Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read together with the consolidated financial statements and related notes included in this Form 10-K. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under Part I, Item 1A. “Risk Factors” or in other parts of this Annual Report on Form 10-K (“ Form 10-K”). Our historical results are not necessarily indicative of the results that may be expected for any period in the future. The discussion of our financial condition and results of operations for the year ended December 31, 2021 is included in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022.
Overview
Rivian is an American automotive manufacturer that develops and builds category-defining EVs and accessories. Rivian creates innovative and technologically advanced products that are designed to excel at work and play with the goal of accelerating the global transition to zero-emission transportation and energy. Rivian vehicles are built in the United States and are sold directly to consumer and commercial customers. The Company provides a full suite of services that address the entire lifecycle of the vehicle and stay true to its mission to keep the world adventurous forever. Whether taking families on new adventures or electrifying fleets at scale, Rivian vehicles all share a common goal — preserving the natural world for generations to come.
In the consumer market, we launched the R1 platform with our first generation of consumer vehicles: the R1T, a two-row, five-passenger pickup truck, and the R1S, a three-row, seven-passenger SUV.
In the commercial market, we launched the RCV platform. Our first vehicle on this platform is our EDV, designed and engineered by Rivian in collaboration with Amazon, our first commercial customer. Amazon has placed an initial order of 100,000 EDVs, subject to modification.
During the year ended December 31, 2023, we produced 57,232 vehicles and delivered 50,122 vehicles.
Factors Affecting Our Performance
The growth and future success of our business depends on many factors. While these factors present significant opportunities for our business, they also pose risks and challenges, including those discussed below and in Part I, Item 1A. “Risk Factors,” that we must successfully address to achieve growth, improve our results of operations, and generate profits.
• Ability to Develop and Launch New Offerings. The R1T, R1S, and EDV appear to resonate with customers based on positive responses to vehicles delivered and our historic order bank. We believe the Rivian brand is becoming established in the most attractive consumer and commercial vehicle market segments. However, our ability to grow revenue and expand margins will also depend on our ability to develop and launch new vehicle platforms and programs, including R2. Our future financial performance will also depend on our ability to offer services that deliver an intuitive, seamless, and compelling customer experience profitably.
• Ability to Attract New Customers. Our growth will depend in large part on our ability to attract new consumer and commercial customers. We have invested heavily in developing our ecosystem and plan to continue to do so. We currently have low brand awareness but through our planned investment in marketing, we expect to see substantial increases in brand awareness and for that to translate into more orders for our vehicles and as a result increase our base of Rivian customers. We expect marketing activities will include brand campaigns, community events, and partnerships along with digital marketing campaigns. When we launched and began selling our R1 vehicles, we generated a large order bank of reservations. In 2023, the increased volume of produced and delivered R1 vehicles and increased order cancellation rate has notably reduced this R1 vehicle order bank. For 2024, we expect our total deliveries to be both derived from our existing order bank as well as new orders generated during the year. However, our current incoming order rate must improve for us to meet our delivery targets. To support demand generation, we are in the process of implementing new capabilities, such as expanding our retail customer engagement spaces (“spaces”), expanding our demonstration drives, offering leasing programs, and building our sales and marketing team, technology, and infrastructure, which increases our costs and adversely impacts our
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profitability. To generate and maintain demand, we expect to incur significantly higher and more sustained marketing and promotional expenditures than we have previously incurred to attract customers. An inability to attract sufficient new customers at appropriate vehicle pricing points would substantially impact our ability to grow revenue or improve our financial results.
