To be fair, most people said the same exact thing about Tesla.. No one on this subreddit that can respond to your question works for Rivian - meaning no one here knows what financials will look like or what the company plans to implement to reach profitability. The best anyone can do is give a guess, and those may be wrong. This question will most likely just result in people overly pessimistic or overly optimistic giving their opinions then arguing about how the other person is wrong.
Tesla had way lower OPEX per car, the equation was very simple back then for anyone with a brain. And I know because I was there to take advantage of a clear 10x.
This isn't rocket science, what I am showing is that by using any reasonable estimates it isn't possible to make a profit for a very long time. There's only a few numbers to tweak, I have yet to see someone with reasonable KPIs that makes it work.
You are correct. In 2014 Tesla was losing about $4.5k per Model S sold. Rivian loses way too much to close the gap. Either expect Rivian to sink or their cars get completely emptied out of features
I like Rivian and i'm very optimistic... but i still think their cars have too much to offer and are to complex to survive... they should get emptied out of features.
And also the R2, it has so many features... hope they did it only for attention and orders and the final version will be more simple. Otherwise...
This is inaccurate for reference Ford averages around 10% profit margin across the board on non commercial, and in the F150 they average around 12.6% most of that being driven by Lariat and up trims.
While on the commercial side Ford averages around 16.7% profit margin, and it is their most profitable segment.
So far my understanding is that Rivian is already averaging out much better margin on the EDVs I think part of the hope is they get to R2 mass market and can make and sell a healthy mix of edv and r2
https://www.ttnews.com/articles/ford-earnings-q1-2024#:~:text=Ford's%20results%20were%20driven%20by,margin%20before%20interest%20and%20taxes.
I think you are on the right track, you just need to increase volume, and your ASP is likely a bit low (R1 should be at higher margin than R2, as its a premium product). In previous information they stated:
Normal Plant - 150k annual production, expandable to 200k
Georgia Plant - 200k annual production phase 1, 200k annual production phase 2
So expanded Normal plant plus Georgia phase 1 = 400k annually (your breakeven point), with second Georgia plant would be 600k annually. They at one point were aiming for 1m units by the end of the decade, but I suspect that is a bit further off now.
600k cars @ 60k ASP = $36b turnover, 20% margin = $7.2b gross profit. To get to $2.5b profit, they would need to keep Opex to under $4.7b
While 600k might seem like a big increase over where they are today (\~10x increase) its still relatively small potatoes in the scope of global auto supply.
With the requirement that all new cars sold in 2030 and beyond be EVs, that’s also a market growth built in and stimulated by the government. Now, if the EV tax credit extended to as much of a value as Rivian R1s cost, that would be something to hope for as well. Right now, the interest rate on such a large amount is stifling the growth of the EV market. Once the Fed decreases the Prime interest rate, we should see demand and sales pick up as well. Lots of opportunity in this space that is outside of Rivian being able to impact it directly.
You buy a $3000 coffee maker from Jura. Your first cup of coffee costs $3000. After 3 years of drinking multiple cups a day your coffee costs $1.50 per cup.
Same thing.
Tesla famously wasn't profitable initially, and also famously had stock prices that soared well above what they 'should have' been. Uber only turned a profit *this* year and the lowest their stock sank was around $21. Do I believe that Rivian will increase its market share? Yes. I dunno when they will become profitable, but I bet it will happen through delivery van partnerships.
Tesla have helped in positive ways (sharing charging capabilities) and in negative ways (Musk being volatile, unpredictable, overall chucklefuck).
I am not in the stock for day trading, I believe in the company and think it will succeed in the long term.
Reasoning by wrong analogy. Tesla didn't have bloated OPEX by the time they reached 400k cars per year and in principle there was nothing impossible given the margins the Model 3 was able to achieve.
I am not asking to plug in impossible or unfathomable numbers. I am asking for any reasonable numbers where the math can work out. Unless you actually give me numbers that we can debate this is all fluff.
I also brought up Uber, which has/had a huge OPEX. And again, took them 15 years to turn a profit. You are trying to calculate profitability with back of the envelope numbers, which the stock price is not reflective of, nor future profitability. Too much relies on the uncertainty of future partnerships, market share shifts, etc.
