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The all-American EV startup is cutting costs to survive.

America’s most interesting electric-vehicle company is about to have the defining year of its life.
On Wednesday, the company reported that it lost $1.58 billion in the fourth quarter of last year, bringing its net annual losses to $5.4 billion. It announced that it is laying off about 10% of its salaried employees, but — at the same time — promised that it has a plan to achieve a small profit by the end of this year.
Rivian does not seem to be in trouble — not quite yet, at least. But the earnings made clear what electric-vehicle observers have known for a long time: Either the company will emerge from this year poised to be a winner in the EV transition, or it will find itself up against the wall.
That’s partially because Rivian has a stomach-turning number of corporate milestones coming up. Over the next 11 months, it plans to unveil an entirely new line of vehicles, shut down its factory for several weeks for cost-saving upgrades, break ground on a new $5 billion facility in Georgia, and — most importantly — turn a profit for the first time. It also expects to manufacture and deliver roughly another 60,000 vehicles to customers.
Any one of these goals would be difficult to achieve in any environment. But Rivian is going to have to execute all of them during a time defined by “economic and geopolitical uncertainties” and especially high interest rates, its CEO R.J. Scaringe told investors on Wednesday. Since 2021, Rivian’s once robust stockpile of cash has been cut in half to about $7 billion; at its current burn rate, the company will run out of money in a little more than two years.
Although Rivian’s situation is dire, it’s not experiencing anything out of the ordinary. As I’ve written before, the electric truck maker is crossing what commentators sometimes call “the EV valley of death.” This is the challenging point in a company’s life cycle where it has developed a product and scaled it up to production — thereby raising its operating expenses to eye-watering levels — but where its revenue has not yet increased too.
During this vulnerable period, a company essentially burns through its cash on hand in the hope that more customers and serious revenue will soon show up. If those customers don’t arrive, then it either needs to raise more cash … or it runs out of money and goes bankrupt.
It’s a frightening time, but once a company crosses the valley of death, it can reach an idyll. Not so long ago, Tesla found itself in something like Rivian’s position as it prepared to launch the Model 3. Seven years later, it is the most valuable automaker in the world.
Once Rivian’s revenue exceeds its costs, its problems will get easier, or at least more straightforward: Instead of fighting for its survival and watching its cash reserves dwindle, Scaringe will be able to make more strategic trade-offs. Should the company cut costs to expand its profit margin and reward investors, or should it pass the savings along to customers in the form of lower prices, thus growing its market share? Scaringe can’t make these types of decisions until his firm is safely out of the valley.
Claire McDonough, Rivian’s chief financial officer and a former J.P. Morgan director, has a plan for crossing that canyon — an aptly if strangely named “bridge to profitability” that it will attempt to build this year. Rivian’s survival, she said, will depend above all on cutting the unit costs of producing its vehicles, including by using fewer materials to make every car. Other savings will come from making more vehicles faster. That’s what makes the shutdown plan, though it might seem extreme, worth it; McDonough said those improvements alone will get the company about 80% of the way to profitability.
Another 15% will come from marketing more “software-enabled products” to Rivian drivers and by selling air-pollution credits to other carmakers, whose vehicles are not as climate-friendly. This is a tried-and-true technique; Tesla first turned a profit in 2021 by selling regulatory credits needed to comply with federal and California state-level rules to other, dirtier automakers. But that same year, Tesla also debuted an entirely new vehicle: the Model Y crossover, which quickly became its top seller in the United States. Tesla, in other words, finally started to make money by cutting costs, finding new revenue sources, and releasing new products.
New products, however, are becoming a weak point for Rivian. The company says that high interest rates will keep demand for its vehicles flat this year. It expects to make about 60,000 of them, about 20,000 fewer than what it had once anticipated. The Rivian R1S, a three-row S.U.V., has become the company’s flagship; it is selling better and is cheaper to manufacture than Rivian’s pickup, the R1T. It also costs at least $75,000, or nearly $600 a month to lease. The highest-tier models can cost $99,000. Turns out, it’s difficult to sell a lot of $70,000 trucks when even the cheapest new-car loans hover around 6%.
