Rivian Loses $33K on Every Truck It Sells: Report
jalopnik.com
jalopnik.com
https://jalopnik.com/tesla-loses-a-lot-of-money-selling-cars...
Also, as a general rule, don't read financial information from bloggers.
1. Each car costs $33k more to make than it sells for. Marginal cost > marginal revenue. Selling more cars will hurt the business. Quite dramatic, basically nothing can be done.
2. Each car costs less than it sells for. Marginal cost < marginal revenue. But the business overall is making a loss, equivalent to $33k times cars sold due to fixed costs. Selling more cars helps the business. Less dramatic, business as usual for a company that can only be profitable at scale, nothing new.
Headline says #1, but I really doubt it’s #1.
Out of the box a Range Rover is a better off roader than a Jeep, more locking differentials, and more ground clearance, but simply the average buyer isn’t going to use it that way.
Putting both those vehicles to shame is the Mercedes G-wagon, but only once in my life have I ever seen one of those on the trails.
Realistically the best capabilities will come from the aftermarket, and that depends on how many people can afford to beat up that vehicle.
* The amount a vehicle costs to produce decreases dramatically depending on how many you're producing because of economies of scale, vendors charging less, and higher negotiating power in volume. They're currently not producing at the scale they expected, so their production costs are inherently higher.
* It's extremely difficult to know where you can cut costs in ways that won't affect customers significantly at design time. If you're a new startup in a competitive market, a bad reputation is a death sentence. It might be worth starting out conservatively and cutting those costs when you have better data.
* They went through production/design in one of the worst supplier markets in decades. Production costs might have increased due to last minute part changes, now they need to claw that back down again.
Etc.
But in this case, it's likely just BS. They're probably just taking the yearly loss and dividing it by the number produced. Which is different from each marginal car produced costing them 30K.
edit to add: the article claims the main reason for them losing so much money is lack of throughput, which demonstrates that the claim is bullshit. If they made even more cars and "lost 30K" on each one they'd be worse off.
Hah! I knew I wasn't the only one who noticed that. It's like the old joke:
> Q: How do you expect to stay in business if you lose money on every sale?
> A: Easy. We'll make it up on volume!
More seriously, a production line has huge fixed costs associated with it, so you really need to get the most throughput out of it that you can, in order to maximize profits.
Generally speaking, the cost per unit goes down as throughput goes up, especially in the car manufacturing space. Production rate is insanely important to car manufacturers making any money at all.
Virtually every single new mass produced vehicle ever made started off losing money on a per-unit basis until manufacturing scales.
cost per unit = cost per unit + total non-unit costs/total units.
So they're loosing money overall, but the unit economics may still work.
Famously, GM used to spend ridiculous amounts of time and money to fix cars coming out of some of its plants. It wasn't uncommon for some cars to be incapable of being driven out of the plant. The more cars they made, the more errors, and the more time and money spent on fixing them. This was a major factor in the development of the NUMMI plant.
What brings cost down is increased quality, reduction of waste, and increase of speed. If you don't have all three you aren't gonna save money.