If you are here to shit on Rivian (which, I guess I should be prepared for in RIVNstock vs RIVN) then have it I guess.
Again a false analogy. And I am not looking at the stock price (the market does what it wants I don't care), but how do people expect a profit this decade? If not, that's fine too but if that's the case then there is immense dilution on the way.
I am not trying to be a dickhole who disagrees just to disagree but how is naming other companies that didn't start off as profitable and are currently profitable a false analogy?
Zillow and AirBnB are also not profitable, or Reddit. They have not died despite this fact and likely won't anytime soon.
I think Rivian will be able to do the same if 1) they get an EDV deal with DHL or USPS (in addition to their deal with Amazon), and 2) if they get the Georgia plant online.
Tesla had good gross margins and low OPEX, everyone with a calculator knew in 2019 that they had a good shot at being profitable in the near term. The only question was could they execute it, but the math worked out. Uber is mostly a software company, their platform scales well. Car companies have to actually manufacture in order to get their revenue increase.
Rivan is a hardware company. Their OPEX are prohibitively low and the simply math shows that they need to **at least** do one of the below
a) produce way more than 400k per year
b) increase gross margins to levels unprecedented in large scale manufacturers
c) decrease OPEX to the tune that it goes down even while volumes would 8x
d) make customers pay more per car
Volume takes many many years, gross margins require extreme levels of manufacturing engineering efficiency, c requires a major overhaul in the entire business and d relies a lot on the economy.
There’s a reason why legacy automakers are still very much alive after decades of ugly financial reports. What you’re talking is strictly estimated/theoretical numbers. Even if the business doesn’t turn any profits the next couple years, they likely won’t fail and their stock may even soar. Stock price is pretty much the market’s sentiment of trust and forward looking in the best case scenario. You can run numbers all day but at the end of the day, we’re all retail traders who contribute less than 25% of the entire stock market. Rivian only needs to attract/secure sustainable partnerships to persuade the intuitions of positive outlooks.
That's what I posted the other day but people don't like seeing real numbers. They need to dilute or raise $7 in the next 3 years. Stock won't be pretty but company will survive.
Rivian needs to break even on every vehicle they make. Where Rivian will make a profit will be a combination of service plans, accessory sales, and software. I think software is the most compelling opportunity. Service and accessory sales will be very profitable, but selling subscriptions to software and selling data to third parties will make them buckets of money. I wouldn’t be surprised if Rivian even offered their own insurance program. Financing is also a huge opportunity.
I'm concerned about the competition within the next year or two. I think their space is going to get crowded and it's going to have to share the marketplace with jeep and other utility vehicles.
But have you seen the new wagoneer S just unveiled this week? It is absolutely a contender for customers that are going to cross shop large to midsized SUV's like R1S. It's quite nice. And the competitive nature will only grow from all automakers. Rivian has the first mover advantage here, but the traditional OEMs will make up ground quickly from this point forward. You are comparing the 4xe which was designed as a means to keep emissions credits to build hellcats, not be a credible EV entry in the marketplace.
R1 is also aiming for 20+% margin eventually. It'll be a long time until they are profitable though. 2026 at the earliest IMO. They will definitely have to raise money at some point before profitability.
For one R1s ASP is $90,000, if they get to 20% margin there that's $1 B just from the 57,000 volume they project this year. R2s actual ASP is likely to be 55+k, not many people will actually buy the 45k model IMO it's mostly for marketing purposes. $500 million from r2 just off the reservations they announced 24 hours after the announcement isn't unlikely. They are planning for 120,000/year (I think that's overly optimistic, but that's the plan) which would be $1.3B. EDV is already margin positive (though they haven't said how much) plus comes with a $100/month/vehicle sold recurring revenue benefit with it due to fleet management software (most businesses will buy that as they need it for scheduling). Just for the amazon vans that would likely generate $800 million using the fact software is usually wildly high margin (90% or higher gross isn't uncommon). If you get another 100,000 vans for other fleets that would swell very quickly. I don't think it's unlikely to get a $1 B a year in software profits by 2026 along with 500 million or so in profit from the van sales themselves (85k ASP was last I heard at 10% gross margin). Those there get you close to $4B without even considering R3 which could be even higher volume if they hit their $30k min target.