Rivian once had a first-to-market advantage in the electric three-row SUV market, but that may be fizzling out, too. Kia is now selling its own all-electric three-row SUV, the EV9, for $18,000 less than the R1S; in fact, the Kia EV9’s most expensive trim costs $76,000, which is only slightly more than the cheapest R1S. The Kia SUV can also charge faster than the Rivian under ideal conditions. It remains an open question how many rich suburbanites are still interested in buying Rivians, especially now that the Tesla Cybertruck and Ford F-150 Lightning are competing directly with Rivian’s pickup truck.
The company’s hopes, in other words, rest on its next product line: the R2, which it will launch on March 7. We know almost nothing about the R2 line, except that it will probably include an SUV, that it will go on sale in 2026, and that it will fall somewhere in the $45,000 to $55,000 price range. (The median new car transaction in the United States now costs $48,200.) Last year, Scaringe told me that the R2’s timing was perfect because it would fit “beautifully with what we see as this big shift” in the American EV market. In today’s market, he said, “a lot of people ask themselves, Am I gonna get an electric car? Well maybe the next one.” He better hope they’ll start buying that next one in 2026.
Even if they do, Rivian may still have to confront the problem that Tesla has changed the EV market before Rivian could get there. When the first Tesla Model 3s were delivered in 2017, the sedan was instantly one of the best EVs on the market — because it was one of the only EVs on the market. Now every automaker in the world has plans to compete at the Model 3’s price point.
Rivian’s fortunes don’t rest entirely on American consumers; it also sells vans to commercial fleet operators, as well as delivery trucks to Amazon. (Amazon owns about 17% of Rivian.) But that business can be lumpy. Rivian’s vehicle growth slowed down last quarter, for instance, almost entirely because of a near pause in sales to Amazon, which sets up fewer new vehicles in the fourth quarter. If Amazon is willing to bail out Rivian, in other words, it’s not yet clear in the data.
None of this is to say that the company’s outlook is dire. Rivian was always going to find itself at a moment like this, when its expenses exceeded its revenue by such a large amount. The automaker already has devoted fans, and many people — myself included — are interested in the R2 as a potential first EV purchase.
And the company has shown that it can make strides in a single year. Twelve months ago, I had never seen a Rivian on the road before; today, one is regularly parked on my block. The company rocketed from a standing start to become the No. 5 best-selling electric car brand in America last year. What the company has done so far is impressive. But now it must prove that it can be great.
Editor's note: This story has been updated to correctly reflect Rivian's cash burn rate.
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Europe’s heat wave has finally ended — and good riddance. The continent recorded at least 1,300 excess deaths over the past week, according to the World Health Organization. Mortuaries in Paris and other cities were overwhelmed.
North America will now get its turn with summertime heat: At the end of this week, New York, Philadelphia, and other cities down the East Coast — including several where World Cup knock-out games will be played — could see their hottest temperatures since 2012.
As I wrote last week, these bouts of extreme heat are caused by climate change. Severe and record-breaking heat waves are one of anthropogenic global warming’s clearest and most indisputable symptoms.
But as I also wrote last week, Europe and North America have very different ways of dealing with extreme heat. Most Americans have air conditioners, but they remain rare in Europe — and especially in northwestern Europe, including France, Germany, and the United Kingdom.
Since last week, I have read countless explanations about why Europeans don’t have air conditioning at the same rates as Americans — or even Canadians. Perhaps Americans and Europeans have a different relationship to suffering, goes one theory, or maybe the European left has managed to politicize air conditioning in a way that the American left has never tried to do. The cultural divide here is more real than I once would have thought: In Paris, the deputy mayor chided Americans for even asking about Europe’s AC use; she argued air conditioning “contributes and aggravates” to air pollution and climate change. In Florida, meanwhile, we name elementary schools after the inventor of mechanical refrigeration.
Throughout all of this, I’ve assumed that Europeans would purchase air conditioning as the warming climate demands it. Much like the Pacific Northwest, where AC adoption lagged the rest of the United States for decades, much of Western Europe used to enjoy a climate where AC was unnecessary. That changed in Oregon, Washington, and British Columbia after the 2021 heat dome. Now that summertime highs are rising in Europe, too, it seemed obvious that people would go out and buy window unit air conditioners — and where they can’t buy them because of local laws, they’ll push for reform.
