Rivian reassures investors with cost-cutting moves, green credit sales amid weak EV demand
Rivian reassures investors with cost-cutting moves, green credit sales amid weak EV demand
Investors were reassured Thursday as Rivian Automotive confirmed its road to profitability, despite a difficult environment of falling electric vehicle (EV) demand and parts shortages that are cutting into production. Aggressive cost-cutting measures and a windfall in green car credits means the company will still achieve a gross profit in the fourth quarter, the company said. That update eased frayed nerves after Rivian, in its first ever quarterly revenue decline since going public three years ago, mopped up for losses.
The California-based maker of electric SUVs and pickup trucks rose nearly 2% in after hours trading. Rivian was also confident about the future, stating it also expects to deliver the full year of vehicles and generate an annual gross profit by 2025.
Rivian's record selling of regulatory credits is a key driver of its financial performance, expected to bring in USD 300 million each in 2024 and 2025, up from the USD 73 million in credits it generated in 2023. But the credits of automakers, which can be sold to offset environmental regulations, have become a critical revenue stream as EV demand grinds as interest rates rise and hybrid competitors steadily gain ground.
Rivian has been concentrating on selling green credits, as well as lowering production costs through renegotiating supplier contracts and revising its manufacturing process. That’s similar to what rival Lucid Motors is doing, which has also been unloading its luxury EV models, slashing prices to move them off showroom floors. The two companies are planning to launch cheaper models by 2026 to grab a bigger consumer base in the mass market.
Strategic partnerships, help support Rivian’s outlook. Amazon backed company, which has a joint venture with Volkswagen Group, is predicted to inject USD 5 billion into its finances.
Amid uncertainty about potential new tariffs under President-elect Donald Trump's administration, Rivian CEO RJ Scaringe told analysts the company is closely monitoring the situation and focusing on sourcing from suppliers that are less exposed to trade restrictions.
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