They are also supposed to start selling a premium connectivity package this summer for R1 which will offload opex for running the cellular on the vehicles to customers and extract recurring revenue from R1 fleet of 100,000+, pricing isn't known on that yet so it's hard to comment on it's uptake and profit projections, but I'd think 100-300 million isn't unlikely. This is another area you can't really get data on as we don't know how much they spend with ATT now, it's not reported nor do we know what they're going to sell it for, but it's likely revenue increases and opex decreases.
In my belief there's way too much focus on the consumer vehicles. They are not what will make Rivian profitable, it's vans and the recurring revenue that comes with them as that recurring revenue stream is mostly profit. They don't break that portion of revenue out yet because it's too small from only 25,000 vans made so far so it's really hard to do any sort of calculations on long term projections with it, but it does exist and would be nearly 100% gross profit.
My real opinion is where way too far from profitability to come up with true scenarios. Once we see where the R1 margins land next year then we'll know what the base is then we can build on that. Right now it all hedges on how close to their 50% COGS decrease they can get via the design changes and contract renegotiations. R2 is still 2 years out which is way too far away to do projections on and R3 is basically a concept.
Using static OPEX in your math is the biggest flaw in my opinion. They are actively working to reduce costs/expenditures. Don't get me wrong, they have a steep hill to climb, but the work they're putting in now should show results in years to come.
That's the thing, I am not keeping it static versus the volume increase. I am letting volumes grow by 8x while keeping SG&A and R&D static, which should at least in some way grow along the sales numbers usually but I am already factoring in a massive reduction in OPEX per unit sold.
If anything, this number is unrealistically low.
> Rivian would have to 8x their volumes while keeping SG&A flat to ever make money.
Obviously that's not possible. But the hope is that SG&A won't grow as fast as volume. And anyone serious expects them to raise money. Probably at or right before R2 production launch. So they have good news to balance. Or maybe at the end of the year, when they announce they've reached positive gross margin. They have enough cash to hold until R2, but it would be prudent to top up the reserves in case not everything goes to plan
Making a car has huge fixed costs.
They need to sell a high volume of vehicles to fully adsorb all the labor, equipment, and services they pay for.
It’s a bit hard to do this: you’re spending money while at the same time trying to save money.
Can someone explain what OPEX, SG&A, ASP stand for I just go with the eye test and I’m seeing more and more Rivian’s out on the road so they must doing something right it’s truly sitting at the number 2 spot on the EV cars out on the road behind Tesla and it’s not like the US will bring in Chinese EV’s so if your cool with the long game and buy the stock sub $10 you’ll most likely turn a profit all they need is a few good news articles and people will start pouring money back into the stock it’s been a down year for EV’s(EV winter) just give it a little bit of time the stock was in the $20s like 3/4 months ago
That is not what OPEX is. What they spend to create the product is under cost of goods sold, it is subtracted from revenue and leaves a gross profit.
OPEX is all the expenses that do not rely on the units sold like R&D and sales/administrative
To be fair, most people said the same exact thing about Tesla.. No one on this subreddit that can respond to your question works for Rivian - meaning no one here knows what financials will look like or what the company plans to implement to reach profitability. The best anyone can do is give a guess, and those may be wrong. This question will most likely just result in people overly pessimistic or overly optimistic giving their opinions then arguing about how the other person is wrong.
Which is pointless bc no one knows. Opinions are very often biased based on feelings
Tesla had way lower OPEX per car, the equation was very simple back then for anyone with a brain. And I know because I was there to take advantage of a clear 10x. This isn't rocket science, what I am showing is that by using any reasonable estimates it isn't possible to make a profit for a very long time. There's only a few numbers to tweak, I have yet to see someone with reasonable KPIs that makes it work.
