1 00:00:00,080 --> 00:00:03,120 Speaker 1: Now we are watching Rivian stock this morning. It is 2 00:00:03,240 --> 00:00:06,800 Speaker 1: down pre market after the EV maker's second quarter revenue 3 00:00:06,800 --> 00:00:11,600 Speaker 1: missed analysts estimates by just a tiny tiny hair. Cash 4 00:00:11,640 --> 00:00:14,160 Speaker 1: burn for the quarter though also came in bigger than expected, 5 00:00:14,160 --> 00:00:17,919 Speaker 1: and this is the worry. With Rivian joining us now 6 00:00:18,040 --> 00:00:20,759 Speaker 1: is the founder and CEO r J. Scarringe, as well 7 00:00:20,800 --> 00:00:23,880 Speaker 1: as Bloomberg Technology co host ed Ludlow, who covers the 8 00:00:23,920 --> 00:00:25,040 Speaker 1: EV market so closely. 9 00:00:25,320 --> 00:00:25,479 Speaker 2: R J. 10 00:00:25,560 --> 00:00:27,880 Speaker 1: I want to ask you just quickly about the sales. 11 00:00:28,200 --> 00:00:32,120 Speaker 1: This is no doubt a hot product. I mean, I 12 00:00:32,120 --> 00:00:34,760 Speaker 1: have been fascinated by the car, I love the design, 13 00:00:35,040 --> 00:00:37,080 Speaker 1: looking at it for years, and people wait in line 14 00:00:37,440 --> 00:00:40,519 Speaker 1: to get them for a long time. Why are sales 15 00:00:40,640 --> 00:00:43,120 Speaker 1: only growing three point three percent? 16 00:00:45,200 --> 00:00:47,200 Speaker 3: Yeah, I mean it's great. As you said, it's great 17 00:00:47,200 --> 00:00:50,000 Speaker 3: to see their action to the products, and we see 18 00:00:50,040 --> 00:00:53,800 Speaker 3: that both through the excitement of our customers directly. But 19 00:00:53,880 --> 00:00:56,240 Speaker 3: there's lots of ways to measure this, and we just 20 00:00:56,280 --> 00:00:59,560 Speaker 3: had a Jdpower as an annual appeal study. We came 21 00:00:59,560 --> 00:01:02,000 Speaker 3: out as an number one brand this year. We had 22 00:01:02,000 --> 00:01:04,880 Speaker 3: a number one ranking owner JD Power City last year. 23 00:01:05,280 --> 00:01:07,280 Speaker 3: So the reaction of the product has been great. We've 24 00:01:08,120 --> 00:01:11,319 Speaker 3: in the second quarter, we went through a big refreshed 25 00:01:11,360 --> 00:01:13,200 Speaker 3: to the product where we've now launched what we call 26 00:01:13,280 --> 00:01:16,520 Speaker 3: generation two of that vehicle, of the R one tRNS, 27 00:01:17,000 --> 00:01:19,720 Speaker 3: where we made significant improvements in the product, but also 28 00:01:19,800 --> 00:01:21,759 Speaker 3: took a tremendous amount of cost out of the vehicle. 29 00:01:23,040 --> 00:01:26,120 Speaker 2: Oh Jay, The kind of summary of the earnings print 30 00:01:26,240 --> 00:01:29,320 Speaker 2: was that all of the guidance previously issued was reiterated, 31 00:01:29,560 --> 00:01:32,640 Speaker 2: and there's a lot of positivity around that. Very simply. 32 00:01:33,120 --> 00:01:35,280 Speaker 2: Loads of people asked me to ask you, can you 33 00:01:35,400 --> 00:01:40,959 Speaker 2: define what modest gross profit means or what you're defining 34 00:01:41,000 --> 00:01:42,840 Speaker 2: it by in order to achieve it? 35 00:01:44,000 --> 00:01:49,120 Speaker 3: Yeah, I mean, ultimately, this has been the central focus 36 00:01:49,160 --> 00:01:51,880 Speaker 3: for us as as a company as a business is 37 00:01:52,240 --> 00:01:55,880 Speaker 3: driving cost efficiencies into everything that we do in Tarbilo materials, 38 00:01:55,880 --> 00:01:59,880 Speaker 3: into how we operate and run our plant, and ultimately 39 00:02:00,040 --> 00:02:03,240 Speaker 3: driving towards, you know, getting our production of our R 40 00:02:03,280 --> 