Introducing Rivian: The Electric Vehicle Upstart
Rivian is one of the most exciting new players in the rapidly evolving electric vehicle market. Founded in 2009 in Michigan by CEO RJ Scaringe, Rivian burst onto the scene in 2018 when they unveiled prototypes of their long-range electric R1T pickup truck and R1S SUV.
With a focus on adventure-oriented vehicles, Rivian tapped into booming consumer demand for EVs combined with the immense popularity of trucks and SUVs. Major investors took notice – Rivian has raised over $10 billion to date from backers including Amazon, Ford, BlackRock and T. Rowe Price.
In September 2021, Rivian announced plans to invest over $5 billion in new manufacturing facilities in Georgia along with thousands of additional jobs to ramp up production capacity.
Culminating years of hype and development, Rivian went public in one of the largest US IPOs since 2014 in November 2021. The company raised nearly $12 billion at a market cap over $85 billion.
Nine months since going public, where does Rivian stand financially? Let‘s analyze their latest cash position.
Rivian Q2 2023 Results: Burning Cash But Boosting Deliveries
Rivian reported earnings for the second quarter of 2023 in early August. The report revealed key metrics on Rivian‘s current financial standing:
- Revenue: $364 million (Q2 2022) to $1.12 billion (Q2 2023)
- Vehicles Delivered: 4,467 (Q2 2022) to 12,640 (Q2 2023)
- Cash On Hand: $16.52 billion (Q1 2023) to $10.20 billion (Q2 2023)
Revenue growth is strong at over 200% year-over-year thanks to accelerating deliveries of Rivian vehicles. However, the company‘s cash pile decreased by $6.32 billion in a single quarter.
This aligns with Rivian‘s massive spending across manufacturing, research, charging infrastructure and operations as they scale up. But rapidly declining cash remains a concern – let‘s analyze why Rivian is burning through money so quickly.
Breaking Down Rivian‘s Cash Burn
Rivian reported a free cash outflow of $1.616 billion for Q2 2023. That‘s over $1.5 billion in cash drained in three months. Annualized, that pace of cash burn is almost $6.5 billion per year.
At that rate, Rivian‘s remaining $10.2 billion cash on hand only provides a runway of around 16 months before reserves could be fully depleted. For a startup still scaling towards profitability, that‘s a dangerously short timeline.
Where is all that money going? A few major cash sinks stand out:
- R&D Spending: $444 million in Q2 as Rivian invests heavily in new products and technology
- CAPEX: $255 million in equipment purchases and factory construction
- SG&A Expenses: $529 million spent on general overhead like salaries, marketing, facilities
Rivian is making the right moves by investing in growth. But the downside is they rapidly dig into finite cash reserves with each major outlay.
Balancing ambitious spending with financial discipline will be crucial. Rivian may need to tap capital markets for fresh financing if cash burn continues at this pace.
Quarterly Cash Flow Analysis
Zooming out beyond just Q2 2023, we can spot cash flow trends over the past four quarters to understand how quickly Rivian‘s finances are evolving:
| Q3 2022 | Q4 2022 | Q1 2023 | Q2 2023 | |
| Operating Cash Flow | -$1.72B | -$1.25B | -$1.77B | -$1.71B |
| Investing Cash Flow | -$1.09B | -$2.27B | -$1.10B | -$620M |
| Financing Cash Flow | -$52M | +$430M | +$18M | +$1M |
Negative operating cash flow persists around -$1.7 billion each quarter as Rivian spends heavily to ramp up manufacturing. Investing activity also remains high, averaging over -$1 billion in quarterly capital expenditures.
Financing cash flow popped in Q4 2022 as Rivian secured asset financing, but otherwise minimally offsets ongoing cash burn.
Overall we see a consistent trend of multi-billion quarterly cash outflows putting pressure on Rivian‘s reserves.
Cash Position Over Time
Rivian‘s cash stockpile has declined at an almost perfectly linear rate over the past year reflecting this constant burn:
At a run rate above $1.5 billion per quarter, Rivian‘s current $10 billion provides less than 7 quarters of cash runway before more financing is needed.
How Does Rivian‘s Cash Stack Up Against Competitors?
Rivian entered an electric vehicle market dominated by Tesla. While still less than 5 years old as a public company, Tesla boasts a market cap over $700 billion along with the strongest cash position in the industry.
- Tesla Q2 2023 Cash On Hand: $23.07 billion
Another emerging player is luxury EV startup Lucid Motors. Lucid went public via SPAC merger in 2021. While struggling with production issues, Lucid raised substantial capital to fund growth.
- Lucid Motors Q2 2023 Cash On Hand: $5.24 billion
Cash Runway Comparisons
Comparing cash reserves alone doesn‘t tell the full story. We also need to consider the rate these competitors are spending their cash against the total stockpile. This gives us a cash runway.
Despite having over $10B cash on hand, Rivian actually has the shortest cash runway at just over 6 quarters. Tesla leads at over 10 years while Lucid sits around 8 quarters.
