Photo: Rivian
Rivian launched the re-engineered R1 lineup earlier this month with the main goal of cutting costs and making the company profitable. Rivian CEO RJ Scaringe explained the cost-cutting measures that will result in a 35% reduction in vehicle manufacturing costs.
In 2021, Rivian hit the bull's eye with the R1T, the first electric pickup truck sold in North America. People expected everything to go smoothly from then on and for Rivian to become a profitable car manufacturer, just like Tesla. However, things went in the opposite direction, with supply chain bottlenecks and economic conditions that made Rivian production grind to a halt in 2022. The company started burning cash, and investors worried that the company would fulfill Elon Musk's prophecy and become extinct.
Thanks to Rivian's fat cash reserves, it didn't happen like that, although continuing on the same path would not have been sustainable for long. The EV startup acknowledged that and prepared corrective actions to stop the bleeding. For most of 2023, Rivian executives explained the measures they took to cut losses and make the company profitable.
Some of these measures were good news for customers, who were promised vastly improved vehicles with the launch of the refreshed R1S and R1T this summer. These include battery optimizations, drive-train improvements, and new software that make the 2025 models vastly superior. The best example is the use of the new Enduro drive units, which were developed in-house. These are better than the ones Rivian bought from Bosch for the Quad-Motor models and are also cheaper to produce.
However, other cost-cutting measures had potential customers worried that Rivian would skimp on features and quality. The EV startup has made such decisions in the past. We remember how Rivian scrapped one of the horns, the 12-volt plug in the center console, the Meridian audio system, and even the driver monitoring camera. Thankfully, it doesn't appear that it took such drastic measures this time, as the refreshed R1 vehicles have been praised by everyone who saw one.
Instead, the carmaker has optimized production at its factory in Normal, Illinois, as Rivian CEO RJ Scaringe explained to Reuters during a recent factory tour. The EV startup removed over 100 steps from the battery-making process, 52 pieces of equipment from the body shop, and over 500 parts from the design of its electric vehicles. Also, thanks to factory retooling in the first quarter and the redesign of many components, Rivian achieved a 35% reduction in the cost of materials for vans and savings of "similar magnitude" for its other lines, as CEO RJ Scaringe told Reuters.
These savings are boosted by other measures Rivian took to make its vehicles cheaper to produce. The battery packs have been redesigned and are now easier to manufacture thanks to the new one-piece design. The new vehicle architecture also cut the wiring by 1.6 miles (2.6 km), reducing labor time and boosting productivity by about 30%. Scaringe previously discussed a 50% total cost reduction from factory retooling and vehicle improvements combined.
Rivian reported a net loss per vehicle of $38,784 in the first three months of the year. That would put the total cost per vehicle at about $120,000, so even a 35% cost reduction would allow Rivian to break even. However, this will not be obvious in the second quarter, which CEO Scaringe warned it would be messy. Given that production was halted for retooling and the refreshed models started sales in the second half of June, Rivian would not benefit until the third quarter.
Thanks to Rivian's fat cash reserves, it didn't happen like that, although continuing on the same path would not have been sustainable for long. The EV startup acknowledged that and prepared corrective actions to stop the bleeding. For most of 2023, Rivian executives explained the measures they took to cut losses and make the company profitable.
Some of these measures were good news for customers, who were promised vastly improved vehicles with the launch of the refreshed R1S and R1T this summer. These include battery optimizations, drive-train improvements, and new software that make the 2025 models vastly superior. The best example is the use of the new Enduro drive units, which were developed in-house. These are better than the ones Rivian bought from Bosch for the Quad-Motor models and are also cheaper to produce.
However, other cost-cutting measures had potential customers worried that Rivian would skimp on features and quality. The EV startup has made such decisions in the past. We remember how Rivian scrapped one of the horns, the 12-volt plug in the center console, the Meridian audio system, and even the driver monitoring camera. Thankfully, it doesn't appear that it took such drastic measures this time, as the refreshed R1 vehicles have been praised by everyone who saw one.
Instead, the carmaker has optimized production at its factory in Normal, Illinois, as Rivian CEO RJ Scaringe explained to Reuters during a recent factory tour. The EV startup removed over 100 steps from the battery-making process, 52 pieces of equipment from the body shop, and over 500 parts from the design of its electric vehicles. Also, thanks to factory retooling in the first quarter and the redesign of many components, Rivian achieved a 35% reduction in the cost of materials for vans and savings of "similar magnitude" for its other lines, as CEO RJ Scaringe told Reuters.
These savings are boosted by other measures Rivian took to make its vehicles cheaper to produce. The battery packs have been redesigned and are now easier to manufacture thanks to the new one-piece design. The new vehicle architecture also cut the wiring by 1.6 miles (2.6 km), reducing labor time and boosting productivity by about 30%. Scaringe previously discussed a 50% total cost reduction from factory retooling and vehicle improvements combined.
Rivian reported a net loss per vehicle of $38,784 in the first three months of the year. That would put the total cost per vehicle at about $120,000, so even a 35% cost reduction would allow Rivian to break even. However, this will not be obvious in the second quarter, which CEO Scaringe warned it would be messy. Given that production was halted for retooling and the refreshed models started sales in the second half of June, Rivian would not benefit until the third quarter.
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