• Ability to Manage Costs. Selling our vehicles profitably requires successful and timely execution against multiple cost reduction objectives across the vehicle and our manufacturing operations. The production capacity at our manufacturing facility in Normal, Illinois (“Normal Factory”) is operating significantly below full vehicle production rate capacity. This lower utilization of plant capacity results in the cost of revenues to operate the plant being much higher per unit of production than would be the case if we were manufacturing at capacity. Our future profitability depends upon our ability to scale our production and delivery operations more efficiently at a lower cost per unit. We may have to accelerate depreciation and amortization on or incur impairments of our equipment in the plant if the utilization of our plant capacity does not increase in the future. Achieving these reductions requires, among other things, scaling our vehicle production volumes, timely introduction of new components and technologies into production, negotiation of unit price reductions with suppliers, and management of our labor and logistics costs. Should we not achieve such reductions in a timely manner, we could experience adverse impacts to our gross margin and consequently overall profitability.
• Ability to Scale our Ecosystem and Brand Experience. Our go-to-market strategy requires us to scale our ecosystem quickly and effectively, including our technology platform and product development and operational infrastructure. Our future success will also depend on our ability to further develop and leverage our proprietary technology platform. Our ability to enhance our product design, engineering, and manufacturing capabilities and expand our production capacity, delivery and service operations, customer service, spaces, Rivian Adventure Network, and charging accessibility will be critical for supporting growth. We believe our long-term ability to achieve our financial targets will depend on our ability to cost-effectively scale these elements, while also delivering a unified customer and brand experience consistent with our adventurous brand commitment.
• Ability to Convert our Customers to Subscribers of our Services. Services are a key part of our growth strategy. We offer a variety of services, including financing, leasing, and insurance, vehicle maintenance and repair, charging, and FleetOS solutions that we believe will grow our revenue outside of vehicle sales. As we increase our base of Rivian customers and expand our services portfolio, we expect our customers to expand their usage of our service offerings over the full lifecycle of their vehicle ownership. We believe the services portion of our business will have the benefit of enabling a higher-margin, recurring revenue stream for each vehicle, therefore improving our margin profile. Our ability to grow revenue and our long-term financial performance will depend in part on our ability to drive adoption of these offerings at profitable price points.
• Ability to Invest in our Production and Capabilities. We believe that customer acquisition and retention is contingent on our ability to produce innovative offerings, including vehicles that deliver the broadest combination of performance, utility, and capability, as well as services that enhance the ownership journey through new features, functions, and a best-in-class customer experience. To this end, we intend to continue making investments, including technology updates, to drive growth as we scale vehicle production and deliveries, expand our offerings, and strengthen our core capabilities. We are planning to shut down our plant in the second quarter of 2024 to implement new technologies, which will temporarily impact our production. As we invest in our business for long-term growth, leading to increases in operating expenses as well as capital expenditures, we may experience manufacturing shutdowns and additional losses, which could delay our ability to achieve profitability and positive operating cash flow. In addition, any delays in the timing or execution of these investments could have an adverse impact on our prospects, financial condition, results of operations, and cash flows. Furthermore, we anticipate that these future investments could require significant external debt and/or equity financing.
• Ability to Develop and Manage a Resilient Supply Chain. Our ability to manufacture vehicles and develop future solutions is dependent on the continued supply of input materials (e.g., lithium and nickel) and product components (e.g., semiconductors). Any inability or unwillingness of our suppliers to deliver necessary input materials or product components at timing, prices, quality, and volumes that are acceptable to us could have a material impact on our business, prospects, financial condition, results of operations, and cash flows. Fluctuations in the cost of input materials or product components and supply interruptions or shortages could materially impact our business. We have experienced and may continue to experience cost fluctuations and disruptions in supply of input materials and product components that could impact our financial performance. Over the prior year, the cost of key metals,
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including cobalt, lithium, resin, aluminum, nickel, and steel, declined significantly. Even though prices for lithium and other battery metals have seen recent sustained decreases from peak levels, prices are expected to remain volatile for the foreseeable future. Given the supplier changes related to the introduction of new vehicle technologies to the R1 platform planned during the second quarter of 2024, we believe our production ramp and rate in our Normal Factory may be limited by supply chain factors in the near-future. For example, we have received claims from our suppliers related to supplier contract changes for which we have incurred payment obligations and may in the future incur additional payment charges. See Note 1 4 “Commitments and Contingencies” to our consolidated financial statements included in this Form 10-K for more information on supplier contingencies. We also must manage the risk of field service actions, including product recalls, with respect to components from suppliers. We continue to work diligently and collaboratively with suppliers to identify and proactively address problems or constraints as quickly as possible.
