVN -5. 23%) has already done so far in its young history. Building an automaker from scratch, in the midst of the entire transition from the internal combustion engine industry to electric cars (EVs), has been a daunting task. Consider that 99 automakers that begin with the letter “A” have gone bankrupt in recent decades.
The good news for Rivian’s long-term investors is that the company has a real chance of succeeding, and the second quarter shows how the company has made progress in its operations and fee reductions. Let’s dig!
Many technical innovations have been made in the company’s operations. One of the most overlooked innovations over the summer came when Rivian upgraded its R1 cars to the second generation. The assistance may drive demand, but the big win was the power gains and load reductions.
Specifically, the frame of the second-generation R1 was redesigned by removing 65 parts and cutting around 1,500 joints. In addition to structural improvements, the company brought forward the plant’s cycle time to increase vehicle production rates by 30 percent. In addition, the second generation R1 features the new Ascent Tri internal propulsion unit that improves functionality and reduces production prices by approximately 32%. The Enduro Dual Performance drive unit further reduces this load, as you can see below.
Another example discovered by delving into the main points is the R1 front cross member of its battery, which has been reduced through the use of high pressure casting allowing a 47% relief in loads. Rivian has gone from 17 electrical assemblies (ECUs) to seven, which has eliminated 1. 6 miles of beam length and especially reduced the load on the ECU.
These improvements discussed above, combined with increased sales prices and tailwinds from unfired curtains, are expected to create a 20% relief in curtain prices when comparing cars produced in the first quarter of 2024 to those that will be produced in the fourth. quarter of 2024, which is critical for the company, generating positive gross margins this year.
Ultimately, by combining charge discounts and power upgrades, Rivian increased the money spent on operating activities by 41% compared to the first quarter of 2024. Developments like this make the difference between a company that will continue to attract investment, such as Volkswagen’s commitment of up to $5 billion, and corporations that are about to close their doors, such as Fisker.
Volkswagen’s commitment and the upcoming joint venture point to a progression that some investors overlook: the company’s in-house creation of software. Rivian develops the vast majority of its software, which has been deliberately designed to be scalable and applicable across many different hardware configurations. However, Rivian’s vertically incorporated software platform could potentially be used through other automakers investing in Rivian for joint ventures, such as Volkswagen, or as part of a licensing agreement that could eventually generate profits for the company.
The most important aspects for investors to pay attention to going forward are the company’s ability to reduce costs, maintain shipments at expected levels, and achieve positive gross profit in the fourth quarter. Rivian has already increased its per-vehicle loss from a loss of $38,700 per vehicle in the first quarter to $32,700 per vehicle in the second quarter.
Rivian’s second quarter wasn’t enough to convince markets to increase inventories, but keep in mind that Rivian’s stocks soared more than 90% between May and mid-July. If investors dig deeper into the details of the second quarter, they’ll find a lot to appreciate in the tariff reductions, power innovations, and cash flow that is expected to last through R2 vehicle production in 2026.
Daniel Miller doesn’t have any spots in any of the titles mentioned. The Motley Fool does not have any positions in any of the titles mentioned. The Motley Fool has a disclosure policy.
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