Rivian's "Hell's Test"

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Introduction

Can Rivian, who has spent all his luck at the beginning, still turn the tide of battle?

Author 丨 Ma Xifeng

Responsible editor 丨 Xu Jinkai

Editor 丨Zhu Jinbin

Electric vehicle maker Rivian will receive $1.5 billion in state and local incentives and tax credits in Georgia, which plans to build a new plant with an annual capacity of 400,000 units.

The company previously announced plans to invest $5 billion to build a second assembly plant in Georgia, second only to its plant in Normal, Illinois. It is expected to be completed and operational by the end of 2024 and, once operational, is expected to employ around 7,500 workers.

Georgia Economic Development Commissioner Pat Wilson said in a statement that the plant also includes a battery production site, a historic victory that put Georgia "at the forefront of the electric vehicle revolution."

Opportunities in the era of big subsidies

Under an agreement with the state, Rivian must meet its 7,500 employment goals and $5 billion investment target by the end of 2028 to receive full incentives and tax incentives. Meanwhile, Rivian and the Georgia Department of Economic Development said in a statement that the average worker's annual salary is $56,000.

Starting in March 2021, the Biden administration has issued a number of policies to support new energy vehicles, which is a win-win situation under the "era of big subsidies" in the United States. New energy vehicle companies are solving some of the employment pressure for the government, and the government hopes to make the United States surpass China in the era of electric vehicles through subsidies and win back the market from China.

Compared with China's target, new energy vehicles account for about 20% of total vehicle sales in 2025 and about 40% in 2030. Biden signed an executive order to achieve 50% of new energy vehicle sales by 2030.

In terms of electric vehicle production data, the two countries have also distanced themselves. Between 2010 and 2020, more than 10 million electric vehicles were produced worldwide. Among them, China is the world's largest producer of electric vehicles, accounting for about 44% of global production, and the number of electric vehicles produced by China every year has reached three times that of the United States.

The United States is really anxious and wants to label the world's electric vehicles as "Made in the USA". But Rivian is just one of those who benefited in the era of big subsidies, and it is also a step in the electrified chessboard between the United States and China, which has a fault tolerance rate for the United States. But the choice in front of Rivian has no fault tolerance rate, and there is only one way to deliver the mountain of mass production, and if it is not successful, it will become a ren.

Although the support and subsidies given by the government can indeed alleviate the pressure on Rivian to some extent, the rivian production capacity that has been anxious for half a year still has not given a "report card" that satisfies Wall Street and shareholders. Rivian's first-quarter production announcement last month coincided with a revised full-year 2022 production target of 25,000 electric trucks and SUVs, but that was only half of the expected number offered to investors last year.

Climb over this mountain

With ford and Amazon's first-quarter earnings reports, Rivian's current embarrassing situation is clearly seen, because although there is no mention of Rivian in the earnings report, it does not leave Rivian.

On April 27, Ford said it lost $5.4 billion in the first quarter due to its 12 percent stake in Rivian. The following day, Amazon released its earnings report. In the first quarter of this year, the stock price of electric vehicle maker Rivian fell by more than 50%, so Amazon's stake in Rivian lost $7.6 billion in value.

Although Amazon previously ordered 100,000 electric delivery vehicles from Rivian, the current market environment is still tough. Like most manufacturers, Rivian is battling supply chain constraints and internal production barriers.

While Rivian's new plant aims to start production by the end of 2024, as 2022 turns into summer, it's only two and a half years before the plant starts. There is still plenty of time to prepare the factory, but in the past two and a half years, the current capacity anxiety should be relieved, which is what needs to be solved urgently.

The high-profile Rivian led the company to the capital markets last November through a sensational IPO. At the time, Adam Jonas, Morgan Stanley's chief auto analyst, supported Rivian's belief that it was well positioned to challenge Tesla, the leader in the electric car industry.

Rivian orders are not lacking, the market and user recognition is acceptable, helpless car is not delivered. And now Rivian experienced Tesla 3 years ago. The key to how to break the game at that time was to create a "high degree of cooperation between labor and machine" super factory, that is, the successful establishment of a high-capacity factory with a certain degree of semi-automation and manual assembly.

It is precisely because of the previous difficulties that Tesla's annual production in 2021 has reached 936,000 vehicles. According to the paper plan, Tesla's global production capacity is expected to reach 2 million vehicles this year — more than twice as much as last year's completed production.

In this period of bitterness, car companies are still planning to double production, which is indeed the confidence brought to Tesla by a factory per month in the first two months. The Berlin plant in Germany was officially put into operation in March, the Texas plant in the United States was completed in April, and the second gigafactory in Shanghai was announced in May.

Building more factories may be the most straightforward way to increase production, and what kind of factories to build, whether it is fully automated or Tesla-style "super factories", is also the key to solving the capacity problem. Tesla's experience also includes eliminating aggressive capacity planning and "technology cults" that are divorced from reality.

Of course, this is not to say that the method Tesla has gone through can be copied, but it may be possible to shorten and shorten the painful climbing stage. The current supply chain environment is more complex than before, but it has also encountered unprecedented subsidies and support.

Deliver the "Off Mountain Difficulty", but over the mountain, you will hear the voice of Rivian.

| Ma Xifeng |

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