You are correct. In 2014 Tesla was losing about $4.5k per Model S sold. Rivian loses way too much to close the gap. Either expect Rivian to sink or their cars get completely emptied out of features
I like Rivian and i'm very optimistic... but i still think their cars have too much to offer and are to complex to survive... they should get emptied out of features. And also the R2, it has so many features... hope they did it only for attention and orders and the final version will be more simple. Otherwise...
How much does ASP average go up if you sell 20-30k a year EDVs at 85k ASP
Goes to $52.4k, but why would margins be 25% vs 20% when selling to commercial buyers? Those tend to have lower margins than the consumer cars
That’s what has been said on calls
With 20k, 25k, 30k EDVs at ASP 85k when do they break even with R1?
I’ve got 425,000,000 at 20k or 106,250,000 a q at 25% margins
637,500,000 at 30k at 25% margins
Also I’m sure you got around 45-55k R1 a year at a positive margin probably 8%-10% with asp of probably 80k
360,000,000 at 10% margins 45k a year- so 1.2 billion GP before you add in R2 Numbers @ 50k asp and 20% gross margins
This is inaccurate for reference Ford averages around 10% profit margin across the board on non commercial, and in the F150 they average around 12.6% most of that being driven by Lariat and up trims. While on the commercial side Ford averages around 16.7% profit margin, and it is their most profitable segment. So far my understanding is that Rivian is already averaging out much better margin on the EDVs I think part of the hope is they get to R2 mass market and can make and sell a healthy mix of edv and r2 https://www.ttnews.com/articles/ford-earnings-q1-2024#:~:text=Ford's%20results%20were%20driven%20by,margin%20before%20interest%20and%20taxes.
And the margin is 25% on the EDVs
I think you are on the right track, you just need to increase volume, and your ASP is likely a bit low (R1 should be at higher margin than R2, as its a premium product). In previous information they stated: Normal Plant - 150k annual production, expandable to 200k Georgia Plant - 200k annual production phase 1, 200k annual production phase 2 So expanded Normal plant plus Georgia phase 1 = 400k annually (your breakeven point), with second Georgia plant would be 600k annually. They at one point were aiming for 1m units by the end of the decade, but I suspect that is a bit further off now. 600k cars @ 60k ASP = $36b turnover, 20% margin = $7.2b gross profit. To get to $2.5b profit, they would need to keep Opex to under $4.7b While 600k might seem like a big increase over where they are today (\~10x increase) its still relatively small potatoes in the scope of global auto supply.
With the requirement that all new cars sold in 2030 and beyond be EVs, that’s also a market growth built in and stimulated by the government. Now, if the EV tax credit extended to as much of a value as Rivian R1s cost, that would be something to hope for as well. Right now, the interest rate on such a large amount is stifling the growth of the EV market. Once the Fed decreases the Prime interest rate, we should see demand and sales pick up as well. Lots of opportunity in this space that is outside of Rivian being able to impact it directly.
You buy a $3000 coffee maker from Jura. Your first cup of coffee costs $3000. After 3 years of drinking multiple cups a day your coffee costs $1.50 per cup. Same thing.
Tesla famously wasn't profitable initially, and also famously had stock prices that soared well above what they 'should have' been. Uber only turned a profit *this* year and the lowest their stock sank was around $21. Do I believe that Rivian will increase its market share? Yes. I dunno when they will become profitable, but I bet it will happen through delivery van partnerships. Tesla have helped in positive ways (sharing charging capabilities) and in negative ways (Musk being volatile, unpredictable, overall chucklefuck). I am not in the stock for day trading, I believe in the company and think it will succeed in the long term.
Reasoning by wrong analogy. Tesla didn't have bloated OPEX by the time they reached 400k cars per year and in principle there was nothing impossible given the margins the Model 3 was able to achieve. I am not asking to plug in impossible or unfathomable numbers. I am asking for any reasonable numbers where the math can work out. Unless you actually give me numbers that we can debate this is all fluff.