00:02:04,760 Speaker 3: one T and R O n s to to positive 41 00:02:04,760 --> 00:02:07,360 Speaker 3: gross margin ultimately to have the business gets a positive 42 00:02:07,360 --> 00:02:12,520 Speaker 3: for cash flow and profitability. So there's a whole series 43 00:02:12,560 --> 00:02:14,600 Speaker 3: of steps we're making along the way in terms of 44 00:02:14,639 --> 00:02:17,679 Speaker 3: improving costs, but the biggest singular step that we've made 45 00:02:18,400 --> 00:02:20,040 Speaker 3: is what we did in the second quarter. We took 46 00:02:20,080 --> 00:02:22,679 Speaker 3: the plant down for about a month or it, made 47 00:02:22,720 --> 00:02:27,600 Speaker 3: meaningful changes to the operations and importantly changed a significant 48 00:02:27,919 --> 00:02:30,880 Speaker 3: portion of our supply base out to new suppliers in 49 00:02:30,960 --> 00:02:34,799 Speaker 3: conjunction with a number of design improvements, and all that 50 00:02:34,840 --> 00:02:37,760 Speaker 3: comes together to take us to a place where, uh, 51 00:02:38,080 --> 00:02:40,359 Speaker 3: you know, the incremental contribution to every vehicle we sell 52 00:02:40,480 --> 00:02:44,520 Speaker 3: is positive. And that's you know, that's what we're driving towards. 53 00:02:44,520 --> 00:02:46,600 Speaker 3: That's where we continue to guide towards for the fourth 54 00:02:46,680 --> 00:02:47,280 Speaker 3: quarter of this year. 55 00:02:48,160 --> 00:02:50,000 Speaker 2: In the first instance, Oh sorry, Matt, I was just 56 00:02:50,040 --> 00:02:51,680 Speaker 2: going to hold our jay to account on that one 57 00:02:51,680 --> 00:02:54,360 Speaker 2: and say, in the first instance, is it just like 58 00:02:54,919 --> 00:02:59,400 Speaker 2: more than zero or single digits gross profit? Just I 59 00:02:59,400 --> 00:03:00,919 Speaker 2: think that's the so that we're looking for. 60 00:03:02,160 --> 00:03:05,639 Speaker 3: Yeah, we haven't provided a specific number, but certainly by 61 00:03:05,639 --> 00:03:09,040 Speaker 3: saying it's positive gross margin, it's more than zero. You know, 62 00:03:09,040 --> 00:03:13,079 Speaker 3: our objective, what we've guided to for a long time. 63 00:03:13,120 --> 00:03:15,679 Speaker 3: We continue to maintain this guidance is the long term 64 00:03:15,960 --> 00:03:20,000 Speaker 3: margin profile on our one should be around twenty five percent. 65 00:03:20,280 --> 00:03:22,720 Speaker 3: And so that's what we you know, beyond just this 66 00:03:22,720 --> 00:03:26,680 Speaker 3: this fourth quarter performance that we're tracking towards seeing how 67 00:03:26,720 --> 00:03:29,400 Speaker 3: we continue to improve in twenty twenty five and beyond. 68 00:03:29,960 --> 00:03:33,600 Speaker 3: We still maintain confidence in the twenty five percent gross margin. 69 00:03:33,840 --> 00:03:37,920 Speaker 1: And the gross profit on vehicles has nothing to do 70 00:03:37,960 --> 00:03:40,560 Speaker 1: with the credits. But with credits you can make a 71 00:03:40,560 --> 00:03:42,840 Speaker 1: lot of money, as we've seen in the in the 72 00:03:42,880 --> 00:03:47,800 Speaker 1: case of Tesla, you're making you know, double digit millions there. 73 00:03:47,960 --> 00:03:50,680 Speaker 1: Do you expect that to grow considerably? Is it really 74 00:03:50,680 --> 00:03:52,000 Speaker 1: part of your financial planning? 