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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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Kettle offers parametric insurance and says that it can cover just about any home — as long as the owner can afford the premium.
Los Angeles is on fire, and it’s possible that much of the city could burn to the ground. This would be a disaster for California’s already wobbly home insurance market and the residents who rely on it. Kettle Insurance, a fintech startup focused on wildfire insurance for Californians, thinks that it can offer a better solution.
The company, founded in 2020, has thousands of customers across California, and L.A. County is its largest market. These huge fires will, in some sense, “be a good test, not just for the industry, but for the Kettle model,” Brian Espie, the company’s chief underwriting officer, told me. What it’s offering is known as “parametric” insurance and reinsurance (essentially insurance for the insurers themselves.) While traditional insurance claims can take years to fully resolve — as some victims of the devastating 2018 Camp Fire know all too well — Kettle gives policyholders 60 days to submit a notice of loss, after which the company has 15 days to validate the claim and issue payment. There is no deductible.
As Espie explained, Kettle’s AI-powered risk assessment model is able to make more accurate and granular calculations, taking into account forward-looking, climate change-fueled challenges such as out-of-the-norm weather events, which couldn’t be predicted by looking at past weather patterns alone (e.g. wildfires in January, when historically L.A. is wet). Traditionally, California insurers have only been able to rely upon historical datasets to set their premiums, though that rule changed last year and never applied to parametric insurers in the first place.
“We’ve got about 70 different inputs from global satellite data and real estate ground level datasets that are combining to predict wildfire ignition and spread, and then also structural vulnerability,” Espie told me. “In total, we’re pulling from about 130 terabytes of data and then simulating millions of fires — so using technology that, frankly, wouldn’t have been possible 10 or maybe five years ago, because either the data didn’t exist, or it just wasn’t computationally possible to run a model like we are today.”
As of writing, it’s estimated that more than 2,000 structures have burned in Los Angeles. Whenever a fire encroaches on a parcel of Kettle-insured land, the owner immediately qualifies for a payout. Unlike most other parametric insurance plans, which pay a predetermined amount based on metrics such as the water level during a flood or the temperature during a heat wave regardless of damages, Kettle does require policyholders to submit damage estimates. The company told me that’s usually pretty simple: If a house burns, it’s almost certain that the losses will be equivalent to or exceed the policy limit, which can be up to $10 million. While the company can always audit a property to prevent insurance fraud, there are no claims adjusters or other third parties involved, thus expediting the process and eliminating much of the back-and-forth wrangling residents often go through with their insurance companies.
So how can Kettle afford to do all this while other insurers are exiting the California market altogether or pulling back in fire-prone regions? “We like to say that we can put a price on anything with our model,” Espie told me. “But I will say there are parts of the state that our model sees as burning every 10 to 15 years, and premiums may be just practically too expensive for insurance in those areas.” Kettle could also be an option for homeowners whose existing insurance comes with a very high wildfire deductible, Espie explained, as buying Kettle’s no-deductible plan in addition to their regular plan could actually save them money were a fire to occur.
But just because an area has traditionally been considered risky doesn’t mean that Kettle’s premiums will necessarily be exorbitant. The company’s CEO, Isaac Espinoza, told me that Kettle’s advanced modeling allows it to drill down on the risk to specific properties rather than just general regions. “We view ourselves as ensuring the uninsurable,” Espinoza said. “Other insurers just blanket say, we don’t want to touch it. We don’t touch anything in the area. We might say, ’Hey, that’s not too bad.’”
Espie told me that the wildly destructive fires in 2017 and 2018 “gave people a wake up call that maybe some of the traditional catastrophe models out there just weren’t keeping up with science and natural hazards in the face of climate change.” He thinks these latest blazes could represent a similar turning point for the industry. “This provides an opportunity for us to prove out that models built with AI and machine learning like ours can be more predictive of wildfire risk in the changing climate, where we’re getting 100 mile per hour winds in January.”
Everyone knows the story of Mrs. O’Leary’s cow, the one that allegedly knocked over a lantern in 1871 and burned down 2,100 acres of downtown Chicago. While the wildfires raging in Los Angeles County have already far exceeded that legendary bovine’s total attributed damage — at the time of this writing, on Thursday morning, five fires have burned more than 27,000 acres — the losses had centralized, at least initially, in the secluded neighborhoods and idyllic suburbs in the hills above the city.
