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Over the last 30 days, smaller Rivian Automotive (Nasdaq: RIVN) outperformed Tesla (Nasdaq: TSLA) at 33% and 4%, respectively. The catalyst was a newly formed partnership with AT&T, announced on December 14th. The telecom giant will integrate Rivian’s R1 and Commercial Van EVs into its fleet of vehicles starting in early 2024.On top of that, AT&T will serve Rivian customers as the exclusive provider of internet connectivity in the US and Canada for over-the-air software updates. Previously, in 2019, Rivian partnered with Amazon to roll out 100,000 delivery vehicles by 2030.Both partnerships originate from the Climate Pledge to pave the road to net-zero annual carbon emissions by 2040, co-founded by Amazon and the non-profit Global Optimism. Notably, Amazon also has an 18% stake in RIVN shares.
“Around a quarter of CO2 emitted in the transportation sector in the US comes from commercial vans, so it’s imperative we do all we can as soon as possible to help cut emissions,”
Dagan Mishoulam, VP, Strategy & Go to Market at Rivian Automotive
Moving forward, does Rivian have a higher growth potential than Tesla?
Rivian’s Momentum
At a $791.64 billion market cap, TSLA shares are harder to move than RIVN’s $21.7 billion market cap. This means that future positive news for Rivian is poised to have the same double-digit boost. In the last Q3 earnings report, Rivian raised production guidance from 52,000 to 54,000 vehicles.The EV company also beat Wall Street revenue consensus at $1.3 billion, having delivered 15,564 vehicles. Although Rivian still generated a loss of $477 million in Q3, it was the fifth consecutive quarter with diminishing losses year-over-year.
“The key drivers of our path to positive gross profit are ramping production and leveraging our fixed costs, material cost reduction, and increasing average selling prices.”
Excerpt from Rivian’s Q3 earnings report
To that end, Rivian improved its gross profit per unit delivered at ~$2,000. Rivian expects further cost improvements from negotiated supplier price reductions, commodity cost cuts, and new technologies. However, Rivian EVs still fall into the luxury category.While Tesla can afford to cut its EV prices aggressively, the Rivian startup is in a different market position.Is there Room for Another Luxury EV Brand?The average price of Rivian EVs ranges between $75,000 and $80,000, which is not conducive to mass adoption, given that surveys consistently show EV price as the main adoption obstacle. Rivian appears to be aware of this problem with the following statement in the Q3 report:
“vehicle retail sales depend heavily on affordable interest rates and availability of credit”
However, now that rate cuts are firmly on the table following the latest FOMC meeting, Rivian could enter the profitability range sooner rather than later. The semiconductor chip shortage would have to be absent for that to happen.Previously, this was the main reason for not significantly ramping up production but is absent from Q3’s report. Likewise, lithium, nickel, cobalt, and aluminum costs would have to stabilize. These critical materials have all steadily gone up in the last two years.The Department of Energy (DOE) views some materials as critical and higher on the supply risk. Fortunately, Rivian switched to new lithium iron phosphate (LFP) technology for standard packs while reserving high-nickel batteries for longer-range vehicles. Depending on DOE’s critical materials list assessment, the agency will determine the eligibility for tax credits under the Inflation Reduction Act 48C. Presently, new Rivian EVs are not eligible for the full $7,500 tax credit, while the pickup and SUV models are eligible for a $3,750 federal tax cut.
RIVN Price Stock Forecast
Moving forward, Rivian is working on its next EV platform, R2. The cheaper lineup will be manufactured in the $5 billion manufacturing complex in Georgia, aiming to lower the prices for the mass market. However, the production is not expected to ramp up until 2026 fully.The goal is for Rivian’s Georgia factory to churn out 200,000 EVs annually. With the cheaper and smaller R2 models, this is likely the timeline for Rivian’s consistent profitability. Considering this horizon, based on 22 analyst inputs pulled by Nasdaq, RIVN stock is a “strong buy.” The average RIVN price target is $25.63 vs the current $22.73. The high estimate is $40, while the low forecast is $15 per share.More By This Author:Market Braces For ‘Triple Witching’ Friday As Over $5T In Contracts To Expire Costco’s Strong Start: Q1 Earnings Soar To $3.58 Per ShareWhich Trillion Dollar Marketcap Stocks Can Come Back Big In 2024?
