Last Friday, October 4th, Rivian announced they would be cutting their production forecast from 57,000 vehicles down to somewhere between 47,000 and 49,000, about an 18% drop. That’s a pretty steep drop, and Rivian’s stock plummeted 9% upon everyone hearing the news. The company blamed softening demand and a “parts shortage” for the reduction, which raised more questions. A parts shortage? What parts? Is this an industry-wide thing, and if so, why hasn’t any other company mentioned this? What’s going on here?
Well, now we know what’s going on, and the parts shortage is not industry-wide, nor is it about some rare, exotic part. In fact, it’s about he most common type of part you’ll find on anything electrical: wires. Specifically, copper wires, the kind used for windings in electric motors. There’s plenty of wire being made, but what looks to be a simple yet devastating “miscommunication” with a parts supplier has doomed Rivian to not being able to get this crucial resource, leading to the company scaling back their production forecast.
The supplier in question is Essex Furukawa and the product is “magnet wire,” which the company has been cranking out since 1896! Oh, and speaking of Essex history, here’s a fun little aside: in 1965, the company sponsored Ford’s racing team, and campaigned a 427 Cobra nicknamed “Ollie the Dragon!”
That’s pretty cool! But back to uncool things, like supplier chain problems. According to Transport Topics, a source who chose to remain anonymous said that the “carmaker miscalculated when communicating supply and demand needs with Essex,” which just kind of sounds like somebody gave the supplier the wrong numbers. Someone who – and I’m just speculating here – is probably not employed with Rivian anymore.
The demand for Essex Furukawa’s wire is strong enough that by the time Rivian realized the mistake, Essex’s resources were already devoted to producing the wire for other companies and Rivian was out of luck. Essex Furukawa appears to have been Rivian’s sole supplier for this copper wiring, and, according to Bloomberg, while Rivian did identify other possible suppliers for the wire, the short notice made ordering the wire cost-prohibitive. So, Rivian is stuck and has had to reduce production forecasts.
All of this could have happened from one email or phone call with bad numbers. One point of failure, with colossal cascading consequences, if you don’t mind the alliteration.
It’s kind of amazing that such a crucial part would only have a single supplier, but Rivian still isn’t at production levels, even when everything is going right, which would make that a necessity. Still, I suspect Rivian will be lining up some backup suppliers for crucial things like copper wire to prevent this from happening again.
Oh, one last thing, check out this great unidentifiable car on Essex’s website:
That’s even better than what the insurance companies make!
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