Should Rivian Investors Be Alarmed After the EV Maker's Recent Move?

Automakers of all kinds, from the largest global automakers to full electric vehicle (EV) start-ups, have had plenty of strategy adjustments to make with the implementation of tariffs on imported vehicles and automotive parts, as well as the ending of the $7,500 EV purchase tax credit. Some automakers have paused vehicle launches and adjusted vehicle production, among other moves valued in the billions of dollars. Rivian (NASDAQ: RIVN) announced that it is taking steps to cut workforce -- is it a red flag for investors?

Changes are brewing

A witch's cauldron wasn't the only thing brewing this Halloween season, with changes brewing at EV maker Rivian. The automaker announced that CEO RJ Scaringe will serve as interim marketing chief as Rivian restructures key operations and slashes more than 600 jobs. The strategy is to integrate vehicle operations into its service team "to create fewer customer handoffs," said an internal memo, according to Automotive News.

While this shake-up and round of layoffs shouldn't be a total surprise, it is larger than previous moves. Rivian cut about 1.5% of its workforce in September, and roughly 1% in June, while this round was closer to 4.5%.

Image source: Rivian.

The hope is that the company's lean-out of its operations will better prepare it for the launch of its highly anticipated R2 crossover. "With the launch of R2 in front of us and the need to profitably scale our business, we have made the very difficult decision to make a number of structural adjustments to our teams... ," Scaringe said at the start of the memo, before continuing, "I am incredibly confident in R2 and the hard work of our teams to deliver and ramp this incredible product."

Prepping and being ready to flawlessly execute the launch of the R2 is paramount for Rivian's success and livelihood going forward. As investors know, the company has seen cooling demand for its R1T pickup and R1S crossover.

Data source: Rivian press releases. Graphic source: Author.

That graph even includes the company's strong third quarter, when it reported a 32% sales surge, compared to the prior year, to 13,201 vehicles. Of course, part of that surge was demand being pulled into the third quarter from the fourth quarter, as consumers on the fence about EV purchases jumped to cash in on the government's $7,500 EV tax credit before it expired at the end of September -- even if many of Rivian's vehicles didn't qualify.

Investors should also note that Rivian cut its full-year delivery forecast to a range between 41,500 and 43,500 vehicles from the previous range of 40,000 to 46,000 – it delivered 51,579 vehicles in 2024. Ultimately, for Rivian investors, this move is just what management considers a necessary evil to combat financial pressures while preparing for the most important vehicle launch in its young history.

What it all means

To say a lot hinges on the R2's success might be an understatement. With a price tag starting around $45,000, the vehicle is supposed to open the door to a much wider addressable market compared to the current R1 vehicles' high-end premium customer base.

With strong levels of pre-orders and the ambition to take on Tesla's popular Model Y, the R2 is exactly what Rivian needs to take its top line to the next level, enabling the company to build scale and prove to investors it has a real chance to reach profitability on the road ahead.

Further, what a lot of investors overlook is that the R2 is also key to Rivian opening the door to overseas markets, as the company plans to launch a right-hand drive version for the U.K. and European launches in late 2026. This is new territory for the company, as it doesn't currently sell the R1 vehicles in Europe.

Circling back to the original question: Are these job cuts a red flag for investors? No, they aren't. The moves are simply the aftermath of a young EV company with waning demand for its current products and on the verge of its next major launch.

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.