Rivian’s Cash Burn is becoming a problem
Analysts are concerned about how much Rivian is spending, Tesla is lobbying for a factory in Ontario, and things are going badly in Europe. All that and more in Morning shift for Thursday, August 11, 2022.
Equipment one: Rivian is burning through cash
Back in college, both a Business student and a viewer of HBO’s Silicon Valley, I have learned all kinds of words that a normal person without any business would know. Runway. Lean production. Product-market fit. Now, it looks like Rivian is learning the meaning of Cash Burn. Are from Automotive News:
Rivian Automotive is facing scrutiny over operating expenses, capital expenditures and a cash burn as part of its second-quarter earnings after the market close on Thursday, as the EV maker ramps up production factory in Illinois and plans to build a second factory in Georgia.
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Last month, Rivan [sic] announced a 6% reduction in its workforce, or about 14,000 people, prior to the announcement. Rivian said it wants to optimize spending to increase production and develop the R2 platform for the Georgia plant.
Market analysts are focusing on how much money Rivian is burning because of relatively limited deliveries and rising costs due to current and future expansion.
Seems like every time Rivian In The Morning Shift, I have to mention the company’s vertical integration strategy, which increases short-term costs through investments in upgrading capabilities for long-term savings and reduced dependence on suppliers. external level. Damn, now I’m using business words. Rivian is spending a lot of money upfront to save money later, but you know what investors like – every quarter has to be record profits.
2nd gear: So Tesla wants to go to Canada?
Tesla has been building factories around the world, but it seems the company is thinking of a new locale: Ontario. Tesla apparently lobbied the Ontario government for “reform,” before setting up shop with a new factory in the area. Are from Automotive News:
Tesla is lobbying the Government of Ontario as part of efforts to establish an “advanced manufacturing facility” in Canada, an electric vehicle maker’s filing for the province’s Office of the Integrity Commissioner shows.
The company’s Canadian unit is working with the government to “identify opportunities for the industrial base to enable reform,” the revised filing from July 18 said.
Elon Musk claims that the search in Canada is because he is “half-Canadian” and I can’t tell if this is a joke or Tesla’s actual business strategy. Could be both.
3rd gear: Things in Europe are bad for car companies
Volkswagen and BMW are seeing sales start to fall from their all-time highs. Continental has noticed an increase in materials and energy costs. Russia is limiting the amount of energy it sends to its Western neighbors. Combined, these are known by historians as Cool zone. Are from Bloomberg:
Europe’s economic trends are catching up with the region’s auto industry.
Volkswagen’s finance arm expects earnings to fall this year as rising interest rates and inflation are starting to weigh on auto demand. Frank Fiedler, chief financial officer of VW Financial Services, said: “Customers are debating whether to buy a car or push a rental agreement a month in advance because of concerns about rising energy prices. That follows a warning from BMW last week that new car orders are falling from a high, especially in Europe.
While Continental confirmed its outlook for the year on Tuesday, the German parts maker said it had to shoulder around 3.5 billion euros ($3.6 billion) in additional costs for raw materials, energy and logistics, with the price of containers shipped overseas increasing eightfold in some cases. . Continental’s chief financial officer, Katja Duerrfeld, described conditions as “like a storm” and predicted these pressures “won’t ease soon”.
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Electricity prices have broken records in recent weeks as Russia restricts gas supplies to Europe. An ongoing heatwave is disrupting the waterways needed to transport coal to factories and power plants. Germany has said it will prioritize gas deliveries to private homes instead of factories if there are shortages as it turns colder in the coming months. Other European countries are likely to take similar actions.
To be clear, it is an objective interest to prioritize gas delivery to homes instead of factories. After studying Maslow’s Hierarchy of Needs, I can confirm that heat and energy are much more important than BMW. However, with another global recession looming, all of these factors pile up to paint an ominous picture.
4th gear: There may be an end to the transportation shortage
In the midst of a shortage of cars, a shortage of chips, and a shortage of bicycles, you don’t forget about Shipping in progress shortage, right? Low supplies of ships and containers, combined with record international orders, have made it difficult to send and receive items overseas. But there is hope on the horizon, follow Reuters:
The CEO of Hapag-Lloyd (HLAG.DE) said that global growth in container fleets through new orders and new building activity will outpace shipping demand from next year and ease the situation. current market tightening.
“Over the next 24 months, it is clear to us that supply growth will outpace demand” after presenting the figures for the first half of 2022, said CEO Rolf Habben Jansen.
Domestic delivery companies have largely been able to keep up with the surge in demand, although not without a cost to their employees. I can confirm this anecdote: Last night, I placed an order for apparel which as of press time had reached my house, but last weekend I placed an order of razors from the UK without Looks like it hasn’t been delivered yet. I just want to be able to shave again.
5th gear: Toyota doesn’t back down from production estimates
Production, for Toyota, has not good This year. However, the company maintained, despite the lack of quarterly targets, that it could meet its original target for the year: 9.7 million cars produced. Are from Reuters:
Toyota Motor Corp (7203.T) on Wednesday said it would keep its plan to produce 9.7 million vehicles globally this financial year, even as it announced another related shutdown. to the spread of COVID-19.
The Japanese carmaker is looking to boost production in earnest after the COVID-19 shutdown in China and a global chip shortage forced it to repeatedly cut output in the April-to-April quarter. June.
The company said it will suspend production on three lines at its Motomachi plant in central Japan for a number of days in September. That comes after its Tsutsumi plant suspension announced on Monday and this Tuesday.
To say “we are not cutting our production target, but we have recently cut production and we will do it again soon” all in one statement is bold. It’s not clear how Toyota aims to make up for lost time and how they will get the raw materials to achieve this – all those chips still need to come from somewhere.
Reverse: One day I’ll see this, I promise
Neutral: You might be asking yourself, God, what have I done?
Remember when I I swear to buy a car I can’t see? I will probably go back to that. I can see no problem with this path.