By
Tolu Ajiboye
December 14th, 2023
Those Rivian employees who have lost their job are entitled to 14 weeks of regular pay and health coverage, Rivian-paid COBRA benefits and continuation of mental health and fertility benefits through the end of the year, as well as job placement assistance and Q1 2023 equity vesting.
One more company has joined the list of those reducing their headcount. American electric vehicle manufacturer and automotive technology company Rivian Automotive Inc (NASDAQ: RIVN) has announced its decision to lay off 6% of its staff, which makes up about 840 employees. According to the internal email from Rivian founder and CEO RJ Scaringe, downsizing the company is a part of the restructuring plan announced back in July 2022.
RJ Scaringe wrote:
“In 2022, we took steps to focus our product portfolio and drive a lower cost structure. Continuing to improve our operating efficiency on our path to profitability is a core objective and requires us to concentrate our investments and resources on the highest impact parts of our business.”
Rivian CEO has also explained that the ongoing price war on the EV market was one of the factors driving the decision to lay off employees. The company’s major competitors Tesla Inc (NYSE: TSLA) and Ford Motor Company (NYSE: F) have recently increased production and cut prices on their EVs, which reflects a fight to win over buyers while analysts predict a slowing pace of growth for EVs this year.
It is still unclear if Rivian whose vehicles are priced at $67,500 and up will also slash prices in response to its competitors. Its main problem is not demand but issues around supply, as it continues to ramp up production to get vehicles to customers on time. Besides, the EV producer has seen a challenging 2022, as it missed a full-year target to deliver as many as 25,000 vehicles. As a result, its stock dropped significantly, by over 75%.
CFRA Research analyst Garrett Nelson commented:
“They’re bleeding cash and would like to grow at a much faster rate, but they continue to struggle with their EV production ramp and have been unable to meaningfully drive down unit costs. We think that is what’s behind this decision.”
While for Tesla the price decrease could boost global deliveries by 12% to 15%, for smaller EV vehicles such as Rivian or Lucid Group it is a new challenge. They simply can not afford to sell their vehicles at a lower price like Tesla whose revenue for 2022 totalled $12.6 billion at near-17 percent operating profit margins. Therefore, smaller companies lay off employees as a cost-cutting measure.
As RJ Scaringe said, the priorities for Rivian include ramping and enhancing the R1 electric truck and SUV and the electric delivery van. The company will also focus on ramping its go-to-market capabilities such as charging and service infrastructure and optimizing costs and operating expenses across the business.
Those Rivian employees who have lost their job are entitled to 14 weeks of regular pay and health coverage, Rivian-paid COBRA benefits and continuation of mental health and fertility benefits through the end of the year, as well as job placement assistance and Q1 2023 equity vesting.