Rivian founder and chief executive RJ Scaringe said the US electric vehicle maker was forced to dramatically rework its supply chain in the second quarter after abrupt disruptions to rare earth metals.
“Q2 is a challenge for us because we had a significant drop in production, where if you look at Q1, we produced around 14,000 vehicles and Q2 produced around six [thousand],” Scaringe said in a new interview at the This Car Pod! from Doug deMuro.
“And the reason for that significant drop was a lot of really abrupt changes to the supply chain,” he added. “In our case, we produce 100% of our cars in the United States. And of course, 100% of those are electric.”
One of the most impacted materials impacting Rivian’s production between April and June were the rare earth metals.
“So the export controls are on heavy rare earth metals… so effectively magnets really hurt us because we only make electric cars and every electric car needs magnets to make the motor,” Scaringe stated.
Rivian had to “do a lot of work to come up with a new supply chain and really dramatically shift how we were sourcing a lot of materials to go into our motors,” Scaringe said.
This led to “an abrupt slowdown in production.” The company’s high fixed costs compounded the impact.
“So the cost went up. The cost stayed the same, but we weren’t spreading those costs across a lot more volume. So we guided that the second half of the year, we’re going to actually produce more vehicles in the first half.
We think Q3 is going to be a really strong sales quarter, just in part because of the ending of the $7,500 tax credit. So a lot of folks are going to be opting to get their EVs right now.”
Scaringe acknowledged the “bunch of sort of compounding factors” but insisted Rivian was positioned for recovery as it prepares to launch its mid-size SUV R2 in the first half of next year.
“But look, we couldn’t be more excited. We’re coming up on the launch of R2. And R2’s for me, R1 is like a labor of many, many years of love.
R2’s benefits from an organization so much more mature. And so everything from how it’s manufactured, how it’s serviced, to the performance relative to its cost, it’s really, really cool.”
He stressed that the complexity of Rivian’s supply chain makes it vulnerable to global disruptions even though its production is US-based.
“The other thing about auto is, I mean, you guys know so well, I think a lot of times we talk about tariffs, and we sort of equate the economy to as if we’re like buying and selling T-shirts and coffee cups, like really simple supply chains.
These are really complex supply chains,” he said.
“So we buy, you take like our headlight, we buy that as an assembly from a US manufacturer. And it comes, you know, it’s built in the US.
It has about 20 suppliers into it. And those 20 suppliers, and each have about 10 to 15 suppliers. So there’s hundreds of companies involved with our headlight.
And many of those companies are getting materials that come from outside the United States. And that’s a one part. And so the ripple across something with such a complex supply chain is hard to fully appreciate.”
Rivian assembles about 3,000 parts per vehicle, Scaringe noted, but “there’s actually more than 10x that in terms of discrete components that are going into the car, because we buy assemblies.
Despite the fact that we’re very US centric, and we’re very vertically integrated, it still adds a few thousand dollars in cost.”
Beyond the immediate supply chain pressures, Scaringe signalled Rivian’s product roadmap extends well beyond its current line-up.
In a separate interview last week, he said that while the R2 and R3 models are still to be launched, the company is already developing follow-on vehicles.
Rivian is “already working on the R4 and R5 models,” he said, adding that “there may be like an R6,” without disclosing any further details.
