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.
Curtailments are on the rise. BNEF