By Akash Sriram and Abhirup Roy
(Reuters) -Rivian on Tuesday stuck to its forecast that production would not rise this year and said deliveries in the third quarter would be slightly lower, as the EV maker races to rebuild inventory after a factory shutdown in April meant to cut costs.
Shares of the company fell about 2% in volatile trading after the bell. Rivian introduced offers on leases to boost sales, which helped the company beat revenue estimates after it cleared some of its inventory.
“The challenge, of course, then is that in Q3 the inventory is depleted. So, we’re rebuilding our inventory base. We expect deliveries in Q3 to be slightly below that in Q2,” CEO RJ Scaringe told Reuters.
Rivian, which makes the R1T pickup truck and R1S SUV, halted production for three weeks in the second quarter to implement efficiency-boosting assembly line upgrades, which it expects to help post its first profit margin in the last three months of the year.
Cost reduction from the factory retooling will be realized largely in the second half of the year, Scaringe said.
Rivian, still losing thousands of dollars for every vehicle it makes, has seen its order backlog fall in recent quarters as deliveries increased and some customers canceled their reservations.
The company said its loss amounted to 39% of a vehicle’s sales price, greater than the LSEG estimates of 34%.
With the factory retooling, Rivian also introduced a new generation of its R1 vehicles with advanced features and a simpler manufacturing process.
“Gross margins will really take off as they get volume as they are making a lot more money on the R1 platform now, whereas with the first-generation there was no way they were going to get to profitability,” said investor Vitaly Golomb, managing partner at Mavka Capital.
Revenue for the quarter ended June 30 was $1.16 billion, versus analysts’ estimate of $1.14 billion.
EV startups, including Rivian and Lucid, have been bleeding cash as they struggle to balance escalating costs related to scaling production.
“We think this (drop in selling price) is disappointing and expect price realizations to continue declining for the balance of the year given pressures on EV demand,” said Garrett Nelson, VP and senior equity analyst at CFRA Research.
Still, investors said Volkswagen Group’s $5 billion investment in Rivian as part of a new joint venture to share expertise in EV architecture and software development could help sustain the U.S. EV maker’s cash balance till it starts selling its R2 mid-size SUVs unveiled earlier this year.
Excluding items, Rivian posted loss per share of $1.13, lower than the estimates of a loss of $1.21.
(Reporting by Akash Sriram in Bengaluru; Editing by Shilpi Majumdar)
