Dear Rivian: You're F*ck'd [RIVN Stock]

well rivian posted some numbers and

while things are getting slightly better

let's just put it this way things are

only getting slightly better they are

still burning cash and over a fist their

goal was is now to produce 50 000

electric vehicles in a year they had a

goal of 25

000 Vehicles they did slightly miss that

gold coming in at just over 24 000

vehicles I mean that's not bad okay I

don't want to take that away from them

uh obviously they manufacture pickups

SUVs Amazon Vehicles they mainly blame

Supply chains as a limiting factor in

terms of why they are not able to

produce as many vehicles this comes at

the same time as they've stopped

disclosing the number of net new

pre-orders from customers that number

did stand at about 114 000 as of early

November I actually was one of those

people who pre-ordered rivian but now

I'm not taking delivery of Arabian

because I'm spending too much money on

investing in my businesses that's okay I

don't need more cars I think I put six

or seven thousand miles on my my car in

the last 18 months that have had the

darn thing so anyway regarding iridium

they uh they when it comes to some of

their numbers I think it's it's just

worth going straight to the numbers and

seeing what we're facing because you

know some of the numbers okay getting

slightly better but again we're going to

want to pay attention to what is this

gonna mean long term for the business

over at rivian is rivien the kind of

business that you want to invest in now

I've been pretty critical of rivian not

just here on YouTube but also on Twitter

at one point I was shorting rivian I'm

not shorting rivian right now I just

want to be very transparent about that

but I do want to provide perspective

because I do think there are some red

flags that if you're an investor in

rivian you want to be a pay attention

you want to pay attention to if you're

not an investor in rivie then at least

explore some of the things that we're

talking about to understand some red

flags that you want to pay attention to

so let's jump into uh oh okay all right

well the darn iPad's gonna be a little

funky with the way it displays this

again but that's okay so

um what do we have here we've got the

rivian Q4 shareholder letter and some of

the things to pay attention to is there

costs of Revenue

increased only about 14.4 percent

quarter over a quarter now their revenue

increase increased about 23 percent that

means they're actually expanding their

gross margin uh which is good it in

other words means they're losing less

money remember this uh back in uh we

were let's see here last quarter arivian

was spending about two dollars and 71

cents just to get a dollar of Revenue so

think about that for a moment this is

not a net income calculation this has

nothing to do with your operating

expenses or your advertising or anything

it's literally just to say that rivian

spent two dollars and 71 cents to be

able to get uh one dollar of Revenue

that's not ideal right obviously that's

not ideal because it means you're

spending a lot of money to be able to

get less money not ideal right there we

go iPad problem fix so what do we have

uh when we keep going or or look at this

quarter's numbers we see that that loss

uh has fallen now we're only looking at

about 2.51 lost

for every dollar of gross profit they're

making their net income is even worse so

you know obviously the net income is is

a problem they're losing a lot of money

they're losing about 1.73 billion

dollars uh but that's okay let's ignore

that for a moment and at least what

we're seeing is they're trending towards

more profitability but you've got a long

way to go a lot of people get upset at

me because they think oh I only care

about Tesla uh and what they do is they

say hey well Tesla in the early days

lost money as well but if you actually

go back to 2014 remove any kind of

vehicle tax credits that Tesla got Tesla

was still profitable on a gross margin

basis you could go all the way back to

2014 and Tesla when Tesla produced about

7 700 vehicles and what you ended up

finding was oh wow Tesla was profitable

in 2014 on a gross profit basis they

were making about uh 20 bucks for every

100 of Revenue with 7 700 Vehicles

produced without tax credits so think

about that really clearly for a moment

without tax credits Tesla managed to

make 20 bucks on 8 000 Vehicles about 8

000 vehicles on a hundred dollars spent

so I think the easiest way to visualize

that is like this or rather a hundred

dollars of Revenue equaled twenty

dollars gross profit for Tesla in 2014

with about 8K Vehicles right no credits

that's without credits it was even

better without credits today you have

rivian a hundred dollars of Revenue

equals uh 251 dollars of gross loss

gross loss okay so we're nowhere even

close to profitable margin here uh at

about the same Vehicles produced right

so that's your red flag that's what

you're running against here is now the

rivian is really uh beautiful I have to

say uh I was just in Arabian I went to

Reading California the realtor was

amazing he showed me his rivie and I

drove in his rivian the thing is

beautiful but it looks like the warthog

of cars it's absolutely gorgeous like

you look at the car and you're like

please be profitable because I want more

rivians right but the problem is it's

not it's not anywhere near close to

profitable and you could see that in the

numbers here now I want to show you

where they're cutting but something I

want to remind you when we talk about

cutting is one thing that's not getting

cut or the prices and the courses and

building your wealth today was the last

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day we're raising the prices after today

