Can Rivian Weather the Chip Shortage?
Rivian might have a leg up on other EV startups, but that doesn’t mean its success is set in stone. Can the company make it through 2022’s supply chain troubles?
2022 will put Rivian to the test.
The EV startup proved itself to be one of the strongest competitors in its field—winning support from Ford and
Amazon
, beating everyone to the electric pickup truck segment, and raising $12 billion with its initial public offering—but this year will be when the rubber hits the road. Since delivering its first vehicle in September, the new company has hit a lot of speed bumps in the manufacturing process, the worst one being the ongoing
microchip shortage
. The obstacles have already forced Rivian to cut its production goal in half. The chip shortage is harder on Rivian than other automakers
Every car company has to deal with the depleted supply of semiconductors. But for new brands like Rivian, the situation is more dire.
You see, the reason the chip shortage is hitting the auto industry harder than others is because of the
pandemic
. When demand for vehicles plummeted during lockdown, chip suppliers sought out new customers. Automakers have had a tough time getting those suppliers back on board.That plight is even more problematic for new companies like Rivian because they don’t have any prior relationships with chip makers. They also don’t have a history of hitting production targets—targets that are much lower than their older competitors.
The lack of microchips has a domino effect on Rivian’s business
Without convincing chip suppliers to bet on them, Rivian will have a hard time convincing investors to do the same.
Reuters
says the company’s shares already dropped 70% from its peak value, most of which was lost after they cut their annual production forecast to a mere $25,000 units.CEO R.J. Scaringe says there’s still enough capital to keep going, but again, the lack of chips stalls the process. It’s a frustration that’s only heightened by productivity of the rest of Rivian’s assembly line. Scaringe says that of the 2,000 parts in an
R1T
, 0.5% of them are challenged.Not all of those are microchips. The company is also feeling the pressure from rising raw material costs for their batteries. But at least, with enough cash, they can keep battery production moving. The inability to secure chips feels like a dead end.
The cost for a Rivian is rising, too
The two models Rivian has managed to produce, the R1T pickup and the R1S SUV, are pretty impressive machines. But good luck getting your hands on one of them. With production moving so slowly and the waiting list growing, it will take a long time.
On top of that, prices for the two EVS have risen over $10,000 above their original starting prices. The increased sticker price does not bode well for average
car insurance
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