CB Insights recently ran a chart of the value of companies when they went public and where they are today. The most valuable company on the list when it went public was electric vehicle (EV) maker Rivian Inc. (NASDAQ: RIVN). Its value was $87.5 billion then, but it is $12.9 billion today. This makes its performance one of the worst on a list of 19 companies. (Here are the biggest electric vehicle business failures in American history.)
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It should be no surprise that the value has fallen so much. Recently, Rivian said its best years are ahead of it. Yet, it announced a new set of layoffs, meaning management worries that this outlook is untrue. As its slow production mostly keeps its vehicles out of the market, it has to contend with price decreases by Ford and Tesla that may signal the start of an industrywide price war.
Rivian announced it would throw 6% of its 14,000 workers under the bus. The chief executive officer did not resign because of the company’s problems. Bumbling R.J. Scaringe wrote in a letter, reported on by The Wall Street Journal, that the company had to concentrate on production and profitability. Like many tech executives, he had overbuilt the company.
Rivian has said one of its strengths is its cash position. That begs the question of why it has to cut costs. In the most recent quarter, Rivian posted a $1.7 billion loss on revenue of $663 million. For the year, Rivian had revenue of $1.7 billion, on which it lost $6.7 billion. Rivian’s cash position at the end of the period was only $11.8 billion.
Rivian has two distinct disadvantages. The first is that it is a tiny producer. It has tried to dodge that by saying it has about 100,000 backorders. That is misleading, given that these could be canceled at any time. Amazon has pre-ordered 100,000 Rivian vehicles. That could go away as well. Rivian’s important deal with Amazon probably will change.
Rivian is in an industry racked by production competition and price cuts. No global company has a chance to catch Tesla soon. It will sell as many as 2 million cars this year and already has cut prices to do so. Ford has answered with a price cut of its own, and these cuts will ripple across the EV market. Rivian may need to come to market with vehicles with lower prices than planned.
Rivian has been in trouble for some time. The CB Insights analysis shows how much.
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