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you can always email us if you think

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the best price you're going to get going

forward

uh send us an email kevin.com if you

want to bundle up but uh today we will

after today we'll be raising the prices

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live streams okay so uh where they are

cutting here though is they're cutting

Opex quarter over quarter they cut Opex

7.2 percent year over year they over

halved Opex so they're really trying

they're cutting down their research and

development they've almost have their

research involvement year over year

they're cutting down their SG a also

almost having that year over year so

they're trying but that cost of goods uh

cost decline is not something I would

touch with a 10-foot Pole right now it's

very very scary I want to see them

actually get close to break even now

they say in their earnings call oh don't

worry we think we're going to be gross

margin Pro profitable by

2024 I personally don't believe that

this is their uh their earnings call and

I want to say the Highlight uh moment

was okay they're talking about bringing

on their second shift oh yeah over here

they've got a goal of being gross margin

profitable in 2024 I personally highly

doubt they can pull that off hey maybe

their second shift is gonna bring them

closer right maybe they can only spend a

hundred dollars for every hundred

dollars of gross profit they bring in

right that would put them at basically

zero margin that would be fantastic but

right now they're spending 251 dollars

per 100 of Revenue on a gross margin

basis that's horrible it's really really

bad now they have these grandiose

visions and this is where I have a big

concern for rivien okay watch this so

not only do they have these visions of

being able to get to profitability gross

margin profitability in 2024 2025 they

think they can they could fund

themselves through 2025 so they're

basically trying to say hey look we're

not planning on diluting investors we

think we can get to 2025 profitability

without having to dilute investors more

that's great I don't believe it I'm

coughing because I'm allergic to

[ __ ] but you know hey maybe they can

pull it off but this sounds crazy they

say they see a clear path to 25 gross

margin

like they in other words by burning 251

dollars per quarter right now only down

from 271 dollars of burn on a gross

margin basis per 100 of Revenue they

think from that they can go to a

profitable 25 per 100 of Revenue on a

gross margin basis that's a Tesla kind

of Target they think they can achieve

that hey if they can fantastic but you

want to see how they plan to achieve

that and this is where I literally just

wrote what the f okay they think that

they're going to increase their margin

by reducing their cost of goods sold per

vehicle made okay hopefully maybe your

second shift will help you with that

because right now it's disgusting where

you are I mean if you sell a car for

eighty thousand dollars you're spending

over 160 170 000 to get that Revenue I

mean think about it all you have to do

is multiply it by 2.5 so their average

vehicle selling price is about eight

hundred thousand or eighty thousand

dollars holy smokes that means right now

it costs them two hundred thousand

dollars to get an eighty thousand dollar

car off the line that's insane that's

actually an even easier way to put it it

costs rivian two hundred thousand

dollars to make an about eighty thousand

dollar uh average selling price vehicle

right now now I can tell you the exact

average selling price I wrote it down

and that was the Q3 I believe I wrote it

right here eighty two thousand three

hundred dollars is the current average

selling price so the average selling

price right now is eighty two thousand

three hundred dollars uh and uh they

think they can make their vehicles

profitable so somehow bring that gross

costs down from two hundred thousand

dollars a vehicle to eighty two thousand

three hundred but actually not just that

they think they can get their costs to

25 right or 75 so they think they can

actually get to their goal which is a

fair goal to have is 61

725 of cost for an 82 300 vehicle but

this is where the WTF moment is for

rivian okay you ready for this they

think they can actually improve on their

average selling price per vehicle they

are already selling the cars for eighty

two thousand three hundred dollars

and they think they can raise the prices

even more

and there's I mean what do you want to

sell them like Lucid pricing or

something like that and start selling

them for like 200 000 a car it's insane

I don't know I don't see it it seems it

seems ludicrous to me that's Q3 there

here's Q4 uh what do we have on actual

cash flow they're burning uh their cash

free cash flow right now is a negative

4.4 billion dollars uh but they do have

cash you know you know where they got

