A report from Bloomberg has revealed that the California-based manufacturer of electric vehicles, Rivian Automotive, is reportedly working on the development of an electric-powered bicycle.
The company’s plans were reportedly discussed by its Chief Executive officer, RJ Scaringe, with some of the EV maker’s staff last Friday and a group of engineers could already be working on the project, Bloomberg’s company sources confirmed.
On multiple occasions, Scaringe has made comments that suggested Rivian’s interest in commercializing this kind of product. However, it is unclear if the company will be focusing on a bike or a motorcycle. The report is surfacing a few weeks before the company publishes its financial results covering the fourth quarter of 2022 along with its annual report. Analysts will probably make inquiries about the e-Bike project during the upcoming earnings call.
During the first nine months of 2022, Rivian (RIVN) produced 14,317 vehicles and delivered 12,278 units. However, in October last year, the firm was forced to recall 12,000 vehicles as it determined that “the fastener connecting the front upper control arm and steering knuckle may not have been sufficiently torqued”.
Meanwhile, the firm reportedly had a preorder backlog of 114,000 units of its R1 pick-up along with the long-standing order of 100,000 units made by Amazon for its electric-powered delivery vans.
Is It a Good Idea for Rivian to Build an e-Bike?
Focusing on the development of a third product, as would be the case of an e-Bike, does not seem logical from a business standpoint as the firm is still scrambling to keep expanding its manufacturing capacity at the Normal, Illinois plant.
Comments made by the firm’s Chief Financial Officer, Claire McDonough, indicated that Rivian has been struggling with a “high fixed cost structure associated with running high-volume production lines at low volumes”. The firm told analysts that it expected to produce a total of 25,000 vehicles in 2022.
“The supply chain continues to be our largest source of uncertainty as we continue to ramp production. We’ve experienced five days of production downtime in October and November due to a lack of supply of a key component, which limited our quarter-to-date production”, McDonough commented during the call.
Manufacturing another product would put further pressure on the firm’s supply chain and add up some unnecessary headaches for the management team at a point where it should be focusing on ramping up production volumes as fast as possible. Moreover, another source of concern for Rivian could be its elevated cash burn. During the first nine months of 2022, the company’s negative free cash flow ended at $4.7 billion while its cash reserves went down from $18.1 billion to $13.8 billion.
At that pace, even though it would still take Rivian two years to run out of cash, the management may opt not to make capital investments that are not considered necessary for the success of its core business. This is reflected by the latest decisions made by the firm concerning its headcount as Rivian laid off 6% of its employees – around 800 people – earlier this month.
The Micro-Mobility Market is Booming and Rivian May Have Noticed
The global micro-mobility market is booming, with estimates from The Brainy Insights seeing the size of the market expand from around $48 billion in 2021 to $202 billion by the end of 2030, implying a 17.5% compounded annual growth rate.
Meanwhile, estimates compiled by Statista indicate that the United States is the largest region in terms of market size. The value of the US micro-mobility market alone could range between $200 and $300 billion by 2030 while the demand in China and Europe will also be significant with the lowest estimates pointing to market values of $100 and $30 billion for each region respectively.
If Rivian believes there is an opportunity to quickly and easily build a production line for this kind of product, it could be a way to produce some money and positive cash flow for the business so it can avoid, or at least postpone, a capital raise that may result in the dilution of existing stockholders.
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