It had not occurred to me, though, that a simpler obstacle might be blocking Europe’s adoption of AC. Jonas Nahm, a professor of industrial strategy at the Johns Hopkins School of Advanced International Studies, wrote in with a question: What if it’s the windows?
Do you know about Europe’s superior windows? Unlike the United States, where most of our windows hang on a sash and open vertically, the dominant form of window in Germany, Austria, France, Italy, and the rest of the Blue Banana are tilt-turn windows. This distinctive form of fenestration has a dual-action hinge, meaning it can tilt, opening at the top to let in light or air; and turn, swinging fully open on its hinges.
Tilt-turn windows are superior in most respects to our American sash windows or casements. Because they close more securely, they provide better protection against the elements; because you can swing them into a room and access both sides of a pane, they are easier to clean; and because you can tilt them from the bottom and crack them open at the top, they can ventilate a room without creating a draft. They are also ubiquitous in western Europe. Asked once what Germany meant to her, Germany’s former Chancellor Angela Merkel replied: “I think of well-sealed windows. No other country can make such well-sealed and nice windows.”
They are superior in all respects, I would say — except for one. When Americans in older buildings want to get an air conditioner, we go and buy a window unit, then we slide up the sash window and install it. But tilt-turn windows are not so accommodating. Those who have them must instead go and buy a portable AC unit that sits entirely inside a room, snake its hose out the top of the window, and then either purchase a fabric barrier or jerry-rig towels to seal off the crevices.
If you can’t buy a window unit, in other words, then your air conditioning options narrow. You either have to install an unsightly portable AC unit. Or you have to retrofit your entire home and install mini-splits — a far more expensive renovation that may not even be possible in historic or rental buildings.
Can windows alone explain Europe’s differing approach to air conditioning? It certainly explains a gap I’ve noticed in the discourse, where some Europeans seem to see air conditioning as an exorbitant luxury and Americans see it as, well, just another $250 purchase. It matters, too, that most Europeans heat their homes with radiators, meaning there is no forced-air ductwork system that a central air system can piggyback on. (Of course, my 100-year-old apartment building has radiators, too — but we have sash windows, and therefore window units.)
As it happens, I’ve lived in a home in the United States that had tilt-turn windows. An old German landlord of mine installed them in about half the house. We had window units too, but we stuck them in the few rooms that still had sash windows.
But of course, maybe what you don't have always seems more exotic to you. Not so long ago, I found myself in a smoky Berlin bar talking with a German about how much I liked and respected their windows. My companion was confused and asked me what windows were like in America, and I pantomimed opening a sash window and sticking my head out the bottom.
He was thrilled. Wait, he replied, just like in the movies?
I promise tomorrow's newsletter will not be about windows or air conditioning.
Monday’s Supreme Court decision will give Trump sweeping powers over the agency he already effectively controls.
The Supreme Court on Monday morning effectively OK-ed the firing of commissioners at independent agencies with no showing of cause, overturning a 90-plus-year-old precedent and granting the president seemingly vast powers to reshape the federal regulatory state. That likely includes agencies crucial to energy planning and governance, including the Federal Energy Regulatory Commission and the Nuclear Regulatory Commission (though not, notably, the Federal Reserve Board of Governors).
Harvard Law School professor Ari Peskoe argued in an amicus brief for the case alongside a bipartisan gaggle of 11 former FERC commissioners that deciding in the president’s favor on this case “would bulldoze the structural supports that Congress built into ratemaking commissions to protect its price-setting power from abuse,” protections that “foster regulatory stability for industries investing in essential infrastructure.”
So what’s left of that stability following the Supreme Court’s decision? “It’s been 3+ hours and the President has yet to fire a FERC Commissioner. So no immediate effect,” Peskoe told me in an email.
