Rivian Automotive, Inc. (NASDAQ RIVN), despite exceeding Wall Street expectations in the latest quarter report, remains at serious risk financially.
Joe McCabe of AutoForecast Solutions has warned Rivian that it is “one or even two programs away” from bankruptcy.
McCabe’s statement, while confirming the company’s production guidance for the coming year, highlights Rivian’s precarious financial position as it burns cash at an alarming pace.
Rivian’s struggles continue: billion-dollar losses
Rivian’s financial performance, which sees the company lose over $1 billion each quarter, is very concerning.
In Q2, Rivian reported an increase in net losses from $1.2 billion up to $1.46billion.
This translates into a staggering loss of $43,000 per vehicle sold. Rivian struggles to cover its high production cost, even with electric vehicles starting at $70,000. This causes delays in key projects.
One of these setbacks is the suspension plans to build a $5 Billion plant in Georgia initially intended for vehicles of the next generation.
The news caused Rivian’s stock to plummet in April to an historic low of $8.40, further highlighting the company’s financial struggles.
Rivian stock faces pressure
Rivian’s financial problems are compounded by outside risks, such as the upcoming US presidential election in 2024.
McCabe suggests that, if Donald Trump wins a second term, he could roll back key components of the Inflation Reduction Act. This includes tax credits for electric cars.
The broader EV industry continues to be impacted by persistent concerns about range anxiety. Limited charging infrastructure, supply-chain disruptions, and macroeconomic issues continue to weigh heavily on the sector.
Market analyst Crispus Nyaga took a bearish position on Rivian and warned that its stock price could fall further to $10 in the near future, especially if these issues are not resolved.
Can the Volkswagen deal help Rivian?
Rivian has recently been given a lifeline by a deal with Volkswagen that will provide $5 billion of funding through 2026.
Alex Potter, an analyst at Piper Sandler, called the partnership “consequential”, not only for Rivian or Volkswagen but also for the entire auto industry.
It’s important to note that VW is still a direct competitor. History has shown that many automotive partnerships fail to produce the desired results.
It is still unclear if this partnership will be sufficient to prevent bankruptcy.
Rivian’s success in the competitive EV marketplace will be heavily dependent on its ability both to stabilize financially as well as navigate the increasing regulatory and market challenges that it faces.
This post Is Rivian really ‘one or Two programs away from bankruptcy? This post may be updated as new information unfolds
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