# CEO steers electric truck startup Rivian through supply chain twilight zone
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-04-18
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Rivian CEO Struggles to Boost Stock Price Amid
Meta Description: Rivian Automotive CEO R.J. Scaringe struggles with semiconductor shortages impacting electric vehicle production, facing stock price woes and supply chain issues.
URL: https://financedigest.com/ceo-steers-electric-truck-startup-rivian-through-supply-chain-twilight-zonehtml

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By Joseph White

NORMAL, Ill. (Reuters) – Rivian Automotive Inc CEO R.J. Scaringe needs to sell a lot more [electric vans](https://www.financedigest.com/lack-of-electric-vans-opens-door-for-chinese-other-ev-makers.html "Lack of electric vans opens door for Chinese, other EV makers") and pickup trucks to boost a beaten down stock price and fund his ambitious long-term growth plans, but the startup is having trouble buying the parts to build them.

Scaringe can’t get all the semiconductors Rivian needs to accelerate the assembly lines at its factory in Normal, Illinois. Chip [suppliers are skeptical of the young electric](https://www.financedigest.com/new-suppliers-race-to-plug-in-to-electric-car-market.html "New suppliers race to plug in to electric car market") vehicle company’s capability to hit promised production numbers. They are instead allocating more chips to established customers based on the numbers of vehicles they have built in the past, Scaringe said during a tour of the plant.

I have to [call up semiconductor supplier Y and say](https://www.financedigest.com/europe-power-firms-need-1-5-trillion-euros-in-margin-calls-equinor-says.html "Europe power firms need 1.5 trillion euros in margin calls, Equinor says") this is how many Supplier X gave us, and get everybody comfortable because the system’s unproven,” Scaringe said while piloting a golf cart through the factory.

Scaringe thinks suppliers are [holding back](https://www.financedigest.com/fear-of-failure-holding-back-british-entrepreneurs-new-research-finds.html "Fear Of Failure Holding Back British Entrepreneurs, New Research Finds"), wondering if Rivian is using semiconductor shortages as an excuse to cover up more serious production problems. “It’s really frustrating,” he said.

Rivian is not the only automaker caught in a [supply chain](https://www.financedigest.com/minimising-supply-chain-cyber-risks-by-asking-the-right-questions.html "MINIMISING SUPPLY CHAIN CYBER RISKS BY ASKING THE RIGHT QUESTIONS") twilight zone.

There is certainly allocation” by chip suppliers, said Dan Hearsch, [managing director in the automotive practice for consulting firm](https://www.financedigest.com/exclusive-crypto-giant-binance-moved-400-million-from-u-s-partner-to-firm-managed-by-ceo-zhao.html "Exclusive-Crypto giant Binance moved 0 million from U.S. partner to firm managed by CEO Zhao") AlixPartners. Low volume manufacturers are up against skepticism – “are you guys for real?” – while larger players are willing and able to [pay for a year’s worth of chips in one transaction](https://www.financedigest.com/contis-enables-google-pay-to-make-transacting-easier-and-more-secure.html "Contis enables Google Pay to make transacting easier and more secure"), he said.

“On the basis of volume, and reputation and consistency, they (larger automakers) are more attractive,” Hearsch said.

Rivian, which counts Amazon.com Inc and Ford Motor Co as major shareholders, has been slammed.

Rivian [shares have fallen by 60%](https://www.financedigest.com/permitted-share-of-chinas-yuan-in-russian-wealth-fund-doubled-to-60-finance-minister.html "Permitted share of China’s yuan in Russian wealth fund doubled to 60% -Finance Minister") so far this year, and are down more than 70% from their peak of $179.47, reached shortly after the November 2021 initial public offering. Shares sank hard in March after Rivian cut the [production forecast for 2022 in half](https://www.financedigest.com/over-half-of-britons-say-loyalty-cards-encourage-them-to-buy-a-product-niq.html "Over half of Britons say loyalty cards encourage them to buy a product – NIQ") to just 25,000 vehicles.

Rival Tesla Inc Chief Executive [Elon Musk](https://www.financedigest.com/elon-musk-and-others-urge-ai-pause-citing-risks-to-society.html "Elon Musk and others urge AI pause, citing ‘risks to society’") has taken jabs at Rivian, tweeting “I’d recommend they get their first plant working. It’s insanely difficult to reach [volume production at affordable unit cost.”](https://www.financedigest.com/just-eat-delivers-q3-profit-as-cost-cuts-outweigh-lower-order-volumes.html "Just Eat delivers Q3 profit as cost cuts outweigh lower order volumes")

Rising raw materials [costs are adding pressure](https://www.financedigest.com/factbox-global-banks-take-axe-to-jobs-as-cost-pressures-mount.html "Factbox-Global banks take axe to jobs as cost pressures mount"). In early March, Rivian tried to [raise prices](https://www.financedigest.com/graphic-chip-price-drop-raises-questions-on-whether-end-of-shortage-is-in-sight.html "Graphic chip price drop raises questions on whether end of shortage is in sight") as much as 20% for vehicles already on order. Customers complained, the company reversed course, and Scaringe apologized.

