Rivian’s Rocky Road: Can the EV Maker Turn Things Around?
The electric vehicle (EV) industry has undergone a seismic shift since Rivian Automotive (NASDAQ: RIVN) went public in late 2021. Despite its promising start, the company’s shares have plummeted by a staggering 92% in just a short period. However, patient investors may still have a chance to get in on the ground floor of the long-term EV opportunity. Let’s examine Rivian’s pros and cons to determine if this struggling automaker still has what it takes to become a millionaire-maker.
A Shift in the EV Landscape
When Rivian entered the scene, the market was booming, led by industry leader Tesla. Traditional automakers like Ford, General Motors, and Stellantis seemed slow to adapt, giving Rivian an opportunity to fill the gap in Tesla’s model lineup with its focus on pickup trucks and large SUVs. Fast-forward to today, and the landscape has changed dramatically. Pure-play EV companies are struggling to grow, while traditional automakers are flooding the market with a wide range of options, particularly in Rivian’s core segments.
Legacy Automakers Take the Lead
The growth story has seemingly shifted in favor of legacy automakers, who are leveraging their established brands and dealership networks to reach more customers. For instance, Ford’s electric F-150 pickup truck saw sales double year over year to 7,162 units in the third quarter. General Motors is also experiencing massive success with its products, including the Cadillac Lyriq, a luxury SUV that saw sales soar 139% to over 7,000 units. Both offerings compete directly with Rivian’s high-end trucks and SUVs.
Rivian’s Struggles Continue
Rivian’s second-quarter earnings highlighted the severity of its challenges. Sales grew by a meager 3% year over year to $1.12 billion, while operating losses expanded 7% to $1.38 billion. The company’s Q3 earnings, expected on November 7, are unlikely to be much better. Vehicle deliveries have declined 36% year over year to just 10,018 vehicles, falling short of analyst expectations.
A Glimmer of Hope
Despite these challenges, Rivian’s CEO R.J. Scaringe remains optimistic about the company’s prospects. He believes that by reducing materials costs and improving factory efficiency, Rivian can achieve a modest gross profit by the fourth quarter of 2024. If successful, this could pave the way for the company to scale into operating profitability over the long term. Additionally, Rivian plans to launch a new SUV called the R2, which will use its new mid-sized vehicle platform and start at a more affordable $45,000.
Survival Mode
Unfortunately for investors, Rivian is currently in survival mode. For the next few years, management’s primary focus will be on keeping the company afloat, rather than returning significant profits to shareholders. With $7.87 billion in cash and short-term investments, Rivian can maintain its current cash burn for a few more quarters. However, it may eventually need to explore outside sources of capital, such as equity dilution, which could reduce current investors’ claims on future earnings.
Investor Caution
Before investing in Rivian stock, it’s essential to consider the company’s uncertain path to profitability. While Rivian may still have potential, investors should exercise caution and wait for the company to demonstrate a convincing plan for long-term success.
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