Rivian Loses Access To New U.S. EV Tax Credits

On April 17, the U.S. Treasury announced that effective April 18, only ten electric vehicle (EV) models will initially qualify for the full US$7,500 tax credit available to U.S. new EV buyers. Seven models will be eligible for half the credit, or US$3,750. According to the U.S. Inflation Reduction Act (IRA) passed in 2022, a certain percentage of a car’s battery components — most prominently, the lithium in the battery — must come from U.S. sources or trade allies.

The ten EVs which qualify for the full tax credit include the Tesla, Inc. (NASDAQ: TSLA) Model 3 and Model Y and the Chevrolet Bolt, which are among the most popular EV models sold in the U.S. In aggregate, the models represent about third-thirds of total EV sales in the U.S. (The cheapest Tesla Model 3 will only qualify for half the tax credit because the battery is made in China.)

Many EV models, including Rivian Automotive, Inc.’s (NASDAQ: RIVN) popular R1T electric pickup truck and R1S SUV and models made by foreign car manufacturers like Hyundai, BMW and Nissan, will also lose access to the tax credit. Indeed, no foreign EV model will qualify for any U.S. tax credit under the U.S. Treasury’s directive. These restrictions will place such carmakers at a significant competitive disadvantage versus Tesla and General Motors Company (NYSE: GM).

Separately, in early April, Rivian announced that it produced 9,395 vehicles in 1Q 2023 and delivered 7,946 of them. Both statistics are down slightly from 4Q 2022 when the company manufactured 10,020 EVs and delivered 8,054 units to customers. Nevertheless, Rivian believes it remains on track to produce 50,000 vehicles in the full-year 2023, up from 24,337 in 2022. 

Rivian will report its 1Q 2023 financial results on May 9.

RIVIAN AUTOMOTIVE, INC. —  Selected Financial Statistics

(in millions of US dollars)2023 Guidance1Q 2023Full-Year 20224Q 20223Q 2022
Number of Vehicles Produced50,0009,39524,33710,0207,363
Number of Vehicles Delivered7,94620,3328,0546,584
Revenue$1,658 $663 $536 
Operating Income($6,856)($1,795)($1,724)
Operating Cash Flow($5,052)($1,446)($1,368)
Adjusted EBITDA($4,300)($5,217)($1,461)($1,307)
Capital Expenditures($2,000)($1,369)($294)($298)
Cash – Period End$11,568 $11,568 $13,272 
Debt and Convertible Preferred – Period End$1,812 $1,812 $1,761 
Shares Outstanding (millions) – Period End926 926 921 

Rivian projects that its 2023 adjusted EBITDA will be around negative US$4.3 billion, and that 2023 capital sending will be in the vicinity of US$2.0 billion, implying almost the same level of cash burn in 2023 as in 2022 (US$6.3 billion in 2023 versus US$6.4 billion in 2022).

The company will fill some of this shortfall from its March 10, 2023 issuance of US$1.3 billion of convertible senior notes maturing in 2029. The notes carry an interest rate of 4.625% and have a conversion price of about US$20.13 per share. Still, given the magnitude of Rivian’s projected 2023 cash burn and despite the company’s US$11.6 billion cash position as of December 31, 2022, it seems possible that a stock sale may be needed at some point this year.

The loss of tax credits available to U.S. buyers of the R1T and R1S models cannot be considered a positive for Rivian. Rivian shares have been weak for some time, but its enterprise value is still nearly US$3 billion. Such as valuation is difficult to square with a projected negative US$4.3 billion adjusted EBITDA in 2023.

Rivian Automotive, Inc. last traded at US$12.25 on the NASDAQ.

Information for this briefing was found via Edgar and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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