Rivian’s (NASDAQ:RIVN) CEO RJ Scaringe provided insights to Reuters about how the EV maker plans to achieve positive gross profit by the end of this year. In an interview with Reuters, Scaringe stated that as a result of the company retooling its manufacturing process, it had been able to reduce its cost of materials by 35% for vans, and there were savings of “similar magnitude” for its other vehicles.
RIVN’s Other Cost-Cutting Efforts
The company has also simplified the manufacturing of its battery packs, which have been redesigned and now come in one-piece modules. Rivian’s new vehicle architecture has been designed in such a way that it has reduced the weight of the vehicle and labor time, and increased the rate of assembly on the manufacturing line by 30%.
Why Are These Cost-Cutting Efforts Important for RIVN?
These cost-cutting efforts are crucial for RIVN as the company has not been profitable since its founding in 2009. RIVN reported a loss of around $1.5 billion in the first quarter of FY24. Tim Fallon, Rivian’s VP of Manufacturing at its plant in Normal, Illinois, commented on the cost-cutting efforts, “All of that together leads to us being able to get to our path to profitability and be gross-margin positive.”
However, investors remain worried about Rivian. In the first quarter, the company reported cash and short-term investments of just under $8 billion, a drop of $1.5 billion from the Fiscal fourth quarter.
The company’s cash burn remains a concern for analysts. According to the TipRanks “Bulls Say, Bears Say,” analysts bearish on RIVN have stated that with the cash burn, its “Q4 ’24 gross margin breakeven targets look challenging.”
Is RIVN a Buy, Sell, or Hold?
Analysts remain cautiously optimistic about RIVN stock, with a Moderate Buy consensus rating based on nine Buys, eight Holds, and two Sells. Year-to-date, RIVN has declined by more than 50%, and the average RIVN price target of $13.56 implies an upside potential of 23.2% from current levels.
