Dive Brief:
- Rivian is again producing R1 models in Normal, Illinois, following a planned spring shutdown to retool its facility, the electric vehicle maker announced during its Q1 earnings this week.
- The upgrade introduced new technologies and cost-focused material changes into the R1 vehicle platform, CEO RJ Scaringe said during the company’s Q1 earnings call Tuesday.
- The facility’s retooling also improved manufacturing processes, enabling the R1 line to run 30% faster, Scaringe said. That allowed Rivian to transition from three shifts to two, producing an expected 56,000 units in 2024 and creating more cost efficiencies.
Dive Insight:
During the call, CFO Claire McDonough hailed the Illinois plant retooling as “a pivotal step in driving greater efficiency in R1, through a reduction in variable and semi-fixed costs.”
Rivian lost $38,784 per vehicle in Q1, compared to the roughly $43,000 it lost per vehicle in 2023. McDonough said the company expects the lower variable costs to be the biggest driver of gross profit improvement this year.
“While we don't expect to fully realize these benefits until the second half of 2024, we believe these changes position Rivian to exit 2024 with a much improved margin profile,” she said.
Rivian is trimming expenses ahead of its planned early 2026 R2 model production launch in Illinois, after pausing construction of its $5 billion Georgia plant earlier this year. In its shareholder letter, the EV maker said it plans to produce 215,000 units annually at the Normal factory, allowing it to achieve positive free cash flow.
The company lost $527 million in Q1 and expects to lose $2.7 billion in 2024. McDonough said in addition to the estimated $2.25 billion in cost savings expected by shifting R2 production from Georgia to Illinois, Rivian seeks opportunities to rationalize its capital expenditures. She noted the company will receive $100 million from the State of Illinois for its plant expansion this year as part of a $827 million incentive package announced May 2.
Rivian has invested more than $2 billion in Normal and has manufactured over 100,000 vehicles at the facility since production began in 2021, the company shared as part of the incentive announcement.
“It's amazing to see the plant running again, to see the changes we put in place solving some of the challenges that existed in the line before, solving some of the areas where we felt the costs were not appropriate at the vehicle level,” Scaringe said during the earnings call. “And we're excited to see those changes manifest in the improvements in our cost of goods sold, and of course, in the roadmap to our positive gross margin.”