Rivian (NASDAQ: RIVN) is expected to layoff six percent of its workforce following pressure from EV rivals, which have cut prices significantly already in 2023, putting pressure on electric vehicle makers attempting to reach profitability.
According to an internal memo seen by Reuters, Rivian is axing six percent of its employees in an effort to save money as competitors have surged demand and interest through variety of pricing discounts.
“We must focus our resources on ramp and our path to profitability,” CEO RJ Scaringe said, before apologizing to the affected employees.
Rivian has made several strategy moves over the past six months to conserve cash and work toward profitability within its operations. Just three months after signing a Memorandum of Understanding (MOU) with German automaker Mercedes-Benz to develop electric vans, Rivian scrapped the deal as it needed to “evaluate growth opportunities” and “pursue the best risk-adjusted returns on our capital investments.”
“At this point in time, we believe focusing on our consumer business, as well as our existing commercial business, represent the most attractive near-term opportunities to maximize value for Rivian,” Scaringe said in a statement when the MOU was scrapped.
The cuts are expected to affect 840 employees but will not affect manufacturing operations at its plant in Normal, Illinois.
Rivian had lost $18 billion in cash and cash equivalents at the end of Q3 2022 compared to the same quarter a year earlier.
Some, including Tesla CEO Elon Musk, have criticized its plan to expand production. In August 2021, Musk stated that Rivian should focus on reaching volume production at affordable unit cost before committing to a new production facility.
Musk offered additional advice in mid-2022:
“That affordability threshold is very important. It must both be a good value for money and be affordable in order to achieve good unit volumes. And where car companies can get, kind of, painted into a corner of doom is: If the cost of a car is so high that they have to raise the price of the car to the point where the price of the car is…and Rivian, I think, has this problem, you know, they’re going to need to fix it, or they’re in deep trouble…they raise the price to the point where only a very small number of people can afford the car, no matter how desirable it is. Then, at that point, if you cannot achieve a unit volume that covers your fixed costs, you’re screwed.”
Rivian is down 3.17 percent as of 1:28 PM EST.
Disclosure: Joey Klender is not a RIVN Shareholder.
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