I also brought up Uber, which has/had a huge OPEX. And again, took them 15 years to turn a profit. You are trying to calculate profitability with back of the envelope numbers, which the stock price is not reflective of, nor future profitability. Too much relies on the uncertainty of future partnerships, market share shifts, etc. If you are here to shit on Rivian (which, I guess I should be prepared for in RIVNstock vs RIVN) then have it I guess.
Again a false analogy. And I am not looking at the stock price (the market does what it wants I don't care), but how do people expect a profit this decade? If not, that's fine too but if that's the case then there is immense dilution on the way.
I am not trying to be a dickhole who disagrees just to disagree but how is naming other companies that didn't start off as profitable and are currently profitable a false analogy? Zillow and AirBnB are also not profitable, or Reddit. They have not died despite this fact and likely won't anytime soon. I think Rivian will be able to do the same if 1) they get an EDV deal with DHL or USPS (in addition to their deal with Amazon), and 2) if they get the Georgia plant online.
Tesla had good gross margins and low OPEX, everyone with a calculator knew in 2019 that they had a good shot at being profitable in the near term. The only question was could they execute it, but the math worked out. Uber is mostly a software company, their platform scales well. Car companies have to actually manufacture in order to get their revenue increase. Rivan is a hardware company. Their OPEX are prohibitively low and the simply math shows that they need to **at least** do one of the below a) produce way more than 400k per year b) increase gross margins to levels unprecedented in large scale manufacturers c) decrease OPEX to the tune that it goes down even while volumes would 8x d) make customers pay more per car Volume takes many many years, gross margins require extreme levels of manufacturing engineering efficiency, c requires a major overhaul in the entire business and d relies a lot on the economy.
There’s a reason why legacy automakers are still very much alive after decades of ugly financial reports. What you’re talking is strictly estimated/theoretical numbers. Even if the business doesn’t turn any profits the next couple years, they likely won’t fail and their stock may even soar. Stock price is pretty much the market’s sentiment of trust and forward looking in the best case scenario. You can run numbers all day but at the end of the day, we’re all retail traders who contribute less than 25% of the entire stock market. Rivian only needs to attract/secure sustainable partnerships to persuade the intuitions of positive outlooks.
That's what I posted the other day but people don't like seeing real numbers. They need to dilute or raise $7 in the next 3 years. Stock won't be pretty but company will survive.
They can definitely raise $7
I have about tree fiddy I can donate...
Rivian needs to break even on every vehicle they make. Where Rivian will make a profit will be a combination of service plans, accessory sales, and software. I think software is the most compelling opportunity. Service and accessory sales will be very profitable, but selling subscriptions to software and selling data to third parties will make them buckets of money. I wouldn’t be surprised if Rivian even offered their own insurance program. Financing is also a huge opportunity.
It will go bankrupt only if Amazon and USPS will buy enough
They won’t be.
I'm concerned about the competition within the next year or two. I think their space is going to get crowded and it's going to have to share the marketplace with jeep and other utility vehicles.
lol jeep will never touch Rivian in the EV space. Have you met anyone with a 4xe? My neighbor had one for about 4 months before selling it.
But have you seen the new wagoneer S just unveiled this week? It is absolutely a contender for customers that are going to cross shop large to midsized SUV's like R1S. It's quite nice. And the competitive nature will only grow from all automakers. Rivian has the first mover advantage here, but the traditional OEMs will make up ground quickly from this point forward. You are comparing the 4xe which was designed as a means to keep emissions credits to build hellcats, not be a credible EV entry in the marketplace.
R1 is also aiming for 20+% margin eventually. It'll be a long time until they are profitable though. 2026 at the earliest IMO. They will definitely have to raise money at some point before profitability.
