Rivian Faces Delays, Cuts Production After Supplier Misstep
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When Rivian Automotive's shares dropped nearly 9% on Oct. 4, analysts were puzzled as to why the electric vehicle maker had to so drastically cut its 2024 production targets over yet another supply chain hiccup.
The answer lies in a miscommunication earlier this year between Rivian and its supplier, Atlanta-based Essex Furukawa, which has left the carmaker without access to copper windings, a core component in the electric vehicle motors that Rivian makes in-house, according to people familiar with the matter.
The ongoing shortage has already hobbled production of its R1 pickup and SUV models as well as the delivery van Rivian makes for Amazon.com Inc., further tempering expectations for the EV maker. Amazon ranks No. 1 on the Transport Topics Top 100 list of the largest logistics companies in North America and No. 1 on the Top 50 list of the largest global freight carriers.
Rivian declined to comment on its supplier relationships. Representatives for Essex didn’t respond to requests for comment.
(Bloomberg)
The carmaker miscalculated when communicating supply and demand needs with Essex, Rivian’s sole supplier of what are essentially copper wires that carry the electric current inside the EV motors, said the people, who asked not to be identified discussing the confidential matter.
Essex Furukawa, a unit of Superior Essex, subsequently committed its machines to support other customers, the people said. Rivian has identified other suppliers capable of providing appropriate replacements, but at too high a cost at such short notice.
The blunder helps explain Rivian’s decision to slash its production forecast by as much as 18% to between 47,000 and 49,000 electric vehicles this year.
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Rivian on Oct. 4 said the shortage began to affect production in the third quarter and had become “more acute in recent weeks and continues.”
The situation has been exacerbated by a lack of backup vendors in its supply chain, the people said. Rivian lacks an immediate alternative to provide the parts after its misstep with Essex, allowing the shortage of a single part to mushroom into a significant bottleneck that has hobbled production at its sole assembly plant in Normal, Ill.
Larger automakers often rely on multiple suppliers for their most important parts, but Rivian is still producing EVs at relatively low volumes.
RELATED: Rivian Seeks Federal Loan to Restart EV Plant Construction
Analysts have been reassessing their expectations since the surprise announcement. Following the move, Deutsche Bank analysts led by Edison Yu told investors they are concerned that the shortage could affect deliveries into the first quarter of 2025. They also questioned whether it’s possible for Rivian to achieve its goal of reaching a positive gross margin for the final three months of this year.