• Ability to Grow in New Geographies. We plan to invest in international operations and grow our business outside of our existing operations. We believe we are well-positioned for international expansion within the vehicle segments in which we currently or expect to operate. Other factors that we believe will aid our successful international growth include: the highly flexible, modular nature of our platforms, which we anticipate will provide us the ability to introduce new vehicle programs and configurations; our digital-first approach, which we anticipate will allow us to expand quickly; and our product development expertise, which we anticipate will enable us to offer significant customization for diverse international markets and demographics.
Our international expansion has significant associated investment requirements, such as capital spending related to infrastructure, including additional manufacturing capacity, delivery, and service operations, charging networks, and personnel. International expansion is also subject to a variety of risks, including local competition, multilingual customer support and servicing, delivery logistics, and compliance with foreign laws and regulations related to vehicle sales, data privacy, financing, taxes, labor and employment, and foreign exchange. Should we be unable to expand internationally, this will limit our ability to successfully scale our business with potential negative consequences for our financial condition, results of operations, and cash flows.
• Ability to Maintain Our Culture, Attract and Retain Talent, and Scale Our Team. We believe our culture has been a key contributor to the positive response from our customers, and our mission promotes a sense of greater purpose and fulfillment in our employees. We have invested in building a strong culture and believe it is one of our most important and sustainable sources of competitive advantage. Any failure to preserve our culture could negatively affect our ability to retain and recruit personnel, which is critical to our growth, and to effectively pursue our objectives. If we are unable to retain or hire key personnel, our business and competitive position may be harmed resulting in an adverse impact to our prospects, financial condition, results of operations, and cash flows.
• Seasonality. Historically, the automotive industry has experienced higher revenue in the spring and summer months. Additionally, we expect delivery volumes of commercial vehicle sales to be less in the winter months as customers shift their focus to making last mile deliveries during holidays rather than incorporating more vehicles into their fleet which could result in higher finished goods inventory levels during this period.
• Government Incentives. There are various government policies, subsidies, and economic incentives designed to increase EV adoption. For example, the Inflation Reduction Act of 2022 offers a tax credit for EV purchases or leases contingent upon pricing limits, customer income limits, and assembly, manufacturing, and sourcing requirements. There is no guarantee these incentive programs will be available in the future. Any reduction or elimination of these incentive programs could have a direct impact on demand for our vehicles. In addition, failure to meet the tax credit eligibility requirements may place our vehicles at a price disadvantage and could have a material adverse impact on our business, prospects, financial condition, results of operations, and cash flows.
• Inflation and Rising Interest Rates. The United States economy has experienced inflation in various market segments. In order to help slow inflation, the Federal Reserve Bank in the United States has raised interest rates rapidly and substantially in recent years, and it is expected that interest rates will remain elevated for longer than previously anticipated. This may result in vehicle financing becoming less affordable to customers, influence customers’ buying decisions to less expensive vehicles, or cause tightening of lending standards. If we are unable to fully offset higher costs through price increases or other measures, especially in the near-term as we continue to work through the order bank, we could experience an adverse impact to our business, prospects, financial condition, results of operations, and cash flows.
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Components of Operating Results
We expect to incur significant operating costs and expenses that will impact our future profitability, including research and development (“R&D”) expenses as we develop and introduce new vehicles and services and improve our existing vehicles and services, capital expenditures in the expansion of our manufacturing footprint and operations, additional operating costs and expenses for production ramp-up, raw material procurement costs, servicing, and warranty costs as we expand our deliveries, general and administrative expenses as we scale our operations, and selling and distribution expenses as we market our vehicles and services. Our ability to become profitable in the future will depend on our ability not only to successfully market and sell our vehicles and services at prices we establish, but also to appropriately control costs and realize economies of scale.