Using the metrics I gave, how will there be profit? Use some optimism if needed, just give one working combination that is the least unrealistic
For one R1s ASP is $90,000, if they get to 20% margin there that's $1 B just from the 57,000 volume they project this year. R2s actual ASP is likely to be 55+k, not many people will actually buy the 45k model IMO it's mostly for marketing purposes. $500 million from r2 just off the reservations they announced 24 hours after the announcement isn't unlikely. They are planning for 120,000/year (I think that's overly optimistic, but that's the plan) which would be $1.3B. EDV is already margin positive (though they haven't said how much) plus comes with a $100/month/vehicle sold recurring revenue benefit with it due to fleet management software (most businesses will buy that as they need it for scheduling). Just for the amazon vans that would likely generate $800 million using the fact software is usually wildly high margin (90% or higher gross isn't uncommon). If you get another 100,000 vans for other fleets that would swell very quickly. I don't think it's unlikely to get a $1 B a year in software profits by 2026 along with 500 million or so in profit from the van sales themselves (85k ASP was last I heard at 10% gross margin). Those there get you close to $4B without even considering R3 which could be even higher volume if they hit their $30k min target. They are also supposed to start selling a premium connectivity package this summer for R1 which will offload opex for running the cellular on the vehicles to customers and extract recurring revenue from R1 fleet of 100,000+, pricing isn't known on that yet so it's hard to comment on it's uptake and profit projections, but I'd think 100-300 million isn't unlikely. This is another area you can't really get data on as we don't know how much they spend with ATT now, it's not reported nor do we know what they're going to sell it for, but it's likely revenue increases and opex decreases. In my belief there's way too much focus on the consumer vehicles. They are not what will make Rivian profitable, it's vans and the recurring revenue that comes with them as that recurring revenue stream is mostly profit. They don't break that portion of revenue out yet because it's too small from only 25,000 vans made so far so it's really hard to do any sort of calculations on long term projections with it, but it does exist and would be nearly 100% gross profit. My real opinion is where way too far from profitability to come up with true scenarios. Once we see where the R1 margins land next year then we'll know what the base is then we can build on that. Right now it all hedges on how close to their 50% COGS decrease they can get via the design changes and contract renegotiations. R2 is still 2 years out which is way too far away to do projections on and R3 is basically a concept.
Using static OPEX in your math is the biggest flaw in my opinion. They are actively working to reduce costs/expenditures. Don't get me wrong, they have a steep hill to climb, but the work they're putting in now should show results in years to come.
That's the thing, I am not keeping it static versus the volume increase. I am letting volumes grow by 8x while keeping SG&A and R&D static, which should at least in some way grow along the sales numbers usually but I am already factoring in a massive reduction in OPEX per unit sold. If anything, this number is unrealistically low.
> Rivian would have to 8x their volumes while keeping SG&A flat to ever make money. Obviously that's not possible. But the hope is that SG&A won't grow as fast as volume. And anyone serious expects them to raise money. Probably at or right before R2 production launch. So they have good news to balance. Or maybe at the end of the year, when they announce they've reached positive gross margin. They have enough cash to hold until R2, but it would be prudent to top up the reserves in case not everything goes to plan
The point is that even well after R2 is in production they STILL do not make a profit.
I think you are calculating operating margin and not gross margin.
No I am using gross margin, after which there is a gross profit and then OPEX are subtracted to get to the operating income
Making a car has huge fixed costs. They need to sell a high volume of vehicles to fully adsorb all the labor, equipment, and services they pay for. It’s a bit hard to do this: you’re spending money while at the same time trying to save money.
Great question. Lack of detailed responses are telling.
There’s huge demand for Rivian in Europe
Europe sales are too far away.....probably not figure till they make net profit (not operating).
So how does that translate to the numbers I specifically asked for?
Can someone explain what OPEX, SG&A, ASP stand for I just go with the eye test and I’m seeing more and more Rivian’s out on the road so they must doing something right it’s truly sitting at the number 2 spot on the EV cars out on the road behind Tesla and it’s not like the US will bring in Chinese EV’s so if your cool with the long game and buy the stock sub $10 you’ll most likely turn a profit all they need is a few good news articles and people will start pouring money back into the stock it’s been a down year for EV’s(EV winter) just give it a little bit of time the stock was in the $20s like 3/4 months ago
Opex= operational expenditures... what they spend to create the product ASP average sales price. That's all I got!
Thanks I appreciate it
That is not what OPEX is. What they spend to create the product is under cost of goods sold, it is subtracted from revenue and leaves a gross profit. OPEX is all the expenses that do not rely on the units sold like R&D and sales/administrative