George Gianarikas, Senior Research Analyst at Baird, beaks down the supply chain challenges facing Rivian and the factors that would make the EV maker outpace Ford.

Opening Bell

Rivian to Report Q1 Results as Investor Sentiment Around the EV Maker Worsens

And here to discuss more George generate. A senior research analyst at Baird. Thanks so much for joining us. We know analysts are expecting revenue here to top over $130 million. However, supply constraints have forced Rivian to revise those production forecasts. What are you keeping an eye on when Rivian reports its Q1 results today? Well, first, thanks for having me. I appreciate it. And I think what we'll see from living or a couple of things first and most importantly, we're going to see a stabilization of expectations. And if companies had now a couple of quarters under its belt since its I. P. O. And unfortunately for it and other companies in our space and multiple spaces in the stock market, they've seen expectations come down. I mean, the world has been impacted by supply chain constraints and so has written. So we expect stable financial results, stable expectations and improvement in their order, trends and discussion around a couple other interesting things. First, manufacturing of both the vehicles and new software and motors that they're making. And also more importantly, something we've been talking about for a really long time. And you alluded to in the opening a discussion of their raw material strategy. The world is short raw materials for the easy transition. It's something that's really important to us. It's really important. Obviously Caribbean into other automakers and we expect a lot of discussion on that, on this learning. I'm so glad that you mentioned raw materials because that makes Rivian here more of a rival than an investment for a company like Ford. we know Ford and other major stakeholders of Caribbean did not hesitate to sell stock after the lockup expiration, which just ended. Um, we should also mention Ford didn't quite sell a lot of it's stake in Rivian at this point. It was a lot when we think about the millions. Um, but just a portion of its total investment in the company. Um, I'm wondering, do you think that selling from these early investors raises concerns for investors when it comes to Rivian future short answer? No. Really? Uh, Ford sold eight million of its over 100 million shares. And I want to remind people that Mercedes many years ago had a stake in Tesla and they sold down their steak Very early on. Clearly, it did not impact Tesla's future. Look, you know, Ford is making a competitive vehicle. They have the electric F150, that's clearly a competing against Caribbean. They were investor early on, they made a lot of money on their investment. They took a little off the table. I fully expect these two companies to be more rivals than partners in the future and that's okay. I mean, there are plenty of other people out there who hopefully over time are willing to buy Rivian stock from forward. I I don't think it's any particular negative for Rivian going forward. Interesting to highlight the comparison between Mercedes and Tesla for viewers right now, also wondering how you think Rivian can compete with, not only forward with the F 1 50 lightning, but also just with other newcomers in this space and legacy automakers at this point now we think Caribbean is in a really, really good spot long term. You know, the stock has obviously like other stocks in in our universe and across the market suffered over the last several months based on, like I said earlier, reduced expectations and a general reduction in multiples across the growth space. But when you think about Rivian and you think about what we're autos are going going forward, any market transition, particularly one of this kind of importance. E V s traditional ice vehicles moving to CVS. You know, we had something similar with smartphones in the past where you Nokia and Motorola were the big giant companies and here came Apple who no one really thought had a chance at the time and they completely upended the market. We think this transition of TVs will be the same and Tesla is the Apple of of the of the smartphone era. And Rivian has a real shot, a really, really good chance in our opinion and being one of the company is one of the upstarts that successful going forward. And the traditional AMS have a chance history would suggest that they have, you know that the upstarts, if they're well funded and have a cogent strategy like Caribbean does have a better chance than traditional vendors. I mean, Caribbean specifically does something we really like, they take a full scale approach. They're really interested in materials all the way down to the mining and really interested in autonomy and in order to be successful, we think in the future you have to have a cogent autonomy strategy and the cogent material strategy. We think Caribbean has both And Rivian will receive $1.5 billion dollars in incentives to build a plant near Atlanta. Do you see this effort to bolster the company's production enough to match competitors in the long run? We constantly talk about this, especially with newcomers to the v space. Getting these reservations is one thing actually making those deliveries happen and get the vehicles to customers as another. Look, the company's got a lot to prove so far they've made a few 1000 vehicles, they need to make a lot more than that to turn a profit and to get my car to me, I'd have one on order. Um, But we'll see, we have a lot of conviction that they'll get it done. I mean, they've actually increased the rate of production to a little over, we estimate 300 a week at the end of the last quarter. they have some really, really smart people there where we really like their Ceo, their management is top notch and if anyone has a chance of getting this done. It's Rivian, obviously Tesla has done what they've done, they're, you know, they're making well over a million vehicles and DVDS and remember making TVs is different than making traditional vehicles sure there's a lot of stuff that's applicable to both, but it's a different market, make batteries, you have to make different kinds of motors, you use magnets, there's a lot of different stuff going on here and we think it takes a completely new set of competences to get it done and we think Rivian has the right people in place, but like I said, they have to prove it out and they have to start making a lot more cars than they didn't last for. Yeah, and just really quickly general outlook on the tv landscape for this year for 2022 we've been looking at this space as an area for mainstream adoption to really come up. There are a lot of hurdles when it comes to the electric vehicle landscape though, namely when we think of things like infrastructure, but then on the tailwind side you look at the gas prices, I'm reporting here from southern California and being in pain at the pump, do you think this is enough to really push this forward? I think over the last 12, 18 months and even more recently with gas prices that you alluded to, there's been a change in public consciousness EVs are better cars than traditional, full stop, they have better performance, they're more functional there, they have more software integration and I think people are coming to realize that now with, you know, some of the prices stabilize the VVS and the price of ice vehicles have gone up, as has the price of gas. People have finally started to make the shift towards E V s and you know, unfortunately, you can't get them. I mean, in order to get a Tesla, it takes over a year, you put one in reservations. So that's the only issue. We think that the issue for E V s from now over the next couple of years is just getting in people's hands. The orders are basically going through the roof, whether it's Tesla or traditional O E M s. And we'll see what Rivian has to say tonight, but demand is not the problem. People want TVs George generator is so good to have you on the show and get your perspective, senior research analyst over at baird