Last week, premium electric vehicle (EV) maker Rivian Automotive (RIVN 3.76%) released its second-quarter report, which featured better-than-expected revenue and earnings, along with a raise of 2023 annual production guidance to 52,000 total vehicles, from 50,000.
Revenue was $1.12 billion, up 208% from the year-ago period and up 70% from the prior quarter. Growth was primarily driven by the 12,640 vehicles delivered in the quarter, up 59% from the first quarter. Adjusted net loss was $1.02 billion, or $1.08 per share, a 33% improvement from the year-ago period. Wall Street was looking for an adjusted loss of $1.41 per share on revenue of $1 billion, so Rivian beat both expectations.
Earnings releases tell only part of the story. Here are three key things management shared on Rivian's Q2 earnings call that investors should know.
Quarterly R1S SUV production now exceeds R1T pickup production
From CEO RJ Scaringe's remarks:
Importantly, approximately 70% of the R1 units produced during the second quarter were R1S vehicles. This represents the first time R1S quarterly production was higher than R1T production. Our team in Normal [Illinois] has made strong progress through the first half of the year maturing the manufacturing process of the R1S to a point where the build efficiency is essentially equal to the R1T.
It's good news for investors that Q2 was the first quarter that Rivian produced more of its R1S SUVs than its R1T pickup trucks. That's because the R1S is more profitable than the R1T, as Scaringe shared on the call.
Moreover, management expects this dynamic to continue. Scaringe said that for the next quarter or two, the R1S will account for 70%-plus of total R1 units produced because the company wants to address some of the "really long backlog" for this vehicle. Thereafter, management expects the longer-term R1 production split will be 70% R1S and 30% R1T.
As background, Rivian started delivering the R1T in October 2021, and began rolling out the R1S to customers in August 2022.
"Our software capabilities are a structural differentiator that will only grow in importance"
From the remarks of Wassym Bensaid, senior VP of software development:
Since launching our R1 platform in the fall of 2021, we have pushed 22 major [over-the-air] software updates to our vehicles. These updates have been filled with features such as Bird's-Eye Camera View, Drive Cam, Snow Mode, Camp Mode, Pet Mode and much more, all designed to enhance our customers' experience. And the road map we have is equally exciting.
We believe that our software capabilities are a structural differentiator that will only grow in importance as electric vehicles continue to increase in complexity.
Bensaid went on to say that in addition to the company's consumer-facing software work, such as the over-the-air (OTA) updates to a vehicle's features, his team does a lot of important behind-the-scenes work. As an example, the company's "connected software architecture allows us to gather sophisticated data that provide powerful insights enabling us to improve the reliability and safety of our products and reduce our service cost."
Much of Rivian's unique software capabilities stem from the company's decision from the get-go to own the software stack and control nearly every computer in its vehicles.
Rivian's intense focus on owning its software stack and vertical integration is reminiscent of Tesla. Indeed, Tesla CEO Elon Musk has said several times over the years that the EV pioneer is a software company as much as it is a hardware company. This opinion might be pushing it a bit, at least until fully self-driving vehicles are here and legal across the land, but certainly a good case could be made that Tesla and Rivian are hybrid hardware-software companies.
Engineering improvements to drive down cost and open up opportunities "to do some really amazing features"
From Scaringe's remarks:
[A] lot of the improvements in engineering that are going into the [R1] vehicle are to drive cost out. One of the biggest areas is the improvements we're making to the network architecture and consolidating a number of our ECUs [electronic control units] into a smaller number of ECUs, ultimately a 60% reduction in the number of ECUs in the vehicle. And along with that, roughly a 25% reduction in the wiring harness length in the vehicle.
In simple terms, an ECU is a computer. More specifically, it's "an embedded system in automotive electronics that controls one or more of the electrical systems or subsystems," according to Wikipedia's definition.
Rivian plans this 60% reduction in the number of ECUs in its R1 vehicles will occur next year. Scaringe said this consolidation along with the resultant approximately 25% reduction in the length of the wiring harness (which connects all electrical and electronic components in a vehicle) should give the company a "significant multi-thousand-dollar structural cost advantage relative to the traditional approach."
In addition to driving costs down, this ECU consolidation "opens up opportunities to do some really amazing features," he added.
