Rivian announced last week it was cutting its 2024 production forecast by nearly 20%, blaming a part shortage as the reason. As it turns out, that parts shortage was avoidable, had there been better communication between the automaker and one of its suppliers.
Rivian had a tough day on Friday, missing Wall Street estimates for its Q3 2024 deliveries. Not only that, Rivian slashed its production forecast, saying it was dropping from their original forecast of 57,000 vehicles down to between 47,000 and 49,000 vehicles. This figure is 14-18% lower than originally planned, and also 14-18% lower than the number of vehicles they produced in 2023.
However, the aforementioned parts shortage that was behind this production cut was due to a miscommunication with its supplier, Essex Furukawa. This miscommunication led to a shortage of copper windings, a key component in Rivian’s in-house Enduro electric motors.
According to a report from Bloomberg, citing sources familiar with the matter, Rivian inaccurately projected a lower demand for copper than what was actually required. As a result, Essex reallocated resources previously set aside for Rivian to support other customers. Once Rivian realized the mistake, it was too late.
Rivian has been able to find other suppliers, but due to the short notice, the associated costs were too high to make it financially possible to move forward with them.
While Rivian said it was cutting its production forecast, they are still aiming to achieve their first gross profit per vehicle in the fourth quarter of 2024. However, analysts are predicting that this parts shortage could extend into early 2025, also pushing their path to profitability along with it.