On Wednesday, that started to change. Evacuation maps have since extended into the gridded streets of downtown Santa Monica and Pasadena, and a new fire has started north of Beverly Hills, moving quickly toward an internationally recognizable street: Hollywood Boulevard. The two biggest fires, Palisades and Eaton, remain 0% contained, and high winds have stymied firefighting efforts, all leading to an exceedingly grim question: Exactly how much of Los Angeles could burn. Could all of it?
“I hate to be doom and gloom, but if those winds kept up … it’s not unfathomable to think that the fires would continue to push into L.A. — into the city,” Riva Duncan, a former wildland firefighter and fire management specialist who now serves as the executive secretary of Grassroots Wildland Firefighters, an advocacy group, told me.
When a fire is burning in the chaparral of the hills, it’s one thing. But once a big fire catches in a neighborhood, it’s a different story. Houses, with their wood frames, gas lines, and cheap modern furniture, might as well be Duraflame. Embers from one burning house then leap to the next and alight in a clogged gutter or on shrubs planted too close to vinyl siding. “That’s what happened with the Great Chicago Fire. When the winds push fires like that, it’s pushing the embers from one house to the others,” Duncan said. “It’s a really horrible situation, but it’s not unfathomable to think about that [happening in L.A.] — but people need to be thinking about that, and I know the firefighters are thinking about that.”
Once flames engulf a block, it will “overpower” the capabilities of firefighters, Arnaud Trouvé, the chair of the Department of Fire Protection Engineering at the University of Maryland, told me in an email. If firefighters can’t gain a foothold, the fire will continue to spread “until a change in driving conditions,” such as the winds weakening to the point that a fire isn’t igniting new fuel or its fuel source running out entirely, when it reaches something like an expansive parking lot or the ocean.
This waiting game sometimes leads to the impression that firefighters are standing around, not doing anything. But “what I know they’re doing is they’re looking ahead to places where maybe there’s a park, or some kind of green space, or a shopping center with big parking lots — they’re looking for those places where they could make a stand,” Duncan told me. If an entire city block is already on fire, “they’re not going to waste precious water there.”
Urban firefighting is a different beast than wildland firefighting, but Duncan noted that Forest Service, CALFIRE, and L.A. County firefighters are used to complex mixed environments. “This is their backyard, and they know how to fight fire there.”
“I can guarantee you, many of them haven’t slept 48 hours,” she went on. “They’re grabbing food where they can; they’re taking 15-minute naps. They’re in this really horrible smoke — there are toxins that come off burning vehicles and burning homes, and wildland firefighters don’t wear breathing apparatus to protect the airways. I know they all have horrible headaches right now and are puking. I remember those days.”
If there’s a sliver of good news, it’s that the biggest fire, Palisades, can’t burn any further to the west, the direction the wind is blowing — there lies the ocean — meaning its spread south into Santa Monica toward Venice and Culver City or Beverly Hills is slower than it would be if the winds shifted. The westward-moving Santa Ana winds, however, could conceivably fan the Eaton fire deeper into eastern Los Angeles if conditions don’t let up soon. “In many open fires, the most important factor is the wind,” Trouvé explained, “and the fire will continue spreading until the wind speed becomes moderate-to-low.”
Though the wind died down a bit on Wednesday night, conditions are expected to deteriorate again Thursday evening, and the red flag warning won’t expire until Friday. And “there are additional winds coming next week,” Kristen Allison, a fire management specialist with the Southern California Geographic Area Coordination Center, told me Wednesday. “It’s going to be a long duration — and we’re not seeing any rain anytime soon.”
Editor’s note: Firefighting crews made “big gains” overnight against the Sunset fire, which threatened famous landmarks like the TLC Chinese Theater and the Dolby Theatre, which will host the Academy Awards in March. Most of the mandatory evacuation notices remaining in Hollywood on Thursday morning were out of precaution, the Los Angeles Times reported. Meanwhile, the Palisades and Eaton fires have burned a combined 27,834 acres, destroyed 2,000 structures, killed at least five people, and remain unchecked as the winds pick up again. This piece was last updated on January 9 at 10:30 a.m. ET.
On greenhouse gases, LA’s fires, and the growing costs of natural disasters
Current conditions: Winter storm Cora is expected to disrupt more than 5,000 U.S. flights • Britain’s grid operator is asking power plants for more electricity as temperatures plummet • Parts of Australia could reach 120 degrees Fahrenheit in the coming days because the monsoon, which usually appears sometime in December, has yet to show up.
