Tempted to Give Up on Rivian? Here's Why It's Way Too Early for That

Daniel Miller, The Motley Fool

Sat, Oct 26, 2024, 3:30 PM 5 min read

Rivian's (NASDAQ: RIVN) limited history is filled with ups and downs, pleasant surprises and sudden disappointments. Some investors think it's a young electric vehicle (EV) company that has separated itself from other start-up EV automakers, with unlimited potential as the world transitions to EVs. Other investors see a money-burning machine facing intense competition in a capital-intensive industry. But after the company's recent production snag and delivery slowdown, is it time to give up on Rivian?

Absolutely not -- it's way too early for that, here's why.

Delivery slowdown

Let's briefly recap the recent speed bump the company has hit. Rivian delivered 10,018 vehicles during the third quarter, which was a steep 36% decline from the prior year. The start-up EV maker also cut its full-year production guidance from 57,000 vehicles down to 47,000-49,000 units. Investors knew deliveries were expected to remain flat in 2024, but seeing it on a graph feels more impactful.

Image showing a Q3 decline in Rivian deliveries. — Data source: Rivian production and deliveries releases. Graphic by author.

The production snag was driven by a shortage of a shared component between the R1T, R1S, and RCV platforms and has continued since the third quarter. But don't let the recent production hiccup get you down; here are four reasons it's too early to give up on the young company.

Just the beginning

There are a number of projects and programs that are just getting started at Rivian, and eventually they'll help move the needle for the company's top and bottom line.

One such strategy is the company's brand new pre-owned sales program for the R1T and R1S, as vehicles come back from lease arrangements. Not only is this a necessary step to becoming a more legitimate and well-rounded automaker, it opens a new path for revenue at a time new vehicle deliveries are stalling in 2024. The move also opens the door to more consumers as the price tags on the used vehicles are much lower and, as Rivian offers factory warranties and inspections on the vehicles, consumers are more willing to pay above market value for that peace of mind.

Another interesting strategy for Rivian is the expansion of its RCV line, which was originally a product exclusive to Amazon, but that's no longer the case. While there's immense upside with the nonexclusive arrangement now, it's taken time for potential customers to line up tests and pilot programs, but investors could see new customers lining up in 2025. Adding a handful of customers and large orders would be a nice boost for the company.

If you follow Rivian, you've almost surely heard of its joint venture deal with Volkswagen, with the latter planning to invest up to an expected $5 billion in the young EV maker. The deal calls for the two entities to create next-generation software-defined vehicle (SDV) platforms. But what this deal really means for investors is that Rivian's gamble to build its own leading software and electrical architecture could potentially be sold to other companies not wanting to develop their own.

Last, but certainly not least, investors have to take note of the product pipeline, which includes the highly anticipated R2 crossover, and also the smaller R3 and R3X. The R2 is scheduled to launch in the first half of 2026 with a starting price below $50,000 – much more affordable than the current R1 vehicles starting in the lower $70,000 range. The R3 will be even cheaper, and all the vehicles will combine to dramatically expand the company's market reach, improve scale, and narrow its financial losses.

What it all means

Ultimately, it's slightly nerve-wracking for investors to watch deliveries stall and then decline during a production snag, especially since part of the issue could be a lack of demand. The biggest takeaway for investors is that it's still in the very early innings for Rivian, and many of its strategies and programs to expand the top and bottom line are still getting started.

It certainly isn't time to give up on Rivian, but with few catalysts until the R2 launches, investors will have to be patient and willing to accept the swings in stock price -- the stock will continue to be high risk and speculative for the foreseeable future.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Volkswagen. The Motley Fool recommends Volkswagen Ag. The Motley Fool has a disclosure policy.

Tempted to Give Up on Rivian? Here's Why It's Way Too Early for That was originally published by The Motley Fool

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