75 00:03:53,880 --> 00:03:57,120 Speaker 3: And I think as we design the business and think 76 00:03:57,160 --> 00:04:01,360 Speaker 3: about how we're operating a company, the credits environment is 77 00:04:01,360 --> 00:04:05,080 Speaker 3: certainly something that's a helpful tailwind, but we don't design 78 00:04:05,120 --> 00:04:09,080 Speaker 3: the company or the business or a strategy around it. 79 00:04:09,080 --> 00:04:11,440 Speaker 3: It is worth noting, though, that we're seeing the credits 80 00:04:11,520 --> 00:04:14,840 Speaker 3: environment really become a lot stronger as a number of 81 00:04:15,560 --> 00:04:19,680 Speaker 3: existing or legacy manufacturers dial back or walk back from 82 00:04:19,680 --> 00:04:24,840 Speaker 3: their electrication strategies. And we see that is further I mean, 83 00:04:24,880 --> 00:04:27,160 Speaker 3: the most important point here is there further amplifies the 84 00:04:27,200 --> 00:04:30,880 Speaker 3: need for more product in the marketplace. There's very very 85 00:04:30,880 --> 00:04:34,640 Speaker 3: little choice in the sub fifty thousand dollars price range, 86 00:04:34,720 --> 00:04:37,840 Speaker 3: and we see that, but just the dominant market share 87 00:04:37,839 --> 00:04:39,920 Speaker 3: position that Tesla has with its Model three and its 88 00:04:39,920 --> 00:04:43,400 Speaker 3: model y. Customers need choice, and so this is why 89 00:04:43,480 --> 00:04:47,040 Speaker 3: we're so excited about the R two program, because we 90 00:04:47,080 --> 00:04:49,240 Speaker 3: think there's a tremendous amount of late in demand that 91 00:04:49,760 --> 00:04:52,640 Speaker 3: wants to buy a vehicle a lot like an R two, 92 00:04:53,240 --> 00:04:56,400 Speaker 3: wants something that's less than fifty thousand dollars in that 93 00:04:56,400 --> 00:04:58,599 Speaker 3: product when it comes to market, it hopefully answers ended. 94 00:05:00,240 --> 00:05:01,599 Speaker 2: For most of the time that you and I have 95 00:05:01,640 --> 00:05:04,280 Speaker 2: known each other and we've talked, Rivian has been in 96 00:05:04,360 --> 00:05:08,120 Speaker 2: a position where it's been supply constrained. I wonder if 97 00:05:08,120 --> 00:05:11,640 Speaker 2: that's still the case on the R one refresh. You know, 98 00:05:11,680 --> 00:05:14,200 Speaker 2: you talked last night as a big factor towards growth 99 00:05:14,320 --> 00:05:18,440 Speaker 2: profit being asp essentially that these higher performance spec are 100 00:05:18,560 --> 00:05:21,800 Speaker 2: ones are going to put you in a wider range 101 00:05:21,800 --> 00:05:25,400 Speaker 2: of price points, but that will be a contributing factor. 102 00:05:25,480 --> 00:05:28,000 Speaker 2: Is there a backlog essentially for our one? Are you 103 00:05:28,080 --> 00:05:30,200 Speaker 2: supply constrained in that sense? 104 00:05:32,000 --> 00:05:35,960 Speaker 3: I mean, it's an important point. We've with a relaunch 105 00:05:36,000 --> 00:05:40,080 Speaker 3: of what we call the Gentwo R one, it's not 106 00:05:40,200 --> 00:05:43,440 Speaker 3: just cost out. We've also added some new packages. We 107 00:05:43,480 --> 00:05:46,160 Speaker 3: have a tri motor, Our new next generation quad motor 108 00:05:46,200 --> 00:05:48,880 Speaker 3: is extremely high performance. That's a lot of us to 109 00:05:48,920 --> 00:05:52,640 Speaker 3: stretch the pricing band from our base you know, roughly 110 00:05:52,680 --> 00:05:55,040 Speaker 3: seventy thousand our vehicle up to over one hundred thousand 111 00:05:55,560 --> 00:05:58,880 Speaker 3: for our quad motor. And what that's really helpful in 112 00:05:59,000 --> 00:06:02,240 Speaker 3: doing is helping to drive I have continual you know, 113 00:06:02,400 --> 00:06:05,839 Speaker 3: sort of maintenance of that high average selling price. So 114 00:06:05,960 --> 00:06:09,520 Speaker 3: this is something that we also continue to have confidence