Rivian Automotive (RIVN 6.73%) first captured investors' attention back in 2019 when it struck a blockbuster deal with Amazon. Rivian agreed to supply the e-commerce titan with a whopping 100,000 electric delivery vans. It was the largest-ever order of battery-powered delivery vehicles at the time.
Amazon also made a large investment in Rivian. The online retail giant owns roughly 17% of the EV upstart's stock, a stake that's currently worth more than $3.8 billion. Amazon no doubt saw the promise of Rivian's technology, as well as its potential to earn a sizable share of a global EV market that's set to top $900 billion by 2028, according to Statista.
Image source: Statista.
If you'd also like to position yourself to profit from the rapid growth of the EV industry, consider buying shares of Rivian today. Here are some more reasons why this high-powered growth stock is an intriguing investment.
1. Rivian is ramping up production
Supply chain disruptions forced Rivian to scale back the number of EVs it produced in 2022. But the automaker is working through these bottlenecks, and a new manufacturing strategy promises to make faster production rates possible while also slashing costs.
Rivian successfully integrated its in-house Enduro motor system into its manufacturing operations earlier this year. The benefits of making more of the parts from which its vehicles are built are potentially enormous. Management credits the introduction of the Enduro motor with helping to improve Rivian's gross profit per vehicle delivered by roughly $35,000. Higher production volumes, which enabled Rivian to better leverage its fixed costs and negotiate price reductions from suppliers, also contributed to the gains.
In all, Rivian expects to produce 52,000 EVs in 2023, up from 24,337 vehicles in 2022. More than doubling its vehicle production would be an impressive achievement for the young EV company. If Rivian can hit its growth targets -- and management appears confident that it will -- investors are likely to enjoy further share price gains.
2. Rivian's profitability should continue to improve
Strong R1S sales are also helping to bolster Rivian's profit margins. The popular sports utility vehicle (SUV) has higher average selling prices than the company's R1T pickup trucks. Rivian's SUV sales thus tend to be more profitable. So it's a positive development that the R1S accounted for approximately 70% of the total number of R1 vehicles Rivian produced in the second quarter, a trend management expects to persist.
Additionally, Rivian is expected to benefit from lower raw material prices in the coming year. Earlier this month, CFO Claire McDonough said the cost savings from declining battery prices should begin to boost Rivian's profit margins by the fourth quarter.
All told, management anticipates that Rivian will start to generate positive gross profit on a companywide basis in 2024. With over $10 billion in cash and investments as of June 30, the EV manufacturer should have the liquidity it needs to reach that milestone. And if further capital raises are needed, financing will likely be on more attractive terms.
3. The R2 could be a game-changer
Rivian's R1S SUVs and R1T pickup trucks are selling well. Yet its upcoming R2 platform is set to be an even more powerful growth driver. The next generation of Rivian's vehicles has the potential to transform the company from a seller of premium-priced EVs to a more mainstream automaker with a vastly larger addressable market.
Rivian's first R2 vehicle is slated to be a compact SUV priced as low as $40,000. For context, the R1T and R1S start at $73,000 and $78,000, respectively. The significantly more affordable R2 is expected to debut in early 2024, with sales commencing in 2026.
If the R2 is well received by consumers, Rivian's stock could be off to the races. There's a good chance that will happen, as Rivian is expected to include many of the most popular features of the R1S in the more attractively priced R2.
Better still, the batteries for the R2 will be made in the U.S., which should help buyers qualify for more tax credits. That could make the R2 even more affordable for more Americans, thereby further increasing its already sizable sales potential.
