EV leader or follower: will Rivian beat this IPO season?
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Where's the growth?
$Rivian Automotive(RIVN.US)$ Rivian has just started production and deliveries, with total deliveries reaching 156 units of the R1T pickup by the end of October, planning to reach 1,000 units of deliveries by year end on production of 1,200 units. Production of the R1S, the SUV, is expected to commence in December with deliveries this year minimal to none. Production is scaling fairly slowly under those targets, from 180 units per month up to a projected ~400-500 units by December, given those targets.
Volumes will need to scale significantly over the next four quarters as the company has "55,400 R1T and R1S preorders in the United States and Canada from customers." Rivian intends to fill out this delivery backlog by 2023, implying substantial growth in volumes from ~1,000 in 2021 to an estimated ~20,000 in 2022. Rivian's launch of both vehicles has continued to be delayed and the company's "production ramp is taking longer than originally expected due to a number of reasons," which could impact the timeframe for those stated deliveries and lead to pre-order cancellations because of the long wait time.
Rivian does believe that this order backlog and Amazon's commitment provide predictable growth and accelerated scaling of volumes, with equipped capacity of 150,000 units currently. Factory expansion is expected to boost capacity to 200,000 units by 2023, but Rivian does not expect to achieve near-max capacity production run rates until 2024. While this does represent impressive scaling alongside potential opportunities of growth in new R1 models planned to be launching as part of a broadening lineup, a solid proportion of that near-term capacity is committed to Amazon - potentially up to 40,000 units/year by 2024.
At an ASP of $70,000 to $75,000 for the consumer vehicles, Rivian has $3.9-$4.1 billion in revenues represented cumulatively through 2023, assuming that it does not lose a substantial amount of pre-orders and can meet that conditional ~55,000 unit volume. The EDV, for Amazon's order, has no stated pricing yet, but will be priced on volume, which could contribute lower margins while boosting revenues.
On the commercial side, Amazon's order is it. That's all Rivian can do for the moment - the company is "unable to serve additional last mile delivery customers beyond Amazon" until 2025 following exclusivity period expiry, or potentially up to 2027 should Amazon trigger its ROFR clause in the agreement. This opens up the door for competition including Mercedes $MERCEDES-BENZ GROUP AG(DDAIF.US)$ eSprinter, GM's Brightdrop, Ford's eTransit, and smaller startups like Bollinger and $Canoo(GOEV.US)$ to pursue sales before 2025. $Arrival(ARVL.US)$ does pose a threat, but like Rivian, is committing most of its launch volume to $United Parcel Service(UPS.US)$. While 100,000 units is a massive starting point for the commercial business, apart from international expansion, the period of exclusivity gives competition time to scale and pressure growth.
Amazon's 100,000 unit order the primary outlet of growth through 2025 is expected to book a majority of Rivian's revenues. So, some potential for revenue growth stems from Rivian's ability to grow its order book in consumer vehicles, with current preorders representing close to $4 billion in revenues by 2023 assuming no cancellations. Expanding production can aid consumer vehicle growth and revenues over this time frame, should Rivian be able to reach annual production volumes of ~100,000 units of consumer vehicle volume by 2025.
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