It's challenging to maintain profitability in the auto industry as it's capital-intensive and cyclical, and electric vehicles' added complexity makes it even more difficult. Up-and-coming electric-vehicle maker Rivian (RIVN 3.48%) is finding out the hard way that this industry is unforgiving and demands results.
After its 2021 IPO, which was the largest of any company since 2014, Rivian is proving that its goal of offering drivers electric sport utility and truck options fills a gap in an electric vehicle industry dominated by sedans and coupes. Numbers from the company's Q2 earnings report show that consumers increasingly want gas alternatives that allow outdoor enthusiasts to maintain their driving preferences.
Production, deliveries, and reservations are all up
For the second quarter, the company received another 8,000 pre-orders. The total number of reservations sits around 98,000 now. An increase in demand means production should follow suit -- and Rivian produced and delivered more cars last quarter than ever before.
The Q2 earnings report shows Rivian produced 4,401 cars, up from the 2,553 cars the company produced in Q1. It also delivered almost four times as many cars as in Q1.
Production and deliveries are where most attention falls in the EV industry. If companies can't mass produce vehicles and deliver them, then profits will clearly take a hit. Yet this is the third quarter Rivian has increased its production and deliveries. Accomplishing a record number in both categories is no small feat, especially when considering that supply chain issues still persist.
Costs are up, too
Although there were plenty of good things that happened for Rivian in Q2, the earnings call had its fair share of less-than-stellar news as well. Of most concern might be the company's increase in projected losses. Rivian originally forecast a loss of around $4.75 billion for 2022, but that number has now jumped to $5.4 billion.
At the end of Q1, Rivian had $17 billion in cash and cash alternatives, but the increase in losses and costs has cut that reserve to $15.5 billion by the end of Q2 that ended on June 30. While production, deliveries, and reservations have increased , the company is yet to turn a profit.
Yet Rivian executives are hopeful that this might all change when its new 2,000-acre mega factory in Georgia becomes operational, but that isn't expected to happen until 2025. Rivian hopes to produce up to 400,000 cars a year, representing a 1,500% increase, once the factory opens.
Potential long-term value
Rivian is making considerable progress being a new company in a difficult industry. Rising costs are likely associated with current macroeconomic factors like inflation and supply chain issues, which should hopefully be resolved by 2025.
Although not yet profitable, investors should take into consideration Rivian's ability to ramp up production and deliveries in the midst of an economic environment that isn't quite conducive to industrial output proving that the EV maker might just have what it takes to stick around for the long haul. In addition, the increase in reservations proves that consumers are more than interested in the cars the company offers.
While its stock is down more than 80% from its all-time high, it's becoming increasingly hard to ignore the promising future Rivian might have. If you're looking for a long-term play in the EV space, Rivian could be that option. Tesla's (TSLA -1.80%) stranglehold on the industry will likely continue to dwindle as more participants enter the market. And Rivian's current trends could position the company to grab that available share.
It's back is against the wall, but if Rivian doesn't fully exhaust the $15.5 billion cash on hand until the Georgia plant becomes operational, then the burgeoning EV maker looks like it has the potential to cement itself as one of the premier names in the American electric vehicle industry.
