Who is more desperate here- VW or Rivian? Hmmm.... Interesti..

Who is more desperate here- VW or Rivian? Hmmm.... Interesting video, takeaway notes included below.

https://youtu.be/tZLfwMv9zKc?si=sBfShPimLpBj67Yj

Key takeaway notes:

1. Rivian's Struggles:

- Rivian faces significant financial issues, losing tens of thousands of dollars on every car sold due to high production costs.

- In Q3 2024, Rivian reported a gross loss of $39,000 per vehicle, worsening from Q2.

- The company has burned through nearly $6 billion in negative free cash flow in 2023, with its cash reserves depleting rapidly despite a recent $1.3 billion infusion from Volkswagen.

2. Volkswagen's Challenges:

- Volkswagen is profitable but struggles with its transition to electric vehicles (EVs).

- Its EV software is glitchy and unreliable, leading to customer complaints and shrinking market share.

3. Joint Venture Details:

- In June 2024, Volkswagen agreed to invest up to $5.8 billion in Rivian over four years.

- The deal provides Volkswagen with immediate access to Rivian's advanced software and electrical architecture, considered industry-leading.

4. Investment Conditions:

- Investments are tied to milestones: Volkswagen will only release further funds if Rivian achieves two quarters of positive gross profit.

- Rivian has yet to fulfill these conditions, casting doubt on future funding.

5. Rivian's Optimistic Projections:

- Rivian claims its second-generation vehicles have 20% lower material costs, aiming for positive gross margins by Q4 2024.

- Analysts remain skeptical as production improvements have not reduced losses.

6. Financial Outlook:

- Rivian’s current cash reserves, including Volkswagen's payments, could last until mid-2026 without profitability.

- If it fails to achieve gross profit milestones, it risks bankruptcy, making further investments unlikely.

7. Volkswagen's Strategic Benefits:

- Even if Rivian goes bankrupt, Volkswagen retains licenses for its software and architecture, which it plans to use in future EV models.

- Volkswagen's Scout brand vehicles, debuting in 2028, will leverage Rivian’s technology and compete at lower price points, potentially undermining Rivian further.

8. Market Competition:

- Rivian’s cars face insufficient demand, with high starting prices ($70,000+).

- Volkswagen's cheaper Scout models could exacerbate Rivian's sales struggles if the company survives until 2028.

9. Outlook for Both Companies:

- The partnership addresses critical needs for both companies—capital for Rivian and software for Volkswagen—but neither’s long-term success is guaranteed.

- Rivian’s viability hinges on achieving profitability soon, while Volkswagen must refine its EV strategy to stay competitive.

10. Conclusion:

- Rivian’s financial trajectory appears dire, with high cash burn and no credible path to profitability.

- Volkswagen may emerge stronger with Rivian’s technology, but Rivian’s future as a going concern remains highly uncertain.