The electric vehicle (EV) market, underlined by aspiration and an aggressive push by the Biden administration, presents a paradox to American consumers and auto manufacturers, most notably illustrated by the curious case of Rivian, an electric truck manufacturer. Rivian, despite creating electric trucks and SUVs that are lavished with accolades for their impressive features and capabilities, such as an ability to accelerate from zero to 60 miles per hour in a mere 3 seconds and high crash-test ratings, is bleeding money on each vehicle sold.
Rivian’s CEO, RJ Scaringe, acknowledges the significant loss for every vehicle the company sells but emphasizes the necessity of the expenses involved. He said, “We’re competing to build something that’s truly better than all the alternatives, and to try to do that on a limited budget would be detrimental to us achieving our mission.”
"Rivian vehicles sell for over $80k on average. Yet they’re so expensive to build that in the second quarter the company lost $33k on every one it sold…. Even with output increasing, Rivian… is operating at less than one-third of its build capacity" 😬https://t.co/HQwj1CfWcb pic.twitter.com/Nss8n6Ibsl
— Scott Lincicome (@scottlincicome) October 3, 2023
The complexity stems from an intertwining of laudable production quality, consumer pricing, and the company’s weighty financial losses incurred per vehicle. For each electric vehicle (EV) Rivian manufactures and sells at about $80,000, it shoulders a loss of $33,000, a stark contrast to the typical and more financially stable, traditional internal combustion engine (ICE) vehicles, such as the Ford F-150, which has a starting base model price roughly equivalent to Rivian’s loss per EV.
Rivian’s vehicle pricing is juxtaposed against an industry trend of declining EV prices, with the average price dropping to around $53,400 as of August, a significant decrease from over $65,000 a year prior, according to Cox Automotive. This price drop is largely propelled by market leader Tesla, which slashed the prices of its models, instigating an EV price war and setting a challenging environment for competitors like Rivian.
— Breitbart News (@BreitbartNews) October 3, 2023
But where does this leave American consumers and, by extension, the U.S. auto industry under the Biden administration’s relentless push for an all-electric future? It introduces them to a marketplace where quality, luxury EVs — though mechanically commendable and environmentally amenable — are financially unsustainable in the long run for manufacturers unless significantly subsidized or sold at a prohibitively high cost to consumers.
Despite Rivian’s best efforts, like manufacturing vehicles at its Normal, Illinois plant, which operates at just one-third of its total capacity to meet its production estimate of 52,000 units for the year, and despite Scaringe’s commitment to “maintaining our cost reduction efforts through consistent focus and collaboration across all levels of the company,” there’s a tangible tension between producing high-quality, reliable EVs and making them financially accessible to the average American.
Moreover, Rivian’s financial strategy concerns investors, as the company’s stock price has fallen around 70% from its IPO level while spending $18 billion in only two years. Rivian stock (RIVN) traded intraday on Tuesday at about $22.40 per share, down over 5% in a single day and off nearly 30% in the last 12 months.
The situation shows the weakness of the aggressive push toward EVs by the Biden administration, which comes without ensuring an adequate foundation for producers and consumers alike. American consumers, particularly those in middle America, have demonstrated a degree of reluctance to shift to EVs, often due to higher price points and concerns about reliability and functionality, especially in more rural or remote areas where charging stations are sparse.
The administration’s vigorous drive to diminish gasoline auto production reflects a disregard for a substantive section of consumers who require affordable, reliable vehicles without the financial burden presented by the current EV market. Rivian, while achieving notable production numbers and maintaining an optimistic future outlook, epitomizes the incongruence between ambitious EV goals and the stark reality of manufacturing costs, consumer pricing, and long-term sustainability.