The fire emergency in Los Angeles continues this morning, with at least five blazes raging in different parts of the nation’s second most-populated city. The largest, known as the Palisades fire, has charred more than 17,000 acres near Malibu and is now the most destructive fire in the county’s history. The Eaton fire near Altadena and Pasadena has grown to 10,600 acres. Both are 0% contained. Another fire ignited in Hollywood but is reportedly being contained. At least five people have died, more than 2,000 structures have been destroyed or damaged, 130,000 people are under evacuation warnings, and more than 300,000 customers are without power. Wind speeds have come down from the 100 mph gusts reported yesterday, but “high winds and low relative humidity will continue critical fire weather conditions in southern California through Friday,” the National Weather Service said.
Apu Gomes/Getty Images
As the scale of this disaster comes into focus, the finger-pointing has begun. President-elect Donald Trump blamed California Gov. Gavin Newsom, suggesting his wildlife protections have restricted the city’s water access. Many people slammed the city’s mayor for cutting the fire budget. Some suspect power lines are the source of the blazes, implicating major utility companies. And of course, underlying it all, is human-caused climate change, which researchers warn is increasing the frequency and severity of wildfires. “The big culprit we’re suspecting is a warming climate that’s making it easier to burn fuels when conditions are just right,” said University of Colorado fire scientist Jennifer Balch.
America’s greenhouse gas emissions were down in 2024 compared to 2023, but not by much, according to the Rhodium Group’s annual report, released this morning. The preliminary estimates suggest emissions fell by just 0.2% last year. In other words, they were basically flat. That’s good news in the sense that emissions didn’t rise, even as the economy grew by an estimated 2.7%. But it’s also a little worrying given that in 2023, emissions dropped by 3.3%.
Rhodium Group, EPA
The transportation, power, and buildings sectors all saw upticks in emissions last year. But there are some bright spots in the report. Emissions fell across the industrial sector (down 1.8%) and oil and gas sector (down 3.7%). Solar and wind power generation surpassed coal for the first time, and coal production fell by 12% to its lowest level in decades, resulting in fewer industrial methane emissions. Still, “the modest 2024 decline underscores the urgency of accelerating decarbonization in all sectors,” Rhodium’s report concluded. “To meet its Paris Agreement target of a 50-52% reduction in emissions by 2030, the U.S. must sustain an ambitious 7.6% annual drop in emissions from 2025 to 2030, a level the U.S. has not seen outside of a recession in recent memory.”
Insured losses from natural disasters topped $140 billion last year, up significantly from $106 billion in 2023, according to Munich Re, the world’s largest insurer. That makes 2024 the third most expensive year in terms of insured losses since 1980. Weather disasters, and especially major U.S. hurricanes, accounted for a large chunk ($47 billion) of these costs: Hurricanes Helene and Milton were the most devastating natural disasters of 2024. “Climate change is taking the gloves off,” the insurer said. “Hardly any other year has made the consequences of global warming so clear.”
Munich Re
A new study found that a quarter of all the world’s freshwater animals are facing a high risk of extinction due to pollution, farming, and dams. The research, published in the journal Nature, explained that freshwater sources – like rivers, lakes, marshes, and swamps – support over 10% of all known species, including fish, shrimps, and frogs. All these creatures support “essential ecosystem services,” including climate change mitigation and flood control. The report studied some 23,000 animals and found about 24% of the species were at high risk of extinction. The researchers said there “is urgency to act quickly to address threats to prevent further species declines and losses.”
A recent oil and gas lease sale in Alaska’s Arctic National Wildlife Refuge got zero bids, the Interior Department announced yesterday. This was the second sale – mandated by Congress under the 2017 Tax Act – to generate little interest. “The lack of interest from oil companies in development in the Arctic National Wildlife Refuge reflects what we and they have known all along – there are some places too special and sacred to put at risk with oil and gas drilling,” said Acting Deputy Secretary Laura Daniel-Davis. President-elect Donald Trump has promised to open more drilling in the refuge, calling it “the biggest find anywhere in the world, as big as Saudi Arabia.”
“Like it or not, addressing climate change requires the help of the wealthy – not just a small number of megadonors to environmental organizations, but the rich as a class. The more they understand that their money will not insulate them from the effects of a warming planet, the more likely they are to be allies in the climate fight, and vital ones at that.” –Paul Waldman writing for Heatmap