The case stemmed from Trump’s firing of Rebecca Slaughter, a member of the Federal Trade Commission, because her presence on the Commission would, he said, be “inconsistent with my Administration’s priorities.” Slaughter sued to be reinstated under a precedent established in the 1935 case Humphrey’s Executor v. the United States, in which the Supreme Court ruled that the Constitution did not give the president “illimitable power of removal” over government officials. On Monday, the court disagreed, deciding instead that the President should have wide discretion over the composition of agencies like the FTC, which “unquestionably exercises executive power and must therefore be controlled by the Chief Executive,” Chief Justice John Roberts wrote in his opinion for the majority.
In her dissent on the decision, which split 6-3 along the usual partisan lines, Justice Sonia Sotomayor listed FERC and the NRC as among the “dozens of independent commissions are now likely to become purely executive agencies, shifting tremendous power over broad swaths of American life into the President’s hands.”
Agencies like FERC tend not to be as explicitly politicized or partisan as, say, the Environmental Protection Agency, which is led by a single administrator who serves at the pleasure of the president, or the National Labor Relations Board or Federal Election Commission, which oversee areas of law and policy with stark partisan and ideological stakes. This is partly because FERC justifies decisions on electricity and natural gas policy with reference to “technical expertise,” Peskoe’s fellow Harvard Law School professor and former Obama White House official Jody Freeman told me. (If you have any doubt about this, go read through some 1,000-page-plus FERC orders.
FERC also tends to be more collegial than most other independent agencies. Meetings often include encomia to the agency’s chair for being consensus-oriented, and to its staff, who serve commissioners from both parties. Its recent “show cause” orders directing regional electricity markets to prove they’re taking steps to speed up grid interconnection for large new sources of demand garnered a 5-0 majority, with both Democrats on the Commission voting along with their Republican colleagues.
And FERC chairs do occasionally defy the presidents who have appointed them, most notably in Donald Trump’s first term, when then-Chair Neil Chatterjee dismissed Secretary of Energy Rick Perry’s request to support coal and nuclear power plants able to store fuel on site, thus propping up struggling electricity generators.
Interestingly, Chatterjee, who signed the amicus brief to the court, was relatively relaxed about Monday’s decision’s implications for his former agency about. He observed to me in an email, “given that the commission just voted 5-0 on the WH’s biggest priority before FERC I don’t see it being an issue in the near term.”
In other words, FERC and this White House, at least, already see eye to eye.
But that’s no coincidence. Since the beginning of this term, the White House has set out to rein in and control independent agencies, FERC among them. Though Trump initially tapped sitting Republican Commissioner Mark Christie to lead the commission, he ultimately declined to re-nominate Christie for a second five-year term, leading to Christie’s exit from the commission last August.
In his place, the president installed Laura Swett, who has allowed little daylight between the commission’s and the White House’s positions. Both have attempted to keep the focus on balancing the buildout of data centers to serve artificial intelligence while keeping a lid on consumer electricity prices.
While it’s not foreordained that FERC chairs will agree with the presidents that appointed them, even if they’re both members of the same party, Monday’s decision makes disagreement more dangerous for current and future FERC chairs to consider.
“There’s a bigger risk that they’ll have to ultimately yield to political pressure because they’ll have this very overt threat that they’ll be fired,” Freeman told me. “We’re going to see decisions that look more political, that look less expertly driven, and they probably will wax and wane with every new administration, which undermines stability.”
A longtime energy analyst argues that there are no solutions to the hyperscale problem, only tradeoffs.
Sam Altman, Dario Amodei, and Elon Musk need sign-off from fewer than a dozen board members to commit their companies to multibillion-dollar moves. The power plants that supply their data centers need sign-off from 13 states (plus D.C.), thousands of generators, millions of customers, and a federal regulator whose ratemaking standard predates the personal computer in order to build anything new.
Everyone in tech knows about the CEOs of the foundational artificial intelligence labs. Only energy nerds know the names of the people running our grid operators. That anonymity is a feature, not a bug. Grid operators generally think in decades, not years. But right now, they’re telling the U.S. that it has years, not decades, to figure out its own new path forward.
