Electric Vehicle Maker Rivian Plans 6 Percent Workforce Reduction, Business Bleeding Cash

American manufacturer of electric vehicles Rivian The company plans to reduce its workforce to manage costs, as it battles declining cash reserves and a possible price war with rivals.

R.J. Scaringe, CEO of Rivian, stated in an email Wednesday to employees that the company plans to lay off 6 per cent of its workforce. Rivian employs approximately 14,000 people. Scaringe apologized to the employees for having to implement the job cuts. However, he insisted that production and profitability must be the priority. He didn’t give a time frame for the layoffs. To discuss the matter, the firm will hold a meeting of workers on Friday.

“Continuing to improve our operating efficiency on our path to profitability is a core objective and requires us to concentrate our investments and resources on the highest impact parts of our business,” Scaringe Write According to Engadget. “The changes we are announcing today reflect this focused roadmap.”

Rivian, California-based, is losing money on the cars that it makes. According to a Report According to Reuters, Rivian’s average selling price was $81,000 per vehicle in the third quarter. This compares with $220,000 for Rivian’s car.

The company was forced to lower its production targets. Rivian abandoned plans to build European delivery vans with Mercedes in Europe as a way to save cash.

“They’re bleeding cash and would like to grow at a much faster rate, but they continue to struggle with their EV production ramp and have been unable to meaningfully drive down unit costs … We think that is what’s behind this decision,” Garrett Nelson, CFRA analyst, discusses the job cuts according to the outlet.

Rivian Plans

Rivian plans to increase the production of R1S and T vehicles in order to improve profitability. Rivian also manufactures delivery vans to Amazon. It plans to produce more affordable R2 electric vehicles.

Rivian plans to manufacture these trucks in large quantities and is building a $5 billion Georgia factory for manufacturing. However, shipping of R2 trucks won’t begin until 2026.

Rivian previously announced layoffs in July 2013 when it stated that 6 percent would be dismissed. This layoff was caused by concerns about the economy’s rapid change and inflation fears.

Since its initial public offering (IPO) in November 2022, Rivian’s share price has fallen by more than 83 percent as of Feb. 2. Rivian is preparing to wage a price war on electric vehicles (EVs) against Ford Motors and Tesla Motors who have recently announced price reductions.

Price Cuts at Ford and Tesla

Tesla announced that some of its EVs would be reduced by as much as 20% in January. Tesla reduced the base Model 3 car’s price by $3,000, its performance model by $9,000 and Model Y by approximately $13,000.

In a Press release Ford announced price cuts on its top-selling electric vehicle Mach-E (January 30), with reductions in the range from $900 to $5,000.

“We are not going to cede ground to anyone. We are producing more EVs to reduce customer wait times, offering competitive pricing, and working to create an ownership experience that is second to none,” Marin Gjaja is chief customer officer at Ford Model e.

“Our customers are at the center of everything we do—as we continue to build thrilling and exciting electric vehicles, we will continue to push the boundaries to make EVs more accessible for everybody.”

Rivian is not the only EV startup that will be affected. Because of their high costs of production and raw materials, some startups may not be able to compete on price. These firms also don’t have large production like Tesla.