Revenues and Cost of revenues
Vehicle production and deliveries began in September 2021. The majority of our revenues is derived from sales of consumer and commercial vehicles. The majority of our cost of revenues is driven by direct parts, material and labor costs including stock-based compensation, manufacturing overhead (e.g., depreciation of machinery and tooling), shipping and logistics costs, and reserves including for estimated warranty costs related to the production of consumer and commercial vehicles, adjustments to write down the carrying value of inventory when it exceeds its estimated net realizable value (“NRV”), losses on firm purchase commitments, and to adjust for excess and obsolete inventory based upon expectations of forecasted demand.
Operating expenses
Research and development
Our Research and development (“R&D”) cost consists primarily of expenses incurred for the development of our vehicles and related technologies. These expenses include personnel expenses for teams in engineering and research including stock-based compensation, prototyping expenses, consulting and contractor expenses, depreciation expenses, and allocation of indirect expenses.
Selling, general, and administrative
Selling, general, and administrative (“SG&A”) expenses consist primarily of personnel costs for employees in our sales, service, facilities, corporate, executive, finance, and other administrative functions, as well as outside professional services, including legal, accounting, and audit services. Personnel costs consist of salaries and wages, stock-based compensations, benefits, and employment taxes. SG&A expenses also include allocated facilities expenses such as rent and depreciation, and other general corporate expenses such as travel and recruiting expenses.
Other expenses
Other expenses consist of charitable contributions to Forever by Rivian.
Other (expense) income, net
Other (expense) income, net consists primarily of non-operating expenses and income such as interest expense, amortization of debt discounts and issuance costs, and other gains or losses associated with our debt financing arrangements, as well as interest income earned on investments.
Provision for income taxes
Our provision for income taxes consists primarily of income taxes related to foreign jurisdictions in which we do business. We maintain a full valuation allowance on our United States federal and state deferred tax assets as we have concluded that it is more likely than not that the deferred assets will not be utilized.
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Results of Operations
The following tables set forth our consolidated results of operations and production and delivery volumes for the periods presented (in millions, except production and delivery volume).
Years Ended December 31,
2021 2022 2023
Revenues $ 55 $ 1,658 $ 4,434
Cost of revenues 520 4,781 6,464
Gross profit (465) (3,123) (2,030)
Operating expenses
Research and development $ 1,850 $ 1,944 $ 1,995
Selling, general, and administrative 1,242 1,789 1,714
Other expenses 663 — —
Total operating expenses 3,755 3,733 3,709
Loss from operations (4,220) (6,856) (5,739)
Interest income 3 193 522
Interest expense (29) (103) (220)
Loss on convertible notes, net (441) — —
Other (expense) income, net (1) 18 6
Loss before income taxes (4,688) (6,748) (5,431)
Provision for income taxes — (4) (1)
Net loss $ (4,688) $ (6,752) $ (5,432)
Production volume 1,015 24,337 57,232
Delivery volume 920 20,332 50,122
Comparison of the years ended December 31, 2022 and 2023
Revenues
Years Ended December 31, 2022 vs 2023 Change
(in millions, except delivery volume)
2022 2023 $ %
Revenues $ 1,658 $ 4,434 $ 2,776 167 %
Delivery volume 20,332 50,122 29,790 147 %
Revenues increased primarily due to an increase in deliveries of 29,790 vehicles, increased average selling prices, and sales of non-Rivian vehicle trade-ins. Included in revenues for the year ended December 31, 2023 was $73 million of regulatory environmental credit sales.
We expect to increase our non-vehicle revenue, including the sale of regulatory credits, over time.