For decades, this process sufficed for energy generators (and regulators) grown accustomed to gradual, predictable load growth. But over the past several years, the scale and speed of increasing energy demand has overwhelmed the supply -side’s ability to respond. The resulting strain on the grid has reverberated through every rung of the supply chain, delaying development timelines, increasing costs, and elevating energy from political conversations to dinner table discussions.
The loudest creaks and groans are coming from PJM Interconnection, North America’s largest grid operator. Residential bills in the PJM service area are climbing at a dizzying pace. Recent capacity auctions have ended with record prices, which PJM’s own market monitor blames on the explosive growth in data center power demand. Pennsylvania Governor Josh Shapiro has attempted to pressure PJM to lower its capacity price cap. Even Secretary of Energy Chris Wright has called on the Federal Energy Regulatory Commission to develop new procedures to help get data centers online faster.
David Mills, PJM’s CEO, published a 70-page report in May acknowledging that current market rules cannot keep pace with AI-driven load growth. And yet he also refused to recommend a path forward, leaving the decision to “state regulators and legislatures, to FERC, to consumers.”
The most essential grid infrastructure, he explained, “is not a price curve or a performance obligation — it is legitimacy.” In other words, what’s broken isn’t a parameter inside the capacity market, but rather the capacity market itself, along with the political conditions under which it operates. PJM calls this the “credibility trap”: high prices accurately signal that new investment is needed, but when those prices become politically untenable, government intervenes and investment stalls.
The fix, Mills writes, “requires structural choices, not just parameter adjustments.”
Mills is speaking to a deeper issue with the grid than its ability to respond to shifting market dynamics, which is that hyperscalers and grid operators are built to solve two different kinds of problems. Hyperscalers solve engineering problems with specifiable objectives, known constraints, verifiable outcomes. Engineering problems reward concentrated authority and unilateral decision-making.
Grid operators, on the other hand, solve coordination problems. The information they rely on to do so is dispersed across millions of stakeholders, continuously revised and often contradictory, and operators’ preferences are not so much known as they are revealed through deliberation. FERC’s standard for wholesale rates is not whether those rates are objectively “correct,” but rather whether the market settled on those rates through fair competition. The process does not just determine the answer, it essentially is the answer.
This construction is the category error driving the current AI-grid collision. The electricity grid is not an engineering problem with coordination problems attached. It is a coordination problem with engineering problems embedded in it. Treat it as the former and you lose all the information that gets generated in the process of market-based price discovery. You also lose all the buy-in that occurs when real people are faced with real trade-offs and have to make hard, binding choices.
Mills did lay out three possible structural paths in his May letter:
These pathways are not equivalent — unlike with an engineering problem, there are no cut-and-dried solutions here. There are only trade-offs and questions about who bears their consequences. Path C is likely the better answer, while Path A is more expedient. The gap between them is the work PJM’s constituents have to manage over the coming years. PJM may choose the wrong path, or arrive at the right one too late.
The alternative is not hypothetical. If hyperscalers aren’t willing to wait for PJM customers to decide which path they want to take (and recent history suggests they are not) they will build behind-the-meter generation, sign bespoke deals with regulated utilities, and restart dormant nuclear plants. America would be left with two grids, one for compute, one for everything else. The first will be reliable and expensive. The second will be cheaper, fragile, and stranded with the costs of the system the first walked away from. The market would lose the dispatch signal, the error-correcting price mechanism, and the legitimacy of the system that has reliably powered the Mid-Atlantic for two decades.
Economist Friedrich Hayek described the limits of humans’ planning capabilities better than anyone in his 1974 Nobel Prize lecture, using the metaphor of the craftsman shaping his handiwork versus the gardener cultivating growth. The craftsman thinks they can make a perfect tool but repeatedly runs up against the boundaries of their own knowledge, whereas the gardener learns to manage new information as it arises, tending not to the product itself but rather to the conditions that produce it.
Hyperscalers are not bad actors. They have legitimate interests and the political capital to help shape the grid’s future. But we should resist the Newtonian urge to meet unexpected, swiftly moving demand with equally swift supply. Markets and physical systems both tend toward equilibrium, but the former finds it through deliberation, not collision. Instead of trying to unilaterally craft a better grid, hyperscalers might find a better path if they work with the practitioners who already know how to garden.