Mar 08, 2024 07:30 AM IST
Rivian Automotive Inc. is halting plans to build a new multibillion-dollar factory in Georgia, an abrupt reversal aimed at cutting costs while the company prepares to launch a cheaper electric vehicle.
(Bloomberg) — Rivian Automotive Inc. is halting plans to build a new multibillion-dollar factory in Georgia, an abrupt reversal aimed at cutting costs while the company prepares to launch a cheaper electric vehicle.
The decision will save the automaker more than $2.25 billion in capital expenditures, the company said in a filing Thursday. Shifting planned production of the forthcoming R2 model to an existing facility in Illinois will allow Rivian to begin deliveries in the first half of 2026, earlier than expected. The surprise announcement plunges the high-profile factory project into uncertainty, but Chief Executive Officer RJ Scaringe said it remains important to the company.
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Shares of the automaker jumped after the announcement and closed up 13% on the day for their biggest gain since December. The stock had fallen more than 50% this year through Wednesday on concerns over Rivian’s cash and consumer demand for its products.
Rivian in 2022 secured a $1.5 billion package of state and local incentives — the biggest in Georgia’s history — to build the massive plant outside Atlanta. The company pledged at the time to create 7,500 jobs by the end of 2028, winning praise from local lawmakers.
Read More: Rivian to Issue Up to $15 Billion of Debt for Georgia Plant
The retreat comes two weeks after Rivian announced job cuts and said it would keep production flat this year, falling well short of expectations and triggering a heavy selloff in the shares. The company has struggled to transition to mass production since going public in 2021, and the high prices of its models have been a hard sell as overall demand for EVs fades. Rivian has never made a profit and it lost more than $40,000 on every vehicle it delivered in last three months of 2023.
The new model helps fortify Rivian’s “unique brand identity,” but the financial implications of a lower-priced EV remain murky for the company, Tom Narayan, an RBC Capital Markets analyst, said in a note.
“Currently, R1 is losing money,” he said. “The critical question is how will Rivian be able to produce R2 profitably at the $45,000 price point?”
Also on Thursday, Scaringe unveiled the long-anticipated R2, a mid-sized electric sport utility vehicle that will start at around $45,000. That’s about $30,000 less than Rivian’s existing SUV and just under the US average new car sticker price of more than $48,000.
The two-row SUV will be available in two battery pack sizes, with the larger option offering a range of more than 300 miles on a single charge. Customers can chose from one, two or three motor variants of the SUV. Rivian’s also giving the vehicle more advanced autonomous technology with a sensor suite made up of 11 cameras and five radars.
Read More: Rivian Aims to Recreate Tesla’s Model 3 Magic With New R2: BNEF
Rivian, one of the few pure-play EV makers manufacturing in America, is trying to grab market share from Tesla Inc. with the new model, its first aimed at the mass market. The effort highlights a push by automakers to bring down costs in an environment of slowing demand for EVs, with manufacturers from Tesla to Ford Motor Co. to China’s BYD Co. cutting prices.
Scaringe also surprised investors with a prototype of a future crossover EV called R3. Rivian said this model would be priced lower than the R2, without giving a dollar amount or timeline for when it might be built.
Rivian currently makes two consumer plug-in EVs, the R1T pickup and R1S SUV, and a commercial van primarily for Amazon.com Inc., its biggest shareholder. All are built at the plant in Normal, Illinois.
(Updates for closing share price and chart from the third paragraph.)
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