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Cost of revenues and Gross profit
Years Ended December 31, 2022 vs 2023 Change
(in millions, except production and delivery volume)
2022 2023 $ %
Cost of revenues $ 4,781 $ 6,464 $ 1,683 35 %
Gross profit $ (3,123) $ (2,030) $ 1,093 35 %
Production volume
24,337 57,232 32,895 135 %
Delivery volume
20,332 50,122 29,790 147 %
For the year ended December 31, 2023, we incurred cost of revenues of $6,464 million, including $661 million of depreciation and amortization expense. Cost of revenues increased as a result of the increased production and delivery of 32,895 and 29,790 vehicles, respectively. Additionally, we had a $186 million increase in depreciation and amortization expense, partially offset by a decrease in charges to reflect the lower of cost or net realizable value (“LCNRV”) of inventory and losses on firm purchase commitments from $920 million to $107 million.
The decrease in LCNRV write-downs of inventory and losses on firm purchase commitments compared to the previous period is primarily due to a decrease in the cost to manufacture our products as a result of increased vehicle deliveries, lower material costs, and higher estimated selling prices. We expect LCNRV write-downs of inventory and losses on firm purchase commitments to continue to decrease over time as we further reduce the cost to manufacture our products.
Cost of revenues for the fourth quarter of 2023 includes $70 million of costs primarily related to various supplier and other costs incurred in advance of the new technology changes going into the R1 platform as part of our scheduled shut down of our Normal Factory in 2024. While we could incur additional costs associated with our planned shutdown and technology and design changes in the near-term, we do not anticipate these costs to be part of our normal course of business in the longer-term.
Gross profit losses decreased primarily due to the increased vehicle production and deliveries, lower material costs, and higher average selling prices noted above. During the second quarter of 2024, we plan to shut down our Normal Factory to introduce new technologies into the R1 platform. We expect these technology changes to further reduce the cost of our vehicles as we exit 2024, however, in the near-term we expect the planned shutdown to negatively impact our vehicle production and cost of revenues as a result of the direct downtime and lost overhead associated with lower volume.
Research and development
Years Ended December 31, 2022 vs 2023 Change
(in millions)
2022 2023 $ %
Research and development $ 1,944 $ 1,995 $ 51 3 %
For the year ended December 31, 2023, we incurred R&D expenses of $1,995 million, including $138 million of depreciation and amortization expense. R&D expenses increased primarily due to a $98 million increase in engineering, design, and development costs and other related project costs, and a $43 million increase in depreciation and amortization partially offset by a $103 million decrease in payroll and related expenses.
The increase in engineering, design, and development costs and other related project costs were related to higher product development activities for new in-vehicle technologies on our R1 and RCV platforms and continued development of the planned R2 platform. The decrease in payroll and related expenses was due to lower headcount and decreased number of contractors.
We plan to continue investing in future vehicle platforms and new in-vehicle technologies as well as furthering vertical integration of manufacturing.
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Selling, general, and administrative
Years Ended December 31, 2022 vs 2023 Change
(in millions)
2022 2023 $ %
Selling, general, and administrative $ 1,789 $ 1,714 $ (75) (4) %
For the year ended December 31, 2023, we incurred SG&A expenses of $1,714 million, including $138 million of depreciation and amortization expense. SG&A expenses decreased primarily due to a $162 million decrease in stock-based compensation expense, partially offset by a $56 million increase in depreciation and amortization and a $49 million increase in payroll and related expenses.
The decrease in stock-based compensation expense was primarily due to a decrease in expense for awards granted prior to the IPO with accelerated expense recognition due to the IPO as a performance condition. The increase in payroll and related expenses was primarily due to an increase in headcount and personnel costs to support commercial go-to-market operations and corporate initiatives.
We plan to make continued investments in our facilities, commercial operations, and technology for our future operations.
Other (expense) income, net
Years Ended December 31, 2022 vs 2023 Change
(in millions)
2022 2023 $ %
Interest income $ 193 $ 522 $ 329 170 %
Interest expense $ (103) $ (220) $ (117) (114) %
Other (expense) income, net $ 18 $ 6 $ (12) (67) %
Interest income increased primarily due to higher interest rates due to an increasing rate environment.