in. Uh, 115 00:06:09,839 --> 00:06:14,240 Speaker 3: it does reflect as you pointed out, that there's there's 116 00:06:14,279 --> 00:06:17,600 Speaker 3: a backlog of interest and excitement around the product. And 117 00:06:17,760 --> 00:06:20,039 Speaker 3: today one of the things we're focused on is making 118 00:06:20,040 --> 00:06:22,920 Speaker 3: sure that the tri motor and the quad motor ramp 119 00:06:23,880 --> 00:06:26,760 Speaker 3: meets customer demand. It's those are the you know, higher 120 00:06:26,800 --> 00:06:29,320 Speaker 3: price variants. They're great for driving ASP. They're also them, 121 00:06:29,800 --> 00:06:33,640 Speaker 3: you know, the products that a lot of our early 122 00:06:33,680 --> 00:06:36,000 Speaker 3: adopter customers really want to get. They want the best 123 00:06:36,080 --> 00:06:37,320 Speaker 3: version of the vehicle that we make. 124 00:06:38,440 --> 00:06:41,320 Speaker 1: I want a quad motor over a thousand horse power. 125 00:06:42,000 --> 00:06:45,360 Speaker 1: With this vehicle, I think it starts at what around 126 00:06:45,360 --> 00:06:47,720 Speaker 1: around one hundred grand. If I want the highest trim 127 00:06:47,839 --> 00:06:50,720 Speaker 1: level RJ, I would have to borrow money to buy that. 128 00:06:51,640 --> 00:06:54,280 Speaker 1: How important is it for you that the FED bring 129 00:06:54,400 --> 00:06:56,560 Speaker 1: rates down into the into the next year. 130 00:06:59,360 --> 00:07:06,680 Speaker 3: I mean Ultimately, we watched this extremely closely and just 131 00:07:06,720 --> 00:07:09,960 Speaker 3: the overall macro environment that we're in, an interest free environment, 132 00:07:10,120 --> 00:07:12,640 Speaker 3: it does have an impact on folks that are buying 133 00:07:12,680 --> 00:07:16,400 Speaker 3: vehicles that are of this price point, you know, eighty 134 00:07:16,480 --> 00:07:19,920 Speaker 3: ninety one hundred thousand our vehicles. You know, it's hard 135 00:07:19,920 --> 00:07:22,040 Speaker 3: for us to predict exactly how that's going to play out. 136 00:07:22,120 --> 00:07:26,240 Speaker 3: We much like in the credits environment, we work really 137 00:07:26,280 --> 00:07:28,800 Speaker 3: hard to make sure our business is not dependent upon 138 00:07:29,080 --> 00:07:34,080 Speaker 3: ultra low rates. But it certainly affects anybody who's selling 139 00:07:34,160 --> 00:07:37,600 Speaker 3: or selling products that have financing associated with them. 140 00:07:38,160 --> 00:07:41,480 Speaker 2: Oh, Jay, you gave really early heads up to investors 141 00:07:41,480 --> 00:07:43,400 Speaker 2: that you're going to shut down Normal for about a 142 00:07:43,440 --> 00:07:48,320 Speaker 2: month for splicing the plant right accommodate for R to install. 143 00:07:48,480 --> 00:07:50,920 Speaker 2: That's a long period of time. Thinking back to April 144 00:07:50,960 --> 00:07:52,760 Speaker 2: the three weeks, I know you're not going to tell 145 00:07:52,760 --> 00:07:55,960 Speaker 2: me a number for production for twenty twenty five, but 146 00:07:56,040 --> 00:07:58,720 Speaker 2: could you extrapolate out whether it's higher or lower than 147 00:07:58,760 --> 00:08:02,240 Speaker 2: the base of fifty seven given that that four week 148 00:08:02,280 --> 00:08:03,280 Speaker 2: period you outlined. 