This shows the danger for Rivian of aggressive investments combined with production delays – they risk draining reserves faster than revenue can catch up. Careful financial planning is critical.
Projecting Rivian‘s Future Cash Needs
Zooming ahead, we can model scenarios for Rivian‘s potential cash position based on various growth and investment assumptions.
- Conservative Plan: Models 15% q/q growth on gradual Georgia factory ramp. Rivian would need financing by mid-2024.
- Moderate Plan: 25% q/q growth on nominal capex increase. Cash runs out by early 2025.
- Aggressive Plan: 35% q/q growth fueled by high investments. But cash only lasts until 2023 EOY.
An aggressive strategy promises fastest expansion but dangerously depletes the cash buffer and likely requires equity financing sooner. A balanced plan seems most prudent to ensure adequate reserves.
Rivian‘s Options For Refueling Cash Reserves
Given quarterly cash burn averaging $1.5 to $2 billion, Rivian almost certainly needs to return to capital markets for additional financing over the next 1-2 years. What options may be on the table?
Debt Offerings
Many high-growth companies use corporate debt rather than dilutive stock offerings to raise funds. Recent examples among EV peers include:
- Tesla – $1.84 billion across multiple junk bond offerings in 2022
- Lucid Motors – $1.75 billion in senior convertible notes issued in 2022
Rivian could potentially raise $2 to $3 billion via debut debt issuance. This provides operating cash without ownership dilution. However, interest costs would further pressure finances.
Equity Financing
Selling new shares boosts cash but reduces existing shareholders‘ ownership stake. Rivian just completed a massive IPO, but further follow-on offerings are possible. For example:
- Rivian IPO: Raised $11.9 billion in November 2021
- Tesla: Executed 13 total equity raises since IPO, generating over $20 billion total
If Rivian continues impressive growth, investors may have strong appetite for additional issuances.
Strategic Investments
Rivian counts technology giants Amazon and Ford among major early backers. Further support through expanded partnerships could be mutually beneficial.
For example, Amazon previously committed $700 million alone in Rivian equity financing. The e-commerce leader depends heavily on Rivian‘s custom electric delivery vans. More backing aids their EV shift.
External Risks Could Disrupt Rivian‘s Cash Outlook
Beyond Rivian‘s own spending and growth trajectory, broader economic forces could also impact financial needs and access to capital.
Rising Interest Rates
As central banks combat inflation, borrowing costs are climbing. The Federal Reserve‘s base rate has surged from 0.25% to 3.25% over the past year. Higher rates make taking on new debt far more expensive for Rivian.
Tapping credit lines would mean materially higher interest costs. New debt offerings would likely require even more favorable terms to attract buyers.
Ongoing Supply Chain Challenges
The pandemic severely disrupted global manufacturing and logistics networks. While improving, issues like semiconductor shortages still pose production hurdles.
If supply issues persist limiting Rivian‘s volumes, this restricts near-term revenue potential. Cash buffers may deplete faster until supply chain kinks smooth out.
Rising Battery Materials Prices
Lithium and other key inputs for EV batteries surged in cost over 2022. Major raw materials remain very price volatile today. Rising expenses per vehicle cut into margins.
Soaring battery chemistry prices would negatively impact Rivian‘s cost structure and profitability outlook. This could force additional cash spending to offset higher per-unit costs until materials inflation eases.
Government Policy: Friend or Foe to Rivian‘s Finances?
As a pioneer helping accelerate mass EV adoption, Rivian stands to benefit handsomely from regulatory shifts and legislation supporting electric vehicle purchases and infrastructure:
Extended Tax Credits
The Inflation Reduction Act signed into law in 2022 included provisions extending EV tax credits up to $7,500 for several more years. This effectively discounts Rivian vehicles for buyers at the point of sale, supporting volumes and revenue.
Charging Investments
The 2021 infrastructure bill and other legislation funnels billions towards building out charging networks nationwide. More convenient charging access removes barriers to mainstream EV adoption.
Fleet Regulation Incentives
Government agencies like the USPS face regulatory pressure to shift fleets green. As the exclusive provider for Amazon‘s new electric last-mile vans, Rivian is perfectly positioned to capitalize as public and private fleet buyers accelerate EV adoption.
The Bottom Line on Rivian‘s Cash and Financing Needs
Rivian closed Q2 2023 with over $10 billion in cash reserves – an impressive sum demonstrating the strong backing their vision has attracted even pre-profitability.
However, intense capital investments have Rivian burning cash at an alarming rate, with outflows exceeding $1.5 billion per quarter. At this pace Rivian likely needs to tap capital markets for additional financing by mid-2024.
Debt issuances, further equity raises, and strategic partnerships all offer potential mechanisms to replenish Rivian‘s cash buffer to maintain their steep growth trajectory through breakeven profitability.
Navigating market risks from inflation to supply chain woes will challenge the leadership team. But continued progress towards scale production and sales would help ease Rivian‘s cash crunch.
For Rivian the road ahead remains long – but whether through prudent cost discipline or accessing new capital, financial runway exists to reach their destination as a leader reshaping transportation for a more sustainable future.
