Speaker 1: Now we are watching Rivian stock this morning. It is
Speaker 1: down pre market after the EV maker's second quarter revenue
Speaker 1: missed analysts estimates by just a tiny tiny hair. Cash
Speaker 1: burn for the quarter though also came in bigger than expected,
Speaker 1: and this is the worry. With Rivian joining us now
Speaker 1: is the founder and CEO r J. Scarringe, as well
Speaker 1: as Bloomberg Technology co host ed Ludlow, who covers the
Speaker 1: EV market so closely.
Speaker 2: R J.
Speaker 1: I want to ask you just quickly about the sales.
Speaker 1: This is no doubt a hot product. I mean, I
Speaker 1: have been fascinated by the car, I love the design,
Speaker 1: looking at it for years, and people wait in line
Speaker 1: to get them for a long time. Why are sales
Speaker 1: only growing three point three percent?
Speaker 3: Yeah, I mean it's great. As you said, it's great
Speaker 3: to see their action to the products, and we see
Speaker 3: that both through the excitement of our customers directly. But
Speaker 3: there's lots of ways to measure this, and we just
Speaker 3: had a Jdpower as an annual appeal study. We came
Speaker 3: out as an number one brand this year. We had
Speaker 3: a number one ranking owner JD Power City last year.
Speaker 3: So the reaction of the product has been great. We've
Speaker 3: in the second quarter, we went through a big refreshed
Speaker 3: to the product where we've now launched what we call
Speaker 3: generation two of that vehicle, of the R one tRNS,
Speaker 3: where we made significant improvements in the product, but also
Speaker 3: took a tremendous amount of cost out of the vehicle.
Speaker 2: Oh Jay, The kind of summary of the earnings print
Speaker 2: was that all of the guidance previously issued was reiterated,
Speaker 2: and there's a lot of positivity around that. Very simply.
Speaker 2: Loads of people asked me to ask you, can you
Speaker 2: define what modest gross profit means or what you're defining
Speaker 2: it by in order to achieve it?
Speaker 3: Yeah, I mean, ultimately, this has been the central focus
Speaker 3: for us as as a company as a business is
Speaker 3: driving cost efficiencies into everything that we do in Tarbilo materials,
Speaker 3: into how we operate and run our plant, and ultimately
Speaker 3: driving towards, you know, getting our production of our R
Speaker 3: one T and R O n s to to positive
Speaker 3: gross margin ultimately to have the business gets a positive
Speaker 3: for cash flow and profitability. So there's a whole series
Speaker 3: of steps we're making along the way in terms of
Speaker 3: improving costs, but the biggest singular step that we've made
Speaker 3: is what we did in the second quarter. We took
Speaker 3: the plant down for about a month or it, made
Speaker 3: meaningful changes to the operations and importantly changed a significant
Speaker 3: portion of our supply base out to new suppliers in
Speaker 3: conjunction with a number of design improvements, and all that
Speaker 3: comes together to take us to a place where, uh,
Speaker 3: you know, the incremental contribution to every vehicle we sell
Speaker 3: is positive. And that's you know, that's what we're driving towards.
Speaker 3: That's where we continue to guide towards for the fourth
Speaker 3: quarter of this year.
Speaker 2: In the first instance, Oh sorry, Matt, I was just
Speaker 2: going to hold our jay to account on that one
Speaker 2: and say, in the first instance, is it just like
Speaker 2: more than zero or single digits gross profit? Just I
Speaker 2: think that's the so that we're looking for.
Speaker 3: Yeah, we haven't provided a specific number, but certainly by
Speaker 3: saying it's positive gross margin, it's more than zero. You know,
Speaker 3: our objective, what we've guided to for a long time.
Speaker 3: We continue to maintain this guidance is the long term
Speaker 3: margin profile on our one should be around twenty five percent.
Speaker 3: And so that's what we you know, beyond just this
Speaker 3: this fourth quarter performance that we're tracking towards seeing how
Speaker 3: we continue to improve in twenty twenty five and beyond.
Speaker 3: We still maintain confidence in the twenty five percent gross margin.
Speaker 1: And the gross profit on vehicles has nothing to do
Speaker 1: with the credits. But with credits you can make a
Speaker 1: lot of money, as we've seen in the in the
Speaker 1: case of Tesla, you're making you know, double digit millions there.
Speaker 1: Do you expect that to grow considerably? Is it really
Speaker 1: part of your financial planning?
Speaker 3: And I think as we design the business and think
Speaker 3: about how we're operating a company, the credits environment is
Speaker 3: certainly something that's a helpful tailwind, but we don't design
Speaker 3: the company or the business or a strategy around it.
Speaker 3: It is worth noting, though, that we're seeing the credits
Speaker 3: environment really become a lot stronger as a number of
Speaker 3: existing or legacy manufacturers dial back or walk back from
Speaker 3: their electrication strategies. And we see that is further I mean,
Speaker 3: the most important point here is there further amplifies the
Speaker 3: need for more product in the marketplace. There's very very
Speaker 3: little choice in the sub fifty thousand dollars price range,
Speaker 3: and we see that, but just the dominant market share
Speaker 3: position that Tesla has with its Model three and its
Speaker 3: model y. Customers need choice, and so this is why
Speaker 3: we're so excited about the R two program, because we
Speaker 3: think there's a tremendous amount of late in demand that
Speaker 3: wants to buy a vehicle a lot like an R two,
Speaker 3: wants something that's less than fifty thousand dollars in that
Speaker 3: product when it comes to market, it hopefully answers ended.
