It seems as if every company in the electric vehicle (EV) sector has been throttling back plans and expectations lately. But Rivian Automotive (RIVN 6.47%) has been the exception. That pattern continued after the company released its third-quarter update.
Rivian increased its vehicle output projection for 2023 for the second time this year. That comes after even EV leader Tesla lowered prices to spur demand and make up for lower-than-expected third-quarter vehicle deliveries.
Rivian is seeing momentum from a unique model
The news from Rivian pushed its shares higher as it stands out among EV start-ups. That's because investors see a unique business model from Rivian and a path to eventual profitability. It currently offers its R1 platform SUV and pickup truck for everyday driving as well as off-roading. Alongside those models, the company builds electric commercial delivery vans for Amazon. The big news from its earnings report was related to that commercial product.
Rivian has delivered more than 10% of its multiyear 100,000 vehicle orders from Amazon. That model has exclusively been for Amazon. But now Rivian says it will offer a custom-designed Rivian commercial van to other customers as well. That opens another revenue stream for Rivian as it increases its productivity.
Rivian eyes on a new factory
Management boosted guidance for full-year vehicle production from 52,000 to 54,000 in the recent report. While that's positive news that bucks trends among EV makers, that volume doesn't come close to making Rivian profitable. The below infographic shows the company still reported a loss from operations of more than $1.4 billion in the most recent quarterly period.
But revenue is soaring as vehicle production and deliveries grow. Importantly, Rivian has also been trimming its cash losses. The company used just over $1 billion in cash in the quarterly period. That compares to negative free cash flow of more than $1.6 billion in the 2023 second quarter.
Rivian ended the third quarter with more than $9 billion in cash and equivalents, and it's that capital that will determine the company's future. Investors will need to monitor progress on its next factory to be built in Georgia to see if that free cash flow can turn positive. Rivian just named the plant manager for that facility. It plans to hold a groundbreaking ceremony early next year at the expected 400,000-vehicle annual capacity plant.
The next phase of growth for Rivian
That plant will mark Rivian's next phase of growth with more than just added volume. The Georgia factory will launch Rivian's next-generation R2 platform vehicles, which it expects to launch in 2026. Rivian hopes the new technology will allow it to offer more lower-cost vehicles that appeal to a larger consumer base.
For now, investors are focusing on the trends in Rivian's business, and they were positive about the recently reported third quarter. The upbeat news has investors betting there could be a profitable future for the EV maker, even as it continues to bleed cash. Plenty of things could block that path to profitability, so investors who want to hold some Rivian stock should be sure to allocate only an appropriate amount in the still-speculative name.
