Despite Rivian Automotive Inc. (NASDAQ: RIVN) surpassing Wall Street expectations in its latest quarterly report, the electric vehicle (EV) maker remains at serious financial risk.
Joe McCabe, President and CEO of AutoForecast Solutions, has warned that Rivian is “one or two programs away from bankruptcy.”
While the company reaffirmed its production guidance for the year, McCabe’s statement highlights the precarious position Rivian finds itself in as it burns through cash at an alarming rate.
Rivian’s struggles: billion-dollar losses continue
Rivian’s financial performance is deeply concerning, with the company losing over $1 billion per quarter.
In Q2, Rivian reported a year-over-year increase in net losses, from $1.2 billion to $1.46 billion.
This translates to a staggering $43,000 loss per vehicle sold. Even with its electric vehicles priced starting at $70,000, Rivian is struggling to cover its high production costs, leading to delays in key projects.
One such setback is the suspension of plans to build a $5 billion plant in Georgia, initially intended for next-generation vehicles.
The news caused Rivian’s stock to plummet to a historic low of $8.40 in April, further underscoring the company’s financial difficulties.
Rivian stock faces pressure
Rivian’s financial challenges are compounded by external risks, including the upcoming 2024 US presidential election.
McCabe suggests that if Donald Trump is re-elected, potential rollbacks on key components of the Inflation Reduction Act, including tax credits for electric vehicles, could create significant headwinds for Rivian.
Additionally, persistent concerns about range anxiety, limited charging infrastructure, supply chain disruptions, and macroeconomic factors continue to weigh on the broader EV sector.
Market analyst Crispus Nyaga has taken a bearish stance on Rivian, warning that its stock could drop further to $10 soon, particularly if these challenges remain unresolved.
Can the Volkswagen deal save Rivian?
On the positive side, Rivian recently secured a lifeline through a deal with Volkswagen, which will provide $5 billion in funding through 2026.
Piper Sandler analyst Alex Potter called the partnership “consequential” not just for Rivian and Volkswagen, but for the auto industry as a whole.
However, it’s worth noting that VW remains a direct competitor, and history has shown that automotive partnerships often fail to yield the desired outcomes.
Whether this partnership will be enough to stave off bankruptcy remains uncertain.
Rivian’s future in the competitive EV market will depend heavily on its ability to stabilize financially and successfully navigate the growing regulatory and market challenges it faces.
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