Rivian Automotive announced its intention to raise $1.3 billion through a sale of convertible notes, joining the growing list of electric vehicle (EV) manufacturers seeking to accumulate cash in the face of weakening demand. The convertible notes will be sold to institutional investors to support the development and launch of Rivian’s smaller R2 vehicle series, which is now expected to arrive in 2026. The investors will have the option to purchase additional notes valued at up to $200 million, over and above the initial $1.3 billion. Shares of Rivian plummeted by over 14% on Tuesday, March 7th, following the announcement.
Although Rivian has a healthy cash balance, it has recently taken measures to conserve cash, such as laying off 6% of its workforce and delaying the launch of its R2 series of vehicles by a year. Rivian had $12.1 billion on hand as of the end of 2022, according to its fourth-quarter earnings presentation on February 28th, which the company said would be enough to fund operations through 2025. However, like other electric vehicle manufacturers, Rivian is seeking to raise additional cash to finance the development and launch of new models.
In addition, Rivian’s announcement of lower-than-expected vehicle production for 2023 may indicate a shortfall in demand for its expensive SUVs and pickups. Similarly, Lucid Motors, another EV startup focused on luxury vehicles, recently guided investors to lower-than-expected production levels in 2023 and plans to increase its marketing efforts in the coming months, suggesting that it is also experiencing weaker-than-anticipated demand.