Rivian (RIVN 6.10%) and its investors found out quickly in 2023 that you don't want to disappoint Wall Street when it comes to production and deliveries. As Rivian worked through production bottlenecks, which we'll cover more in a second, its stock price slid lower as its production roughly flatlined sequentially.
Should investors be worried that we might see that again with a production adjustment on the way? Let's dig in.
What happened?
Let's briefly recap what happened toward the end of 2022 and the beginning of 2023, when Rivian hit a snag with its quad-motor, causing production to slow. You can see the flatline in the graph below.
Image source: Author. Data source: Rivian production press releases.
It didn't take long for management to find a solution: Use the Enduro drive unit, which was built in-house, in place of the outsourced quad motor. That adjustment quickly sent production and deliveries substantially higher through the remainder of the year.
So what's happening that could cause a slowdown as we head into 2024? And more importantly, is it potentially another snag that could derail production enough to send investors fleeing?
Battery developments
Let's be clear about one thing: increasing production is one of the primary levers for Rivian to reach profitability. Anything that slows, stalls, or complicates production isn't going to sit well with Wall Street or near-sighted investors.
Recently, Rivian's Chief Financial Officer Claire McDonough teased some new details about upcoming battery developments. However, when news hit that a new battery introduction could slow down production during the second and third quarters of 2024, it was met with healthy caution.
But fear not investors, the teased new "simplified" battery and the introduction of the standard pack next year will do numerous positive things.
First, the new battery for R1 vehicles will significantly simplify the battery pack and module, cutting thousands of dollars of costs out and making manufacturing easier. Not only will the simplified battery improve operational and cost efficiency, introducing the standard battery pack will also give R1 vehicles a starting price in the low $70,000 area -- roughly $8,000 less than the cheapest starting price today.
Further, if investors were also worried about yet another new battery -- the Max pack, which will boost range up to 410 miles -- fear not, because it's not available in configurations with the quad motor, which contributed to prior production delays.
Is Rivian still a buy?
Rivian is one of few automakers that seems to have some momentum going into 2024. It recently negotiated with Amazon to enable sales of its electric delivery van to other customers, it avoided price wars ignited by Tesla, it avoided tense negotiations that Detroit automakers had to navigate with Union Auto Workers (UAW), it's preparing to break ground on its Georgia plant for its upcoming R2 vehicles, it significantly reduced its loss per vehicle by tens of thousands of dollars over the past year, and it still has a nearly-$8 billion cash pile to fund operations in the near term.
While production might slow slightly during production line adjustments for the new batteries, it shouldn't be nearly as drastic as the production speed bump seen in late 2022 and early 2023. Further, these new battery options will increase the number of price points for consumers, improve operations and production simplicity, and reduce costs.
In other words, the addition of the standard pack, max pack, and the new "simplified" battery when it launches will all be worth the slight production hiccups in 2024, and should set the company up for a strong finish in production and deliveries next year. Now, to be fair, if production slows due to a lack of demand, that will be reason for investors to become concerned -- but for now, that isn't an issue.
