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Rivian’s (RIVN -5. 23%) second quarter can be considered its biggest ever after the electric vehicle (EV) maker brought its next-generation vehicle platform and partnered with Volkswagen Group (OTC : VWAGY). Those significant events occurred toward the end of the quarter and did not have a significant impact on second quarter results.
Let’s take a look at Rivian’s most recent quarterly effects and why the company seems to be about to hit the corner.
Rivian’s second-quarter profit rose 3% year-over-year to $1. 16 billion, and the company delivered 13,790 cars in the quarter, up 9% from last year. It produced 9,612 cars in the quarter. Production fell year-over-year and sequentially due to a planned shutdown of its production plant for an equipment upgrade.
The company reiterated its forecast that it will produce 57,000 vehicles during the year.
The biggest challenge for Rivian is that it sells its cars for less than it costs to make them. This continued into the second quarter, generating a negative gross profit of $451 million. This equates to a loss of $32,705 per vehicle alone in the market. production charge and does not come with prices related to the sale of cars or businesses or studies and progression prices. Rivian said the gross loss negatively impacted through pricing of $59 million, or $4,278 consistent with the vehicle delivered, which would not come with its long-term structure.
In total, Rivian reported an operating loss of $1. 38 billion. Meanwhile, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) amounted to negative $860 million.
Unsurprisingly, given its negative gross margins, Rivian has continued to spend money. It posted operating losses of $754 million in the quarter. It spent another $283 million on capex expenditures, bringing loose money to a negative $1. 04 billion in the quarter.
The company ended the quarter with $7. 87 billion in cash and short-term investments. It also had a debt of 5,530 million dollars.
While they don’t appear in its second-quarter results, Rivian took a number of vital steps during the quarter to improve its gross margins and balance sheet.
Rivian has taken two main steps to improve its gross margins. First, it reorganized its main production facilities in Illinois. Management expects this improvement in the production process, that is, cycle times, plant utilization, and costs. Second, it has redesigned its second-generation cars to reduce costs. This included moving to a zoned network architecture to reduce the number of electronic control assemblies in its cars, reducing vehicle complexity, and switching to some lower-cost materials.
Rivian expects those changes to generate modest gross profit in the fourth quarter and for the full year 2025 as it looks to further reduce conversion and curtain costs. Management expects positive gross profits in 2025, although the company has to halt production for longer. More than a month to modernize and integrate new appliances at its Illinois plant ahead of the launch of its R2 vehicles.
In addition to those measures, the company has also reached an agreement on its balance sheet through an investment and partnership with Volkswagen. The German automaker will make an initial $1 billion investment in Rivian, with up to $4 billion in additional investments planned once their alliance project (JV) is approved and certain financial and technological milestones are achieved. Rivian hopes the JV will help it on the cost front, and Volkswagen’s length will help it get higher costs from suppliers.
Rivian is heading in the right direction. Its new diversity of redesigned styles and modernized production services are expected to lead to sustainable gross margins. Meanwhile, it is now subsidized by very giant corporations such as Volkswagen and Amazon, which is its largest shareholder and for which it manufactures electric vehicle delivery vans.
The company has prospects of being a big winner in the EV sector in the long run, but it is still young. At this point, any investment is more speculative.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Geoffrey Seiler has no position in any of the mentioned. The Motley Fool ranks and recommends Amazon and Volkswagen Ag. The Motley Fool has a disclosure policy.
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