Shares of Rivian (NASDAQ:RIVN) are in the spotlight after the company released its first-ever annual shareholders letter. In the letter, CEO RJ Scaringe addresses Rivian’s progress since its initial public offering (IPO) and outlines future plans. Notably, Scaringe admits that “capital markets have changed dramatically” since RIVN stock debuted.
The CEO mentions Rivian is focusing on its 2025 launch and ramp up of the R2 vehicle platform. Vehicles built on the platform will be more affordable than current models and equipped with a new 800-volt battery.
In order to fund the R2 platform, the company must dig into its $17 billion in cash on hand. Meanwhile, Wall Street estimates Rivian will burn through $13 billion to $14 billion in cash between 2022 and 2024.
Furthermore, Scaringe believes the battery supply chain will change drastically. He expects production capacity to “expand by more than 20 times” over the next decade. As a result, Rivian is actively trying to build relationships with cell suppliers in order to create cost advantages over time.
With that in mind, let’s get into the details of the letter.
RIVN Stock: Rivian Releases Its First Shareholders Letter
- Scaringe states Rivian will “front load some of [its] spending.” However, these costs should ultimately create competitive advantages and aid in economies of scale.
- The company’s facility in Normal, Illinois has the capacity to produce 150,000 EVs per year. Rivian’s production goal for 2022 is 25,000 vehicles.
- Rivian has dealt with ramp challenges, which Scaringe characterizes as “nontrivial.” Still, he remains optimistic Rivian will be able to address supply chain issues to ramp up production.
- Meanwhile, analysts don’t believe Rivian will be able to sell 100,000 vehicles until 2024. That’s the same year analysts predict the company will achieve yearly positive gross profit. Rivian currently has a backlog of 90,000 orders for its R1 vehicles.
- The arrival of the R2 platform is similar to a business strategy employed by Tesla (NASDAQ:TSLA). Models S and X were created on Tesla’s first platform, while Models 3 and Y were created on its second platform.
- In order for the company to succeed, Scaringe notes that Rivian must have “compelling gross margins.”
- Over the long term, he believes reinvestment of profits back into research and development will “serve as a sustainable basis for future growth.”
- Finally, Scaringe concludes the letter by stating the Rivian team remains “hyper focused on execution” despite the challenges that lay ahead.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.