Rivian (NYSE: RIVN) is looking to lay off around 6% of its workforce as the EV (electric vehicle) company faces spiraling losses which could only get compounded amid the price war.
Rivian has around 14,000 employees and would eliminate 840 positions as part of the layoffs. Notably, the company laid off around 6% of its workforce in July 2022 as well. Last year, even Tesla laid off employees. It is among the rare profitable pure-play companies and posted record revenues and profits in 2022.
In an internal Rivian memo seen by Reuters, RIVN CEO R.J. Scaringe said, “We must focus our resources on ramp and our path to profitability” even as he apologized for the layoffs. Scaringe said that the company’s “core objective” is to improve efficiency.
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.
While the US IPO market was dead in 2022 due to the tech sell-off, we could see some action now as tech stocks have rebounded. There is a list of some of the upcoming IPOs.
Rivian To Lay Off Employees in a Bid to Lower Costs
Companies, both established as well as newly listed, have been under pressure to cut costs. Many tech companies have laid off employees, at times under pressure from stockholders.
Here it is worth noting that Rivian is among the most well-funded EV startups. The company estimates that the cash is enough to fund its operations until the end of 2025.
However, it has still been taking measures to lower its cash burn. In December, it announced that it is putting on “pause” its deal with Mercedes-Benz to jointly produce electric vans in Europe.
During the Q3 2022 earnings call, Rivian said that it would delay the affordable R2 series of vehicles by one year to 2026.
Many EV companies including Lucid Motors and Nikola raised cash by selling stocks last year. The automotive industry is anyways capital-intensive and given the massive losses that startup EV companies are making on every vehicle that they sell; they need a constant infusion of cash.
RIVN Stock Fell to All-Time Lows In January
In January, Rivian stock fell to its all-time lows as EV stocks continue to witness a derating of their valuation multiples.
Rivian’s market cap was $153 billion at its peak which was in excess of Volkswagen’s then valuation. Even Lucid Motors’ market cap rose as high as $91 billion at the peak. Now, Rivian’s market cap is just above $18 billion.
There have been instances when the company’s market cap fell below the cash on its balance sheet. Markets have been wary of loss-making EV companies especially as the EV price war has escalated following Tesla’s price cuts.
Currently, RIVN 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.
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