rivian

Rivian (NYSE: RIVN) is reportedly looking at producing e-bikes even as the company failed to meet its 2022 EV (electric vehicle) production guidance due to supply chain issues.

2022 was a tough year for EV companies as they battled many headwinds. Not only Rivian, but many other EV companies like Tesla and Xpeng Motors also failed to meet their 2022 delivery guidance. Lucid Motors did manage to meet the guidance but its revised guidance was only about a third of the original guidance.

Bloomberg first reported that Rivian is looking at producing e-bikes. While it is not clear whether the company is looking at a bicycle or an electric motorcycle, Rivian does hold some patents for cycling components.

Rivian produces cars at its Illinois plant and is setting up a second plant in Georgia. It currently sells the R1T pickup and R1S SUV. It also makes delivery vans for Amazon, which is also its largest stockholder.

Pickups and SUVs are the most lucrative models for carmakers and Ford apparently gets most of its profits from its best-selling F-150 pickup.

Truist recommends buying Rivian stock. Among others, it is bullish on the company’s exposure to the most profitable segments of the US automotive market.

It remains to be seen if, in the long term, Rivian can make similar margins on selling electric cars and e-bikes. For now, it has lost around $1.5 billion in the last three consecutive quarters.

Rivian Looking at E-Bikes amid EV Competition

Here it is worth noting that while the market for e-bikes is higher than EVs in terms of unit sales, not many EV companies including Tesla have entered the space. Talking of Rivian, during the Q3 2022 earnings call, it said that it would delay the affordable R2 series of vehicles by one year to 2026 as it battles supply chain issues in the short term.

Meanwhile, like fellow startup EV companies, Rivian is posting massive losses and is burning billions of dollars in cash every quarter. At the end of September, it had nearly $13.3 billion as cash and cash equivalents.

Its cash pile came down by over $5 billion in the first nine months of 2022. After its blockbuster IPO where it raised nearly $12 billion, Rivian had over $18.4 billion as cash on the balance sheet at the end of 2021.

It is meanwhile looking at steps to lower its losses and cash burn and last week it laid off 6% of its workforce, its second round of job cut in less than a year.

In December, Rivian announced that it is putting on “pause” its deal with Mercedes-Benz to jointly produce electric vans in Europe.

Ford Sold Most of Its Rivian Stake

Ford, which was the second largest Rivian investor at the time of its 2021 IPO and held 101.9 million shares of the company at the end of 2021, last year sold 91 million shares for $3 billion.

The company had massive mark-to-market losses on its Rivian investment last year after booking significant gains in 2021.

During their Q4 2022 earnings call, Ford announced a quarterly dividend of 15 cents along with a supplemental dividend of 65 cents. Companies typically provide supplemental dividends when they book a one-time income, which in Ford’s case was the proceeds from the Rivian investment.

RIVN said that in the future it wants to maintain shareholder payouts between 40-50% of its free cash flows.

Ford’s dividend yield is higher than that of General Motors. There is a list of companies that pay good dividend yields.

EV Price War Escalates

Meanwhile, the EV price war has escalated as several companies have slashed prices amid growing competition. Also, companies are looking to enter newer markets in order to increase their sales.

Xpeng Motors showcased its G9 SUV and P7 Sedan at eCar Expo 2023 in Stockholm and the models are now available for ordering in Denmark, the Netherlands, Norway, and Sweden.

For now, Rivian sells in the US and Canada. However, as the company ramps up production it might also enter other markets, including Europe. Markets would now await the company’s Q4 2022 earnings release where it might provide guidance for 2023 EV deliveries.

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