What happened

Rivian Automotive (RIVN 1.32%) stock suddenly shot up around Tuesday noon and rallied as much as 9.1% at its highest during the day through 2:30 p.m. ET.

An analyst expects the EV industry to grow at a much faster pace now and sees auto giants like Tesla and General Motors to be the biggest beneficiaries, but investors in Rivian took cues from the forecast and loaded up on the hot electric vehicle (EV) stock while they still can.

So what

Analyst Rod Lache from Wolfe Research has turned increasingly bullish about the EV industry and expects EV penetration to hit 20% in the U.S. and 22% globally by 2025. He earlier expected EVs to make up 10% of the U.S. and 17.5% of the global passenger car market by mid-decade.

Lache's conviction stems from the Inflation Reduction Act (IRA), which was recently signed into law and offers significant tax credits for consumers who buy EVs that meet certain assembling and battery sourcing conditions. The new car, for example, should be assembled and some of its battery components manufactured and assembled in North America.

Put another way, automotive companies that are pumping big sums of money into EVs and are focused on domestic sourcing and production are best poised to win under the IRA. Lache called the IRA "the most consequential development" in the U.S. auto industry, singled out Tesla and General Motors as two potential winners, and upped his price targets on both stocks.

Now what

EV enthusiasts, however, see potential in Rivian as well as EV penetration rises in the U.S. All three of Rivian's electric vehicles currently on sale -- the R1T pickup truck, the R1S SUV, and the commercial delivery van EDV -- already qualify for tax credits under the IRA.

As of June 30, Rivian had nearly 98,000 preorders across R1T and R1S aside from the 100,000 orders from EDV it already secured in its early days from the e-commerce giant, Amazon. Although Rivian's losses mounted in the second quarter, it ended the quarter with a hefty cash balance that should take care of its growth plans through 2025. Rivian also reiterated its production target of 25,000 EVs for 2022.

With Rivian stock plunging in recent months, EV bulls saw Wolfe Research's encouraging growth projections for the industry as the perfect trigger to buy the EV stock on the dip.