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Factory retooling to save 35% in material cost for vans

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CEO sees similar savings for R1 SUVs and pickups

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CEO highlights improved manufacturing efficiency

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Cost cuts to calm investor nerves - analyst

By Abhirup Roy

NORMAL, Illinois, June 24 (Reuters) - Electric-vehicle

maker Rivian's drive to cut costs and turn its first profit has

removed over 100 steps from the battery-making process, 52

pieces of equipment from the body shop and over 500 parts from

the design of its flagship SUVs and pickups.

The result of Rivian retooling its manufacturing process is

a 35% reduction in cost of materials for vans and savings of

"similar magnitude" for its other lines, CEO RJ Scaringe told

Reuters.

Rivian's overall cost of building its EVs has "improved

dramatically," he told Reuters during a factory tour Friday at

Normal, Illinois, 130 miles (209 km) south of Chicago. "The

design of the parts and the design of the plant facilitate

making the vehicle easier to build."

Reuters got an exclusive look inside Rivian's

four-million-square-foot factory, with investors eager to learn

more about the size and pace of savings after a three-week

shutdown in April.

Cutting cost is critical for Rivian and other EV startups as

high interest rates have turned some potential customers off EVs

that are typically more expensive to buy than their

gasoline-powered counterparts. Rivian has never turned a

quarterly net profit since it was founded in 2009 and lost $1.5

billion in the first quarter.

"We did a similar process of really going through and

redesigning a number of components for cost, so we took over 35%

of the material cost out of the vans," Scaringe said, referring

to a January shutdown of the van line.

Built primarily for major shareholder Amazon ( AMZN ),

Rivian's vans account for about one-fifth of its revenue.

Market leader Tesla has slashed prices but some

smaller EV makers, including Fisker, have filed for bankruptcy.

Rivian is on more solid ground financially, but loses nearly

$39,000 on every vehicle and is banking on cost savings to help

it turn a gross profit this year.

WORK SMARTER

In addition to simplified assembly and less equipment at the

plant, changes flow into the second generation of Rivian's R1

vehicles with company-built drive units, upgraded software and

new battery packs.

Making those battery packs is now easier. The modules are

redesigned and come in one piece instead of walls and floors

that were built separately.

The vehicles also come with a new architecture meant to

reduce weight and improve manufacturing efficiency, including

shedding 1.6 miles of wiring from each vehicle.

Those changes have reduced labor time and pushed the rate of

assembly on the manufacturing line up about 30%.

"All of that together leads to us being able to get to our

path to profitability and be gross-margin positive," said Tim

Fallon, vice president of manufacturing at the plant.

But investors are worried. The plant shutdown meant Rivian

is targeting production of 57,000 vehicles - almost the same as

last year - and shares in the company have halved this year.

Cash and short-term investments fell by about $1.5 billion

in the first quarter to just under $8 billion. Rivian had said

it has enough capital to launch the less expensive and smaller

R2 SUVs in early 2026.

Sam Fiorani, vice president at research firm AutoForecast

Solutions, who had expected the company to require a cash

infusion before summer 2025, said reducing the cost per vehicle

gives Rivian breathing room.

"Focusing on where the cost savings are is extremely

important to the longevity of the company and to calming the

fears of any investors," he said.

To hasten R2 deliveries, Rivian said in March it would start

producing its $45,000 five-seat SUV in its Illinois plant, which

will be expanded, instead of at a planned $5-billion plant in

Georgia. The move will save $2 billion.

R2 will account for 155,000 vehicles per year of the

increased capacity of 215,000 in Normal, Fallon said. The

factory currently has capacity of 150,000 vehicles.

"We've really been able to understand what we need to do to

continue to move forward and really be smarter about what we're

doing," Fallon said.