149 00:08:05,720 --> 00:08:10,560 Speaker 3: Yeah, the decision to put R two in Normal was 150 00:08:10,600 --> 00:08:13,800 Speaker 3: one that's going to ultimately provide us around two point 151 00:08:13,840 --> 00:08:18,280 Speaker 3: twenty five billion dollars of capital savings in terms of 152 00:08:18,920 --> 00:08:21,080 Speaker 3: reduce the amount of capital necessary to launch our two. 153 00:08:21,520 --> 00:08:23,040 Speaker 3: So it was one of the big drivers. The other 154 00:08:23,200 --> 00:08:25,600 Speaker 3: is it allows us to have really high fixed soss 155 00:08:25,600 --> 00:08:28,800 Speaker 3: absorption between R two, R one and our commercial bands 156 00:08:28,800 --> 00:08:30,880 Speaker 3: and a single plan. Now, of course, to do that, 157 00:08:30,920 --> 00:08:32,800 Speaker 3: it does requires, as you've said, to shut down the 158 00:08:32,840 --> 00:08:35,760 Speaker 3: plant for a period of time. What we've provided guidance 159 00:08:35,800 --> 00:08:37,480 Speaker 3: on this is to say in the second half of 160 00:08:37,520 --> 00:08:39,240 Speaker 3: twenty twenty five will be shutting down the plant for 161 00:08:39,280 --> 00:08:44,200 Speaker 3: about a month, and that will impact production. We haven't 162 00:08:45,400 --> 00:08:48,960 Speaker 3: we've been We've guided to say twenty twenty five will 163 00:08:48,960 --> 00:08:52,200 Speaker 3: grow relative to twenty twenty four. We haven't been overly 164 00:08:52,280 --> 00:08:55,840 Speaker 3: specific around these exact numbers of vehicles were produced, but 165 00:08:55,880 --> 00:08:57,840 Speaker 3: it will be another year of growth for us. 166 00:08:58,120 --> 00:09:01,280 Speaker 1: Are When I was a kid, some of the cooler 167 00:09:01,320 --> 00:09:04,280 Speaker 1: guys had a Scout International truck in the high school 168 00:09:04,280 --> 00:09:06,360 Speaker 1: parking lot. I always thought they looked so cool, and 169 00:09:06,720 --> 00:09:10,679 Speaker 1: Folkswagen is reviving that brand. You're working closely with Folkswagen. 170 00:09:10,840 --> 00:09:13,560 Speaker 1: My immediate thought when I saw that story was, Wow, 171 00:09:13,600 --> 00:09:16,640 Speaker 1: they could just take a Rivian and rebody it as 172 00:09:16,720 --> 00:09:20,480 Speaker 1: their new Scout. Is that anywhere near part of the 173 00:09:20,520 --> 00:09:23,880 Speaker 1: plan or what kind of vehicles can you build together 174 00:09:23,960 --> 00:09:24,719 Speaker 1: with VW. 175 00:09:25,960 --> 00:09:29,079 Speaker 3: Yeah, the Volkswaging partnership is something we're really excited about. 176 00:09:29,120 --> 00:09:33,160 Speaker 3: But the focus of this is around our leveraging our 177 00:09:33,200 --> 00:09:38,040 Speaker 3: network architecture, our topology of computers, thepology of electronic controlling 178 00:09:38,160 --> 00:09:40,000 Speaker 3: is the EC used in the vehicle, and then of 179 00:09:40,000 --> 00:09:43,440 Speaker 3: course our software stack. It does open the door to 180 00:09:43,480 --> 00:09:46,480 Speaker 3: other types of partnership and activities we could be doing 181 00:09:46,559 --> 00:09:50,680 Speaker 3: with Folks Riding Group, but to date, the core focus, 182 00:09:50,760 --> 00:09:55,840 Speaker 3: the singular focus is around our software and electronics technology. 183 00:09:55,920 --> 00:09:58,320 Speaker 1: All right, Well, we look forward to any news that 184 00:09:58,360 --> 00:09:59,000 Speaker 1: comes out on that. 185 00:09:59,120 --> 00:09:59,280 Speaker 3: R J. 186 00:09:59,400 --> 00:10:01,720 Speaker 1: Thanks so much for joining us. Really appreciate your time today. 187 00:10:01,800 --> 00:10:01,959 Speaker 3: R J. 188 00:10:02,080 --> 00:10:05,840 Speaker 1: Scaringe there of Rivian as well as Bloomberg Technologies anchor 189 00:10:06,040 --> 00:10:10,320 Speaker 1: Ed Ludlow, who also is essentially the ed reporter for 190 00:10:10,440 --> 00:10:12,239 Speaker 1: us here across all our platforms.