Interest expense increased primarily due to higher interest rates and the issuance of the green convertible unsecured senior notes due March 2029 (“2029 Green Convertible Notes”) and green convertible unsecured senior notes due October 2030 (“2030 Green Convertible Notes”) (together the “Green Convertible Notes”). We expect interest expense to increase in the near term, as a result of our higher debt balances and elevated interest rate environment. See Note 8 “Debt” to our consolidated financial statements included in this Form 10-K for more information.
Provision for income taxes
As of December 31, 2022 and 2023, the majority of our deferred tax assets were comprised of net operating losses generated primarily in the United States and tax credit carryforwards, and for all periods, these assets were fully offset by a valuation allowance.
Liquidity and Capital Resources
Our operations have been financed primarily through net proceeds from the sale of securities, including in our IPO, and from borrowings. The following table summarizes our liquidity (in millions):
December 31, 2022 December 31, 2023
Cash and cash equivalents $ 11,568 $ 7,857
Short-term investments — 1,511
Availability under ABL Facility 343 1,100
Total liquidity $ 11,911 $ 10,468
In March 2023, we issued $1,500 million principal amount of 2029 Green Convertible Notes at a discount of $15 million in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The 2029 Green Convertible
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Notes were issued pursuant to, and are governed by, an indenture dated March 10, 2023, between us and U.S. Bank Trust Company, National Association. The 2029 Green Convertible Notes accrue interest at a rate of 4.625% per annum, payable semi-annually in arrears on March 15 and September 15. See Note 8 “Debt” to our consolidated financial statements included in this Form 10-K for more information on the 2029 Green Convertible Notes.
In April 2023, we amended and restated the credit agreement governing the ABL Facility and released all the associated restricted cash. As of December 31, 2023, we had $1.1 billion of unused committed amounts under the ABL Facility. The ABL Facility contains certain affirmative and negative covenants, including a minimum liquidity covenant requiring us to maintain no less than $1.0 billion of liquidity, which will fall away upon meeting a fixed charge coverage ratio of greater than 1.0 for two consecutive quarters, and conditions to borrowing or taking other actions that restrict certain of our subsidiaries’ ability to, among other things, incur debt, grant liens, make investments, enter into certain transactions with affiliates, pay dividends, and prepay junior or unsecured indebtedness, subject to certain exceptions. As of December 31, 2023, we were in compliance with the covenants and conditions of the ABL Facility. See Note 8 “Debt” to our consolidated financial statements included in this Form 10-K for more information regarding the ABL Facility and related amendment.
In October 2023, we issued $1,725 million principal amount of 2030 Green Convertible Notes at a discount of $15 million in a private offering to qualified institutional buyers. The 2030 Green Convertible Notes accrue interest at a rate of 3.625%, payable semi-annually in arrears on April 15 and October 15. In connection with the issuance of the 2030 Green Convertible Notes, we paid $108 million to enter into privately negotiated capped call transactions with certain financial institutions to increase the effective conversion premium to approximately $31.06 per share. We intend to allocate the net proceeds from the issuances of the Green Convertible Notes to finance, refinance, or make direct investments in, in whole or in part, one or more new or existing eligible green projects, as described in our newly established green financing framework.
We have generated significant losses from operations, as reflected in our accumulated deficit of $13.1 billion and $18.6 billion as of December 31, 2022 and 2023, respectively. Additionally, we have generated significant negative cash flows from operations and investing activities as we continue to support the growth of our business. We anticipate continuing to make significant capital investments over the next several years to focus on ramping up production as we strategically expand infrastructure, including additional manufacturing capacity both domestically and internationally. We also anticipate continuing to make significant investments in future growth initiatives, including vehicle and other technology and software, tooling for current vehicle platforms, future vehicle manufacturing lines, and our service and retail network.
As of December 31, 2022 and 2023, our non-cancellable commitments are disclosed in Note 7 "Leases" , Note 8 “Debt” , and Note 14 "Commitments and Contingencies" to our consolidated financial statements included in this Form 10-K.