Speaker 2: For most of the time that you and I have
Speaker 2: known each other and we've talked, Rivian has been in
Speaker 2: a position where it's been supply constrained. I wonder if
Speaker 2: that's still the case on the R one refresh. You know,
Speaker 2: you talked last night as a big factor towards growth
Speaker 2: profit being asp essentially that these higher performance spec are
Speaker 2: ones are going to put you in a wider range
Speaker 2: of price points, but that will be a contributing factor.
Speaker 2: Is there a backlog essentially for our one? Are you
Speaker 2: supply constrained in that sense?
Speaker 3: I mean, it's an important point. We've with a relaunch
Speaker 3: of what we call the Gentwo R one, it's not
Speaker 3: just cost out. We've also added some new packages. We
Speaker 3: have a tri motor, Our new next generation quad motor
Speaker 3: is extremely high performance. That's a lot of us to
Speaker 3: stretch the pricing band from our base you know, roughly
Speaker 3: seventy thousand our vehicle up to over one hundred thousand
Speaker 3: for our quad motor. And what that's really helpful in
Speaker 3: doing is helping to drive I have continual you know,
Speaker 3: sort of maintenance of that high average selling price. So
Speaker 3: this is something that we also continue to have confidence in. Uh,
Speaker 3: it does reflect as you pointed out, that there's there's
Speaker 3: a backlog of interest and excitement around the product. And
Speaker 3: today one of the things we're focused on is making
Speaker 3: sure that the tri motor and the quad motor ramp
Speaker 3: meets customer demand. It's those are the you know, higher
Speaker 3: price variants. They're great for driving ASP. They're also them,
Speaker 3: you know, the products that a lot of our early
Speaker 3: adopter customers really want to get. They want the best
Speaker 3: version of the vehicle that we make.
Speaker 1: I want a quad motor over a thousand horse power.
Speaker 1: With this vehicle, I think it starts at what around
Speaker 1: around one hundred grand. If I want the highest trim
Speaker 1: level RJ, I would have to borrow money to buy that.
Speaker 1: How important is it for you that the FED bring
Speaker 1: rates down into the into the next year.
Speaker 3: I mean Ultimately, we watched this extremely closely and just
Speaker 3: the overall macro environment that we're in, an interest free environment,
Speaker 3: it does have an impact on folks that are buying
Speaker 3: vehicles that are of this price point, you know, eighty
Speaker 3: ninety one hundred thousand our vehicles. You know, it's hard
Speaker 3: for us to predict exactly how that's going to play out.
Speaker 3: We much like in the credits environment, we work really
Speaker 3: hard to make sure our business is not dependent upon
Speaker 3: ultra low rates. But it certainly affects anybody who's selling
Speaker 3: or selling products that have financing associated with them.
Speaker 2: Oh, Jay, you gave really early heads up to investors
Speaker 2: that you're going to shut down Normal for about a
Speaker 2: month for splicing the plant right accommodate for R to install.
Speaker 2: That's a long period of time. Thinking back to April
Speaker 2: the three weeks, I know you're not going to tell
Speaker 2: me a number for production for twenty twenty five, but
Speaker 2: could you extrapolate out whether it's higher or lower than
Speaker 2: the base of fifty seven given that that four week
Speaker 2: period you outlined.
Speaker 3: Yeah, the decision to put R two in Normal was
Speaker 3: one that's going to ultimately provide us around two point
Speaker 3: twenty five billion dollars of capital savings in terms of
Speaker 3: reduce the amount of capital necessary to launch our two.
Speaker 3: So it was one of the big drivers. The other
Speaker 3: is it allows us to have really high fixed soss
Speaker 3: absorption between R two, R one and our commercial bands
Speaker 3: and a single plan. Now, of course, to do that,
Speaker 3: it does requires, as you've said, to shut down the
Speaker 3: plant for a period of time. What we've provided guidance
Speaker 3: on this is to say in the second half of
Speaker 3: twenty twenty five will be shutting down the plant for
Speaker 3: about a month, and that will impact production. We haven't
Speaker 3: we've been We've guided to say twenty twenty five will
Speaker 3: grow relative to twenty twenty four. We haven't been overly
Speaker 3: specific around these exact numbers of vehicles were produced, but
Speaker 3: it will be another year of growth for us.
Speaker 1: Are When I was a kid, some of the cooler
Speaker 1: guys had a Scout International truck in the high school
Speaker 1: parking lot. I always thought they looked so cool, and
Speaker 1: Folkswagen is reviving that brand. You're working closely with Folkswagen.
Speaker 1: My immediate thought when I saw that story was, Wow,
Speaker 1: they could just take a Rivian and rebody it as
Speaker 1: their new Scout. Is that anywhere near part of the
Speaker 1: plan or what kind of vehicles can you build together
Speaker 1: with VW.
Speaker 3: Yeah, the Volkswaging partnership is something we're really excited about.
Speaker 3: But the focus of this is around our leveraging our
Speaker 3: network architecture, our topology of computers, thepology of electronic controlling
Speaker 3: is the EC used in the vehicle, and then of
Speaker 3: course our software stack. It does open the door to
Speaker 3: other types of partnership and activities we could be doing
Speaker 3: with Folks Riding Group, but to date, the core focus,
Speaker 3: the singular focus is around our software and electronics technology.
Speaker 1: All right, Well, we look forward to any news that
Speaker 1: comes out on that.
Speaker 3: R J.
Speaker 1: Thanks so much for joining us. Really appreciate your time today.
Speaker 3: R J.
Speaker 1: Scaringe there of Rivian as well as Bloomberg Technologies anchor
Speaker 1: Ed Ludlow, who also is essentially the ed reporter for
Speaker 1: us here across all our platforms.