Electric vehicle maker Rivian simplifies production, cuts costs and aims for first profit

By Abhirup Roy

NORMAL, Ill. (Reuters) – Electric vehicle maker Rivian’s drive to cut costs and realize its first profits has eliminated more than 100 steps from the battery manufacturing process, 52 pieces of body shop equipment and more than 500 design parts for its flagship SUV and pickup trucks.

The result of Rivian’s retooling of its manufacturing process is a 35% reduction in material costs for the vans and savings of “similar magnitude” for its other lines, CEO RJ Scaringe told Reuters.

Rivian’s overall cost of building its electric vehicles has “improved significantly,” he told Reuters during a factory tour Friday in Normal, Illinois, 125 miles (209 km) to the south from Chicago. “The design of the parts and the design of the factory makes it easier to build the vehicle.”

Reuters got an exclusive look at Rivian’s four-million-square-foot factory, with investors eager to learn more about the scale and pace of savings after a three-week shutdown in april.

Cutting costs is key for Rivian and other electric vehicle startups because high interest rates have discouraged some potential customers from electric vehicles that are typically more expensive to purchase than their gasoline-powered counterparts. Rivian has never made a quarterly net profit since its founding in 2009 and lost $1.5 billion in the first quarter.

“We did a similar process of looking at and redesigning a number of components based on cost, so we reduced the material cost of the vans to over 35%,” Scaringe said, referring to the closure of the van line in January.

Built primarily for major shareholder Amazon, Rivian’s vans account for about a fifth of its revenue.

Market leader Tesla has cut prices, but some smaller electric vehicle makers, including Fisker, have filed for bankruptcy.

Rivian is on stronger financial footing, but is losing nearly $39,000 on each vehicle and counting on cost savings to help it turn a gross profit this year.

WORK SMARTER

In addition to simplified assembly and less equipment at the factory, the changes come to the second generation of Rivian R1 vehicles with company-built drive units, upgraded software and new battery packs.

Making these batteries is now easier. The modules have been redesigned and are made from a single piece instead of separately constructed walls and floors.

The vehicles also feature a new architecture intended to reduce weight and improve manufacturing efficiency, including removing 1.6 miles of wiring from each vehicle.

These changes reduced labor time and increased the assembly rate on the manufacturing line by approximately 30%.

“All of this together allows us to get back on track to profitability and having a positive gross margin,” said Tim Fallon, the plant’s vice president of manufacturing.

But investors are worried. The factory closure means Rivian is targeting production of 57,000 vehicles – almost as many as last year – and the company’s shares have been cut in half this year.

Cash and short-term investments decreased by about $1.5 billion in the first quarter to just under $8 billion. Rivian said so…

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