We believe our existing balance of cash and cash equivalents and short-term investments, in addition to amounts available for borrowing under the ABL Facility, will be sufficient to meet our operating expenses, working capital, and capital expenditure needs for at least the next 12 months.
Our future operating losses and capital requirements may vary materially from those currently planned and will depend on many factors, including our rate of revenue growth, the timing and extent of spending on R&D efforts and other growth initiatives, the timing, nature, and rate of expansion of manufacturing activities, our ability to drive cost reductions across the business through improved efficiencies, the timing of new products and services, market acceptance of our offerings, and overall economic conditions. Furthermore, we anticipate that future investments may require significant debt and/or equity financing. The sale of additional equity would result in dilution to our stockholders. The incurrence of additional debt would result in debt service obligations, and the instruments governing such debt could provide for operational and/or financial covenants that restrict our operations. There can be no assurances that we will be able to raise additional capital on favorable terms or at all. The inability to raise capital could adversely affect our ability to achieve our business objectives.
Cash Flows
Years Ended December 31,
(in millions) 2021 2022 2023
Net cash used in operating activities (2,622) (5,052) (4,866)
Net cash used in investing activities (1,794) (1,369) (2,511)
Net cash provided by financing activities 19,828 99 3,130
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Operating Activities
Net cash used in operating activities decreased during the year ended December 31, 2023 compared to the year ended December 31, 2022. This decrease was primarily driven by gross profit improvement and increased interest income, partially offset by timing of payments to suppliers.
Investing Activities
Net cash used in investing activities increased during the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily driven by the purchase of short-term investments, partially offset by maturities of short-term investments and a reduction in equipment and construction spend as compared to the earlier stages of our production ramp at our Normal Factory in the prior year. During the year ended December 31, 2023, we continued to invest in the growth of our business at our Normal Factory and our next generation vehicle platforms and technologies.
Financing Activities
Net cash provided by financing activities during the year ended December 31, 2023 was primarily driven by proceeds from the issuance of the Green Convertible Notes.
Critical Accounting Policies and Estimates
The preparation of our financial statements and related disclosures in conformity with U.S. GAAP and the discussion and analysis of our financial condition and operating results require us to make judgments, assumptions, and estimates that affect the amounts reported. We base these estimates on historical experience and on various other assumptions we believe are appropriate and reasonable under the circumstances and apply judgement to possible outcomes as the basis for amounts reported. Because of the inherent uncertainties involved in making such estimates, actual results may differ, and such differences may be material.
We consider the following policies and estimates critical because they are important to the portrayal of our financial condition and operating results, and they require us to make judgments and estimates about inherently uncertain matters. For further information on all of our significant accounting policies, see Note 2 “Summary of Significant Accounting Policies” to our consolidated financial statements included in this Form 10-K.
Inventory Valuation
We review our inventory to ensure that its carrying value does not exceed its NRV, with NRV based on the estimated selling price of inventory in the ordinary course of business, less estimated costs of completion. When our expectations indicate that the carrying value of inventory may exceed its NRV, we perform an exercise to calculate the approximate amount by which carrying value is greater than NRV and record additional cost of revenue for the difference. Once a write-off occurs, a new, lower cost basis is established.
Should our estimates used in these calculations change in the future, such as estimated selling prices or remaining costs, additional write-downs may occur. The decrease in inventory write-downs for the year ended December 31, 2023 compared to December 31, 2022 is primarily due to a decrease in costs to manufacture our products as a result of lower material costs, increased deliveries and higher estimated selling prices at December 31, 2023. A hypothetical 10% change in estimated selling prices or remaining costs would have resulted in the following approximate changes in the inventory write-down for the year ended December 31, 2023 (in millions):
Decrease in Inventory Write-Down Increase in Inventory Write-Down
Change in estimated selling prices $ 168 $ (168)
Change in estimated remaining costs $ 146 $ (146)
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Recent Accounting Pronouncements
See Note 3 "New Accounting Standards" to our consolidated financial statements included in this Form 10-K for a description of recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted.