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The EV maker has struggled to keep production up and costs down

Rivian Automotive set out to build the ultimate electric vehicle for American consumers—a pickup truck with sports-car handling and a dizzying array of features.

Engineers gave the truck a beefy underlying metal frame for higher crash-test ratings and one of the most complicated suspension systems on the market for a smoother ride on- and off-road. It can go from zero to 60 miles an hour in 3 seconds. Rivian added pop-out flashlights stored away in the doors and a portable Bluetooth speaker.

All that comes at a cost. Rivian vehicles sell for over $80,000 on average. Yet they’re so expensive to build that in the second quarter the company lost $33,000 on every one it sold. That’s roughly the starting price of a base model Ford F-150.

When Rivian launched onto the electric-vehicle scene, industry watchers expected it to beat rivals to market and become the “Tesla of trucks.” Investors piled into its splashy market debut in 2021, when it raised nearly $12 billion in cash and became the U.S.’s largest IPO in years. For a short while, Rivian was worth more than Ford Motor and General Motors.

In two years, Rivian has blown through half of its $18 billion cash pile, in part because it struggled to master the nuts and bolts of manufacturing. While production is now growing and losses have narrowed, Rivian still loses money on its vehicle sales. In an industry known for narrow margins and tough competition, Rivian pays too much for parts and produces too few vehicles to cover its costs.

The company currently sells three models: the R1T pickup truck, the R1S SUV and an electric delivery van for Amazon.com. Rivian’s truck and its SUV, which share many parts, accounted for 83% of its August sales, according to Motor Intelligence data.

As of the end of June, Rivian had only built a total of around 50,000 vehicles, a fraction of what other car companies manufacture at a single U.S. factory in a year. Even with output increasing, Rivian’s factory in Normal, Ill., is operating at less than one-third of its build capacity. It aims to produce 52,000 vehicles this year.

Rivian’s share price is down around 70% from its IPO price of $78.

Founder and Chief Executive RJ Scaringe is rushing to slash expenses and slim down operations. He has said he is focused on reducing how much Rivian pays suppliers for parts, simplifying some aspects of the design and boosting production to move closer to profitability.

Losses have narrowed as Rivian produces more vehicles, but its cash burn continued at over $1 billion a quarter at the end of June.

Scaringe said the billions of dollars spent so far were a necessary part of the company’s growth. Company executives say Rivian aims to make a gross profit on its vehicles by the end of 2024.

“We’re competing to build something that’s truly better than all the alternatives, and to try to do that on a limited budget would be detrimental to us achieving our mission,” Scaringe said. Designing and manufacturing a vehicle with “supercar-level stiffness” has been expensive, he said, but is driving demand for Rivian’s trucks and SUVs.

Many new auto companies have stumbled in their attempts to turn an innovative idea into a vehicle that can be manufactured in large volumes. Billions of investor dollars plowed into such startups have evaporated in recent years.

Some, like fellow EV truck startup Lordstown Motors, have already gone bust. Lucid Group is struggling to stem heavy losses on sales of its first model, the luxury Air sedan. Fisker has only begun selling vehicles but has encountered launch delays and cut its production outlook.

Starting up a new factory and launching a new vehicle are two of the most fraught efforts in the car industry.

To limit losses, carmakers try to run their factories at full speed as quickly as possible. Companies take several years to design, engineer and practice manufacturing new vehicles so they can ramp up production in a matter of weeks or months.

It’s unusual for a car company to take as long as Rivian has to run its factory at full production, which in the auto industry usually means running a plant over at least two full shifts.

“You should be able to start to make money after three to six months,” said Mark Wakefield, managing director at advisory firm AlixPartners. “By the time you’re ramped up and running at rate, you’re making pretty good money.”

Even established automakers can struggle with new-vehicle rollouts, especially if they involve more advanced technology. GM has been slow to increase factory output of some new EVs, and Ford expects to lose $4.5 billion on its EV business this year. Unlike Rivian, those companies have other profitable parts of the business to absorb the financial impact.

The past few years have been a whirlwind for the 40-year-old Scaringe, who established Rivian in 2009 after receiving his Ph.D. in mechanical engineering from the Massachusetts Institute of Technology.

A Florida native who favors plaid shirts and black, square-framed glasses, Scaringe spent much of the 14 years since he founded Rivian overseeing a small team that operated in relative obscurity.

Rivian’s first vehicles had to be better in every way than the competition or no one would buy them, Scaringe said at a conference in 2019.

“It will be the best-driving truck or SUV in the world. It must be, because if it’s not, why would somebody pick us over a Ford or over a BMW?” he said.

Rivian set high ambitions for the design. Its complicated suspension system can raise and lower a vehicle’s height by 6 inches to optimize for handling, comfort and stability.

Engineers beefed up the underlying metal structure of the so-called skateboard chassis—a part named for its shape that serves as the base of the vehicle that houses the batteries, electric motors and other electrical components.

Engineering firms that have disassembled the truck say its design is overly complicated. The front end of the vehicle contains far more metal than is needed to provide stability and protect occupants in a crash, the firms say. The added metal means that while the R1T pickup is smaller than the Ford F-150 Lightning, its direct competitor, it weighs 685 pounds more.

The skateboard design is also complicated to assemble, requiring multiple layers of metal to slide into one another, say analysts and current and former employees. The tubes have to be welded together twice—once with a robot and then again by hand.

Sometimes, assembly workers had to hammer the pieces to get them to fit, said some of the employees.

“The more sophisticated the engineering is from day one, the harder it is to ramp up the manufacturing and get the vehicles out of the shop floor to fuel the cash flow,” said Frank Bunte, CEO of France-based manufacturing consultants A2Mac1, which has examined the R1T.

Scaringe said Rivian prioritized getting vehicles into production quickly over immediate profitability, which led to some cost issues. It aimed to refine the design afterward. Rivian plans to introduce a redesigned skateboard next year as part of its efforts to increase production volumes.

“We accepted that we’d have a lot of issues in the vehicle to start with,” he said. Rivian’s ability to redesign major aspects of its vehicles so soon after launching is a competitive advantage rather than a costly oversight, he said.

Other criticisms, like the weight of the vehicle and strength of the body, are unwarranted, he said, because Rivian intentionally built it to stand out with superior crash-test ratings.

Another factor driving costs was the company’s push to build components based on in-house designs, rather than buy less expensive parts off the shelf from established suppliers.

Among them were electronic control units, tiny computers that power certain vehicle functions. While these units usually handle multiple functions, from battery power management to steering control, Rivian built multiple units with different functions with the intention to consolidate them later in the rush to hit production deadlines.

In all, Rivian is paying $25,000 per vehicle more than the typical market rate for parts, according to an estimate from Wells Fargo analyst Colin Langan.

Rivian’s difficulties were compounded by pandemic-related shutdowns and supply-chain issues, including a shortage of semiconductors and lithium—a key ingredient in batteries—that drove costs higher and slowed production.

Rivian also decided to launch its three models in quick succession, which the company said has made it harder to work out production kinks.

Former employees say the process of fixing problems and cutting costs has been chaotic. They say Scaringe and other senior executives resisted suggestions to remove some of the less-essential perks in the vehicle, such as the in-door flashlight and Bluetooth speaker.

Scaringe said some of these changes would have made only a minor difference in vehicle costs and the company has made progress on its cost-cutting targets.

The company is making progress renegotiating supplier contracts that were signed in 2018 and 2019 for above-market rates, he said. Scaringe said that at one meeting with suppliers, “I stood on stage and said, you’re overcharging us by 41%.” Either the prices would come down or Rivian would find alternatives, he said.

Ultimately, Rivian has tasked its engineers with cutting up to $40,000 per vehicle in parts and production expenses, former employees say. Rivian declined to comment on the cost-cutting target, but Scaringe said the company doesn’t have to hit all of its targets to achieve gross profit by the end of next year.

Langan, of Wells Fargo, said he believed Rivian would have to both cut costs and raise prices to hit its targets, which will be difficult in this current environment. He estimates Rivian would have to sell its models at an average price of $96,000 per vehicle and run its factory flat out to achieve it.

Rivian last year raised prices up to 20% on some model configurations. Many competitors, including Tesla, have recently cut prices on their EVs.

Rivian has had some successes. It rolled out the industry’s first battery-powered truck and buyers and car reviewers have lauded its models’ features and performance on- and off-road.

Motor Trend described the R1T as “the most remarkable pickup truck we’ve ever driven,” and as of early November last year, Rivian had about 114,000 reservations. It has since stopped reporting this figure, saying it’s no longer an accurate measure of demand now that the company is producing more vehicles.

Sales volume was up 60% in the second quarter over the previous quarter, while revenue was up 69%, to $1.1 billion, helping to shrink per-vehicle losses.

Rivian no longer has the first mover advantage, and there are signs that demand is slowing for its pickup truck. Despite low production volumes, the company has excess inventory of some configurations.

The company is applying lessons learned from the first launches to a new generation of EV models, now being developed under its R2 line, company executives say. These smaller electric SUVs will be built at a new Georgia factory and sell at a lower price point.

Rivian is banking on them to deliver the sales volume needed to fuel future profits and says it has enough cash to last through 2025.

The models’ arrival was pushed back last year and is now expected in 2026.