Rivian details its lithium iron phosphate plans

The buzziest EV startup in town is, fittingly, embracing the buzziest battery chemistry around.

Rivian reported its first-quarter earnings last week and shared more information about its plans to build EVs with lithium iron phosphate (LFP) batteries, following its announcement of a “standard” LFP battery pack in March.

The LFP batteries will be introduced later this year in the electric delivery vehicles Rivian is building for Amazon, and will be available in its electric trucks beginning in 2024, according to the company.

This move by Rivian comes as automakers in the West follow the trend of LFP adoption in China, where battery giant and EV maker BYD has embraced the chemistry.

Tesla began using LFP batteries for the EVs it builds in China in October 2020 and announced it would switch to this chemistry for all standard-range cars worldwide in October 2021. Ford has been working on LFP packs for its first-generation EVs, CEO Jim Farley told analysts last week. Volkswagen and Daimler also plan to build EVs with LFP batteries.

Diversifying the battery packs

LFP batteries, unlike others commonly used in EVs today, do not require nickel or cobalt. That makes them less expensive to produce.

The trade-off is that LFP batteries have lower energy density than lithium-ion cells that use nickel, which means that for years the chemistry wasn’t considered viable for EVs because it provided a lower range.

But recent improvements in pack design have increased the range these batteries can achieve, and rising prices for nickel, cobalt, and lithium, along with difficulties securing supplies of these metals, are all contributing to automakers’ embrace of LFP batteries.

In Rivian’s earnings call, CEO RJ Scaringe emphasized the importance of a diversified approach to battery cells as the industry expects to face constraints on battery materials toward the end of this decade.

“[LFP] is a hedge on nickel pricing,” he told analysts last week. “And fits beautifully as a base-model configuration, and certainly for our commercial vehicle, fits really nicely.”

Rivan claims the LFP standard battery pack will provide more than 260 miles of range, compared with about 314 miles provided by the “large” pack powering its flagship R1 trucks today.

Some customers may want to pay more for that higher range, but Rivian noted that LFP makes sense for commercial-delivery vehicles because they tend to make shorter trips.

Rivian’s position

Like the rest of the EV industry, Rivian is navigating a particularly challenging supply-chain situation, which has stifled production in the first quarter of this year. The company claims it has the capacity to build 150,000 vehicles per year at its manufacturing facility in Normal, Illinois, but the company said that supply-chain issues, particularly the semiconductor shortage, limited production to just 1,410 EVs in the first quarter of 2022.

“The actual production lines themselves—both in terms of their stability as well as their production rate—[have] continued to improve. The challenge is, as those lines have continued to improve, we’ve had supply constraints that haven’t allowed us to actually fully utilize them,” Scaringe said on the earnings call. “The number of vehicles we produced to date this quarter is almost exactly equal to the number of semiconductors we have to support all the components that go in the vehicle.”

Rivian says it currently has more than 90,000 preorders for its first generation EVs and is working to ramp up production. But the company also has to begin delivering on its contract with Amazon for electric vans this year. Those electric delivery vans will make up about one-third of the 25,000 EVs Rivian aims to build this year, Scaringe told analysts.

Outfitting those commercial vans with LFP batteries, along with a new dual-motor configuration, could help Rivian improve its margins on the 100,000 EVs it has agreed to build for Amazon, despite the raw-material cost increases the company has seen since Amazon placed the order in 2019.

Bottom line: Rivian is facing headwinds outside of supply-chain pressures. It’s recalling 502 R1 trucks, or ~10% of all the vehicles the company has built so far, because of issues with airbag sensors.

Ford, Rivian’s largest investor after Amazon, began selling its shares ahead of the earnings report last week and has now unloaded nearly 15% of its stake in the company. Rivian stock has dropped by ~75% since its IPO in November.

The company’s net losses totaled nearly $1.6 billion for the first quarter of 2022, and Rivian will have to spend a lot more as it scales. The EV maker plans to build a new production facility in Georgia, set to open by 2025. With more than $17 billion of cash on hand, Scaringe assured investors that the company has the capital it needs to complete it and continue to scale.