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Should You Invest In Rivian in 2022?

By Rekha Khandelwal – Jan 12, 2022 at 4:17AM

Key Points

  • Amazon's partnership with Stellantis serves as a reminder that Rivian operates in a competitive market.
  • Rivian retains Amazon as its customer and can potentially supply other commercial customers.
  • Despite the recent fall, Rivian stock sports a massive valuation.

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How will Amazon's deal with Stellantis affect Rivian?

Rivian (RIVN 0.08%) grabbed a lot of attention after its multibillion-dollar initial public offering (IPO) last year. Many investors saw Rivian's partnership with Amazon (AMZN -1.25%), under which it will deliver 100,000 electric delivery vans to the latter, as a key pillar of Rivian's growth story. So, how does Amazon's deal with Stellantis (STLA 1.01%) affect Rivian? And should you buy Rivian stock in 2022? Let's discuss that next.

The Amazon partnership

Amazon is looking to make its last-mile delivery operations low emission by switching to electric delivery vehicles. The e-commerce giant obviously doesn't want to rely on a single electric vehicle (EV) maker for the same. Stellantis has been providing light commercial vehicles for Amazon's last- mile operations since 2018. While Amazon has partnered with Rivian for the delivery of electric vans, it makes sense for it to also buy electric vehicles from its existing supplier Stellantis, which is launching the electric version of its Ram ProMaster in 2023. 


Image source: Rivian.

Stellantis has designed the electric Ram ProMaster keeping Amazon's needs into consideration. The order size hasn't been decided, or disclosed, as the companies say they would be "putting thousands of BEV ProMasters on the road every year." 

Indeed, the increased competition is bad news for Rivian. But the truth is that Amazon's partnership with Stellantis has not increased competition. It has just reminded investors of the competition that already existed. Investors were buying Rivian stock as if it will not face any competition. Amazon's partnership with Stellantis served as a reminder that Rivian does not operate in a vacuum.

All is not lost for Rivian

Again, just as Rivian isn't the only one offering electric pickup trucks, SUVs, or delivery vans, Amazon isn't the only customer for Rivian. Rivian offers both consumer and commercial vehicles. In the commercial vehicle segment, Amazon seems to be Rivian's only customer as of now; at least, the company hasn't announced any other name so far. However, that need not be the case always. It can always deliver vehicles to other commercial customers.

Further, Amazon's partnership with Stellantis may not impact Rivian much. Amazon has said that this partnership does not affect its relationship with Rivian. There does not seem to be any major reason for Rivian investors to panic about the Stellantis partnership.

Finally, Rivian has more than 71,000 pre-orders for its R1 pickup trucks and SUVs. The company could see increasing orders if it gets a positive response from its initial customers and manages to deliver vehicles as per its plans. Rivian's R1T pickup truck has already won the MotorTrend's 2022 Truck of the Year award. 

Is the EV maker's stock a buy?

Rivian stock has fallen nearly 50% off its all-time high price of more than $172 that it hit in November. The stock has fallen nearly 17% so far in 2022. Despite the fall, Rivian stock sports a market capitalization of more than $77 billion. That looks a bit too high for a company that faces significant risks and has delivered only a few hundred vehicles so far.

Just as in the commercial segment, Rivian faces competition in the pickup trucks and SUV market too. Ford is getting record reservations for its upcoming pickup truck F-150 Lightning. Several other auto and EV makers, including Tesla and General Motors, are planning to launch their electric pickup trucks soon. So, Rivian could face very stiff competition in this market too.

Though Rivian has delivered the first electric pickup trucks ever, the company still faces significant risks. So, you could either wait for a more attractive entry point or wait until the company's growth story evolves enough to justify the stock's valuation. That doesn't seem to be the case right now, but that may change as 2022 progresses.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Rekha Khandelwal has no position in any of the stocks mentioned. The Motley Fool owns and recommends Amazon and Tesla. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policy.

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