rivian vehicle

The price of Rivian stock went up nearly 11% today at $29.8 per share after the company announced that it is on track to reach its year-end target of 25,000 vehicles produced.

In a press release published earlier today, the company stated that it produced 4,401 vehicles during the second quarter of the year – a figure that was in line with the company’s expectations for the period.

However, despite today’s uptick in the firm’s share price, Rivian stock accumulates a 71.5% loss since the year started while it is also trading 83.6% below its post-IPO high of $179.5 per share.

Back in March, Rivian (RIVN) was forced to reduce its production forecast for 2022 due to supply chain constraints. Analysts believe that the company needs to increase investors’ confidence in its ability to live up to the management’s ambitious goals.

Rivian’s Normal, Illinois factory has an installed capacity of 150,000 per year according to the company. The firm has plans to increase that maximum output to 200,000 units next year while it is also planning to build another facility in Atlanta, Georgia in 2025 as it expects that the demand for its electric vehicles will continue to grow.

For the construction of this facility, the company signed an agreement with local authorities of the state that would result in $1.5 billion worth of incentives for the company to locate its manufacturing compound there.

Supply Chain Constraints Affect Rivian’s Ability to Scale its Operations

The current environment is positive for electric vehicles as gasoline prices have soared due to the sanctions imposed by several countries on Russia amid its hostile actions against Ukraine.

Automakers have been pushing US legislators to pass a bill that would provide up to $52 billion in subsidies for chip manufacturers so they can ramp up their efforts to build facilities within the country that can provide crucial components to the automotive industry and other sectors.

However, lawmakers have been entangled in discussions concerning a wide range of topics and have failed to reach a middle ground on several topics – a situation that has led to a slowdown in the bill’s advance.

“Other countries are out there now cutting deals. And if Congress continues to dither, that dithering will send a message that the United States isn’t serious, and we will lose out on these once-in-a-generation investments and all of the jobs and national security benefits that come with it”, stated Gina Raimondo, the US Commerce Secretary in regards to the stalemate.

Does Rivian Have Enough Money to Keep Operating at a Loss?

rivian stock price chart
Rivian (RIVN) price chart – Source: TradingView

Obtaining enough financing to keep scaling its manufacturing capacity is a crucial task for Rivian’s management as the company is not yet producing enough money from the sale of its vehicles to generate positive free cash flows.

The positive news is that Rivian managed to secure a significant amount of funding during its initial public offering (IPO) and those reserves should help the company in staying afloat despite the current challenging macroeconomic conditions.

During the first quarter of the year, the company reported total cash reserves of $16.4 billion. In addition, the firm trimmed its losses from $1.6 billion during the same period last year to just $414 million while it burned around $800 million in cash compared to $1.45 billion it disposed of during the first quarter of 2021.

In addition, Rivian has an initial order of 100,000 vehicles from Amazon for its commercial electric delivery van (EDV).

As long as Rivian can maintain its cash burn under control and keep increasing its sales, it is a matter of time for the firm to ramp up its cash-flow generation capacity to positive territory.

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