this cash from folks from you if you

were a retail investor they should be

sending you a thank you card because

they built up an 18 billion dollar cash

pile and In fairness hey oh I'm sorry

that's now down to 11.5 billion that was

the 21 uh 2021 number well anyway that's

where they got the money from right they

did a direct listing they saved on

underwriting fees and they took

advantage of retail momentum thinking

that this was the next Tesla and because

people thought this was the next Tesla

they threw money hand over fist at the

stock giving the company now what's 11.5

billion dollars in cash left they've got

some in inventory they've got plant

property and Equipment fine that's great

we've got some payables over here of

only about two billion dollars they've

got maybe a you know some long-term debt

over here so call it three billion

dollars they've got free and available

cash I would call it free cash of

somewhere around eight billion dollars

that's fantastic that should give them

about one point you know seven five ish

years before needing to raise money

which is roughly 20 25. that's when they

actually think they can be gross

profitable that's fantastic you know if

all things go great maybe they can pull

it off but let me just say you know

going from a where's that earnings call

going from uh you know spending 200 000

on a car that costs eighty two thousand

three hundred dollars I don't know man

good luck that's all I'm saying good

luck rivian uh you know like and if I

were an investor those are the things

I'd be paying attention to again maybe

with the second shift they can get that

cost substantially down maybe maybe

we'll only spend 150 000 a vehicle he's

still a far cry from eighty two thousand

three hundred dollars I don't know how

much really the second shift is going to

make a difference

get it and get more Vehicles off the

line it should is it going to double

production maybe I mean at these numbers

if you are able to double production in

theory you could get the cost per

vehicle down to a hundred thousand

dollars so if you have a perfect scale

right so in other words you open up a

second shift and you perfectly double

production you're still going to have an

increase of cogs right because you have

material costs and labor costs that go

into it but let's just say they could

double production without doubling costs

well okay then you bring the cost per

vehicle down to 100 Grand so you're

still losing 20 grand on a gross margin

basis per vehicle but you're not going

to be able to double it that way because

you're going to have increased labor and

and a material costs

so even though you're manufacturing may

be twice as many cars you're not going

to get twice the benefit so you're still

going to be losing 120 130 to 150 000

per or spending 130 to 150 000 per 80

000 vehicle it still does not make sense

the numbers are very very bad and all

you have to do is go look at Teslas in

2014 uh and when they were manufacturing

8 000 vehicles and they're not that bad

these numbers are are a company that

looks like it potentially will never be

profitable and that's scary they'll

probably have to go bankrupt or get

acquired by someone else or

raise their prices substantially for

their vehicles I don't see that

happening if they can't raise the prices

for the vehicle substantially then

they're potentially on the course of

bankruptcy or they just start putting

less expensive stuff in the cars but

then at that point if they start

cheaping cheapening out on the car which

is beautiful right now absolutely

beautiful some of the stuff they put in

the car right now gorgeous if they start

cheaping out on it well then why would

you buy a ravine over a Tesla which

Tesla has the autonomy which rivien

doesn't you know rivian has like

adaptive cruise control it makes no

sense to me I don't know you know maybe

maybe I'm just like passionately

concerned we'll call it that I'm like

the Doctor Who's you know yelling at

somebody who has a terrible diet trying

to say would you just eat some salty

nuts please like get some good fats in

you that's just not what I feel like

right now yeah I'm not saying they can't

survive off you know a rib eye and a

Cheesy hamburgers and prime rib dips but

they're probably gonna die of a heart

attack you know is there a chance they

won't sure

but they're playing with fire that's all

I'm saying about Rivia okay I look

beautiful car I just want to be so

crystal clear because I'm not trying to

offend rivie notice in fact you know

what I think if you buy a rivian you are

getting a 200 000 car for 80 grand

that's the way to look at it you win if

you're the customer at rivian unless of

course there are a bunch of service

issues that come up in the future but

assuming that's not an issue you win if

you're a rivian customer because you are

basically robbing rivien you are getting

an 80 grand car or a 200 000 car

basically for for you know 80 grand you

win