Innovations in battery technology, charging infrastructure, and falling costs could help electric vehicles (EVs) achieve widespread adoption.
One company working on this is Rivian (RIVN -2.97%), a U.S.-based EV maker focused on luxury vehicles. Its vehicles aim to deliver performance and sustainability, and the company has ambitious plans to expand its product lineup. However, before buying the stock, there are some things you'll want to know about the company first.
Rivian's journey has been a bumpy ride
Established in 2009, Rivian designs, develops, and manufactures premium electric vehicles (EVs). Their lineup features the rugged R1T pickup truck, the versatile R1S SUV, and the eco-friendly Rivian electric delivery van.
As part of Amazon's climate pledge in 2019, it committed to achieve net-zero carbon by 2040. To achieve this goal, the company partnered with Rivian to bring 100,000 electric delivery vehicles on the road by 2030
The company generates its primary revenue through the sale of EVs. In addition to vehicle sales, the company benefits from environmental regulations that promote zero-emission vehicles. By meeting these regulatory standards, the company earns tradable credits, which can be sold to other manufacturers seeking to comply with these guidelines.
Rivian has faced some challenges on its journey. In the first nine months of 2024, the company generated revenue of $3.2 billion. However, high costs of revenue have resulted in a gross profit loss of $1.3 billion. When factoring in operating expenses, including research and development and other general costs, Rivian has incurred a total operating loss of $4 billion thus far in 2024.
RIVN Revenue (TTM) data by YCharts
Management is hopeful for positive gross profit in the fourth quarter
One factor weighing on Rivian's production this year has been component shortages. Coming into 2024, the company projected that it would produce 57,000 vehicles. However, in the third quarter, the company reduced its production forecast to 48,000 vehicles at the midpoint due to a shortage of a part used in its R1 SUV and R1T pickups and delivery vans.
In the fourth quarter, Rivian produced 12,727 vehicles at its manufacturing facility in Normal, Illinois, and delivered 14,183 vehicles. For 2024, it produced 49,476 vehicles and delivered 51,579, which was in line with management's adjusted full-year guidance provided in the third quarter. Following its solid fourth-quarter deliveries, Rivian stock popped higher.
Investors do have something else to look forward to in the near term. The company's management expects it will post a positive growth profit in the fourth quarter, thanks primarily to $275 million in contracted regulatory credit revenues that will be recognized in the quarter.
What's next for Rivian?
Rivian needs to find a way to become profitable, and one strategy to improve its margins is to expand its vehicle lineup and expand its production capacity. Last year, the company introduced its more affordable R2, R3, and R3X models, which have more broad appeal and help increase sales. Deliveries on the R2 are expected to begin in 2026.
Image source: Rivian.
A recent loan agreement with the U.S. Department of Energy should help Rivian ramp up production and crank out enough vehicles on a large scale. On January 16, the company closed on the loan agreement for up to $6.6 billion, which will be used to construct its next manufacturing facility in Georgia. Construction is set to begin in 2026, and vehicle production at that facility will not start until 2028.
Until then, Rivian will produce its R2 at its Normal, Illinois facility. A Rivian spokesperson told Reuters that its Illinois plant, where it produces its electric delivery vans, can produce 150,000 vehicles annually. Expanding production for the R2 could help it achieve a total annual capacity of 215,000 vehicles at that facility alone.
Is it a buy?
Component shortages that were a problem in 2024 should no longer be a constraint for Rivian, which could help production return to growth mode. However, the company could face some headwinds as we enter 2025.
Incoming President Donald Trump is also rolling back many of former President Joe Biden's EV policies, leaving the future of the Federal tax credits for EVs in doubt. While Rivian only modestly benefits from the credit, there are concerns that a repeal could weigh on EV demand.
Rivian is taking steps to increase its vehicle lineup and improve its gross margins. The expansion of its Illinois plant and the build-out of its new facility in Georgia should help it achieve these goals. However, its newer R2 vehicle will be delivered in 2026, and other models will launch later.
It will take time and significant capital for Rivian to ramp up production, and the EV maker has a way to go to improve its gross margins and ramp up production on a large scale. For those reasons, investors are best off waiting for further progress before investing in the EV stock.
