Rivian Targets Q4 Profit with Cost Cuts, Green Credits Amid Lower EV Demand

Amid challenging market conditions and component shortages, Rivian aims to post its first gross profit in Q4, driven by cost-saving strategies and rising green credit sales. The company, which saw a revenue drop in Q3, is focused on meeting delivery targets and securing a profitable path forward.

Rivian Boosts Green Credit Sales and Cuts Costs to Tackle High EV Market Expenses

Despite component scarcity disrupting production and lackluster EV demand, Rivian announced on November 7 that it was on course to earn a gross profit in the fourth quarter, boosted by cost reductions and a strong increase in green car credit sales, per Reuters.

Investor concerns about Rivian's first quarterly revenue decline since going public three years ago were allayed on Thursday when the company reiterated the projection for full-year deliveries.

After hours, Rivian's stock was up almost 2%. Additionally, the business anticipates reporting a gross profit each year in 2025.

Regulatory credit sales were projected to reach over $300 million this year and next, a significant increase from the $73 million recorded in 2023.

The California-based electric SUV and pickup truck manufacturer has been cutting costs by renegotiating supplier contracts and modernizing its manufacturing methods.

Buyers who face high borrowing costs select less expensive gasoline-electric hybrid vehicles over battery-powered ones. Thus, Rivian and its competitors must cut expenses.

Similar actions assisted rival Lucid in reducing its losses despite lowering prices to attract buyers for its high-end Air vehicles. After hours, Lucid's stock increased 5% as the company began accepting orders for its new Gravity three-row SUV.

Both firms are working to ensure they have enough cash to last until 2026 when they hope to launch more reasonably priced models that appeal to the general public.

Lucid Secures $1.75B in Funding, Rivian Gains $5B Lifeline Amid Policy Uncertainty

Supported by the Public Investment Fund of Saudi Arabia, Lucid raised $1.75 billion through a private placement and initial public offering last month. With Amazon's support, Rivian joined the German carmaker Volkswagen Group in a technological joint venture that will give it a $5 billion lifeline.

EV manufacturers and the auto industry are preparing for President-elect Donald Trump to revoke many of the current pro-EV policies and slap new tariffs on cars from Mexico and possibly other nations.

"We're closely analyzing a variety of outcomes that could play out with the change in administration," Rivian CEO RJ Scaringe told Reuters in an interview.

During a post-earnings call, he informed analysts that the company has been concentrating on buying from suppliers not subject to high tariffs.

Rivian Cuts Production Forecast Amid Part Shortages, Plans for Recovery with New Battery Deal

Due to production disruptions in the third quarter caused by a severe shortage of a metal component used in the drive unit of Rivian vehicles, the business had to lower its full-year production projection from 57,000 cars to between 47,000 and 49,000 vehicles. However, the company stuck to its yearly target of delivering between 50,500 and 52,000 cars.

"We weren't able to build all the products and the mix of products that we planned and so that affected us on the demand side and on the revenue side," Scaringe told Reuters.

According to figures provided by LSEG, Rivian's third-quarter sales fell more than a third to $874 million, significantly less than the $989.6 million analysts on average projected.

According to Scaringe, the part shortage will not hamper production next year. However, a three-week suspension of its sole manufacturing site in Normal, Illinois, for significant retooling already affected production in 2024.

Additionally, Rivian signed a five-year battery supply agreement with the Arizona unit of LG Energy Solution for its less expensive, smaller R2 SUV.

Under Biden's Inflation Reduction Act, which offers incentives to EV customers, the arrangement will assist the company in meeting domestic production criteria.