Another day, another company announces that it will lay off 6 percent of the employees. Today, that company is Rivian, the EV carmaker that had one of the biggest IPOs of 2021 but has since struggled to hit its targets as manufacturing and supply chain woes escalate.
The layoffs also come amid a looming electric vehicle price war, in which Tesla and Ford have cut prices on their flagship vehicles. Other automakers have said they aren’t ready to cut prices on their own electric vehicles, but analysts predict more companies will follow. Rivian currently sells three models: the R1T truck and the R1S SUV, as well as the EDV, which stands for electric delivery van.
According to Reuters, the layoffs are expected to affect 840 employees at the Irvine, California-based company.
According ReutersThe layoffs are expected to affect 840 employees at the Irvine, California-based company, which has a total workforce of 14,000. Workers at Rivian’s plant in Normal, Illinois, will not be affected, the company said.
In a memo to employees, Rivian CEO RJ Scaringe said the layoffs are part of a broader cost-cutting effort aimed at helping put the company on a path to profitability. “In 2022, we took steps to focus our product portfolio and drive a lower cost structure,” Scaringe said in the memo, which was sent to the edge by a spokesperson “Continuing to improve our operational efficiency on our path to profitability is a core objective and requires us to focus our investments and resources on the highest impact parts of our business.”
It’s been a turbulent year for Rivian, which saw its 2021 IPO high quickly fade as it grappled with many of the challenges of auto manufacturing. It narrowly missed its full-year goal of delivering 25,000 vehicles and has seen its share price drop more than 75 percent over the course of the year.
This is not the first time Rivian has laid off employees, nor is it the first time it has specifically laid off the same percentage of workers. Last July, the company said it would lay off 6 percent of its workforce in a bid to refocus its business.
Rivian, which sells its vehicles for $67,500 or more, has yet to say whether it plans to cut prices in response to Tesla and others. But the company’s main problem is not demand but supply-related issues as it continues to ramp up production to get vehicles to customers in a timely manner.
Pricing will continue to be a thorny issue for Rivian. Under the EV tax credits contained in the Reducing Inflation Act, the most expensive electric vehicles (sedans over $55,000 and trucks and SUVs over $80,000) would not be eligible for the $7,500 tax credit.
Price will remain a thorny issue for Rivian
Some Rivian electric pickup and SUV configurations will almost certainly be too expensive to qualify for the credit, which could depress demand. Rivian raised the prices of its two models by 20 percent last year, sending its share price tumbling and forcing Scaringe to publicly apologize.
Tesla’s price cuts are expected to hurt other EV companies, including Rivian, Lucid and Arrival, which recently announced it was laying off 50 percent of its staff. Unlike Tesla, which made $12.6 billion in revenue with operating profit margins of nearly 17 percent last year, or Ford, which may have made close to $8 billion (according to analyst estimates), Rivian is currently making nothing. despite the high prices of its vehicles, and is not expected to earn anything before 2030, according to analysts polled by S&P Global Market Intelligence.