Now a [top priority](https://www.financedigest.com/survey-finds-regulation-remains-top-financial-services-priority-for-2017.html "Survey finds Regulation Remains Top Financial Services Priority for 2017") for Scaringe and other Rivian executives is convincing supplier executives that the Normal plant and its workforce are ready to accelerate. As part of that effort, Rivian has [opened the doors to its Normal factory](https://www.financedigest.com/cargill-opens-new-brazil-pectin-factory-first-outside-europe.html "Cargill opens new Brazil pectin factory, first outside Europe") for supplier executives and the media.

Rivian has almost completely remodeled and retooled the plant. Once owned by Japanese automaker Mitsubishi, its row of towering metal stamping presses now boom out large aluminum panels for the bodies of Rivian’s delivery [vans and off-road electric trucks](https://www.financedigest.com/amazon-com-to-invest-over-1-billion-euros-in-european-electric-van-truck-fleet.html "Amazon.com to invest over 1 billion euros in European electric van, truck fleet") and SUVs.

Rivian operates two largely separate vehicle assembly systems inside the Normal factory. One is [building two sizes of electric](https://www.financedigest.com/bmw-invests-1-7-billion-to-build-electric-vehicles-in-u-s.html "BMW invests .7 billion to build electric vehicles in U.S") delivery vans for Amazon. The other builds Rivian’s R1 series [electric pickup trucks](https://www.financedigest.com/swedens-ab-volvo-wins-its-largest-electric-truck-order-so-far.html "Sweden’s AB Volvo wins its largest electric truck order so far") and SUVs, which sell for $67,500 to $95,000. Before the [price hike](https://www.financedigest.com/sony-hikes-ps5-price-on-economic-pressures-rising-rates.html "Sony hikes PS5 price on economic pressures, rising rates"), the most expensive Rivian vehicle was priced at $83,000.

Rivian is now [building and delivering R1 trucks and SUVs to customers](https://www.financedigest.com/effectively-efficiently-build-financial-trust-customer-journey.html "Effectively and efficiently build financial trust on the customer journey"), and assembling vans for Amazon to test. Bursts of [production at the factory stop when parts run](https://www.financedigest.com/organic-expansion-to-run-through-the-mens-grooming-products-market.html "Organic Expansion To Run Through The Mens Grooming Products Market") out, executives said. During the first quarter, Rivian assembled an average of about 40 [vehicles per weekday — less than one hour’s output](https://www.financedigest.com/toyotas-july-global-vehicle-output-drops-again-puts-annual-target-in-doubt.html "Toyota’s July global vehicle output drops again, puts annual target in doubt") if the plant were running full speed.

“I’d love to run a full five-day shift,” Scaringe said. Rivian vehicles have about 2,000 parts, he said. “One half of one percent of those are challenged.”

Scaringe told Reuters more price increases are inevitable, and not just at Rivian, due to the combination of scarce parts and rising [raw materials](https://www.financedigest.com/dulux-maker-akzo-nobel-lifts-outlook-on-easing-raw-material-costs.html "Dulux maker Akzo Nobel lifts outlook on easing raw material costs").

We expect [pricing to remain pressurized](https://www.financedigest.com/heavy-norwegian-gas-maintenance-adds-to-energy-price-pressure.html "Heavy Norwegian gas maintenance adds to energy price pressure"), where it will continue to increase over time,” he said. We did a poor [job of how we rolled that out last time](https://www.financedigest.com/britains-purplebricks-to-cut-more-than-10-of-jobs-the-times.html "Britain’s Purplebricks to cut more than 10% of jobs – The Times"), no doubt. But as we look at going forward we expect further [price increases much like we’ve seen](https://www.financedigest.com/wall-street-seen-opening-higher-but-u-s-recession-priced-in.html "Wall Street seen opening higher but U.S. recession priced in") from essentially the entirety of the auto industry.

Rivian had more than $18 billion in cash at the end of 2021, and Scaringe said the company will not need to raise more capital “in the immediate near term.” But the simultaneous production crunch and [cost surge could delay](https://www.financedigest.com/britain-delays-major-rail-project-hs2-as-costs-soar-again.html "Britain delays major rail project HS2 as costs soar again") when Rivian is able to turn gross margins and cash flow positive.

It needs to do that if it is to start self-funding its significant capital needs.

These include building a new assembly plant in Georgia for its planned R2 line of compact, more affordable trucks, and [investments to secure](https://www.financedigest.com/ils-investment-returns-continue-to-outperform-according-to-aon-insurance-linked-securities-report.html "ILS investment returns continue to outperform, according to Aon insurance-linked securities report") more battery production. Rivian wants to manufacture its own [battery cells](https://www.financedigest.com/bmw-to-make-solid-powers-battery-cells-under-expanded-agreement.html "BMW to make Solid Power’s battery cells under expanded agreement"), while also expanding its roster of battery suppliers.

“Long term, we envision a world where we will make some of our own cells, (and) we’ll purchase cells from great partnerships we have,” Scaringe said. Those two are by no [means mutually exclusive.”](https://www.financedigest.com/making-sure-that-finservs-digital-transformation-doesnt-mean-digital-exclusion.html "Making sure that FinServ’s digital transformation doesn’t mean digital exclusion")

(Reporting By Joseph White; Editing by David Gregorio)


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