After the market close on October 3, Rivian Automotive, Inc. (NASDAQ: RIVN) announced that in 3Q 2022 it produced 7,363 vehicles — including R1T electric trucks, R1S SUVs and electric delivery vans — at its Normal, Illinois manufacturing plant. The company delivered 6,584 vehicles in the just-completed quarter. Most importantly, Rivian said the production and delivery figures were in line with its expectations and that it believes the company is on track to meet its full-year 2022 production goal of 25,000 vehicles.
Investors enthusiastically embraced the news, driving Rivian shares up nearly 13% to US$35.96 on October 4. This movement in the share price boosted Rivian’s enterprise value by about US$3.6 billion. To put that into perspective, the total revenue the company will ultimately realize from producing 7,363 vehicles in 3Q 2022 will be in the vicinity of US$600 million. (The company’s gross profit margin is negative, so the sales likely will not generate any net cash flow.)
Investors should be aware of the following considerations regarding Rivian’s 3Q 2022 production announcement, which are inconsistent with the stock market’s very positive reaction.
First, Rivian must produce 10,687 vehicles in 4Q 2022 to meet its full-year 2022 goal. That represents a production rate of 813 units per week, up a hefty 45% from the 3Q 2022 weekly pace of 560 vehicles. We note that Rivian’s 3Q 2022 manufacturing rate was itself 40% higher than the 399 per-week pace reported from May 10 through June 30.
|Number of Vehicles Produced by Rivian Over Selected Periods in 2022||Total Vehicles Produced||Weekly Rate|
|January 1 through March 8||1,410||147|
|March 9 through March 31||1,143||348|
|April 1 through May 9||1,435||258|
|May 10 through June 30||2,966||399|
|First three quarters of 2022||14,317||367|
|4Q 2022 Goal||10,683||813|
|Full Year 2022 Goal||25,000||481|
Second, the reason for the large gap between Rivian’s production and deliveries is unexplained (7,363 versus 6,584) and continues a pattern that started when the company commenced manufacturing vehicles in 3Q 2021. Over the five quarters 3Q 2021 through 3Q 2022, Rivian has rather surprisingly produced ~2,100 more vehicles than it has delivered to customers (15,332 versus 13,198).
|RIVIAN AUTOMOTIVE, INC. — Quarterly Vehicle Production Data||Full Year 2022E||3Q 2022||2Q 2022||1Q 2022||4Q 2021||3Q 2021|
|Number of Vehicles Produced||25,000||7,363||4,401||2,553||1,003||12|
|Number of Vehicles Delivered||6,584||4,467||1,227||909||11|
(As an aside, Rivian records revenue upon the delivery of vehicles, so its 3Q 2022 revenue will be presumably be based on 6,584 deliveries, not the higher production figure.)
Third, in March 2022, Rivian reduced its 2022 manufacturing projection to 25,000 units from 50,000. The company blamed the familiar “supply chain issues” for the cut. Note that neither the 7,363-unit production rate in the third quarter, nor the ~10,700 implied pace in 4Q 2022 approaches a 50,000-vehicle annual rate.
Rivian’s stock price jump, based on 3Q 2022 actual production statistics that are roughly consistent with — perhaps even less than — what they needed to be to meet the company’s 25,000 unit 2022 production goal, seems like a significant overreaction. Keep in mind than Rivian’s enterprise value is around US$19.5 billion, yet the company estimates its 2022 adjusted EBITDA will be negative US$5.45 billion.
Rivian Automotive, Inc. last traded at US$33.95 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.