Rivian Automotive (RIVN 6.10%) seems like one of the few electric vehicle (EV) automakers heading into 2024 with some momentum. Production bottlenecks are in the rearview mirror, cost-cutting measures are gaining traction, and gross profit per unit is heading in the right direction, among other factors.
But Rivian might also just have two trump cards up its sleeve to spark a rally in 2024. Here's what investors should keep their eyes out for as we head into the new year.
Leasing could be a boon
Broadly speaking, you may not think a leasing program would be a big deal, and that's because, overall, leasing accounts for roughly 20% of new vehicle sales. But here's the kicker: Leasing is a huge part of luxury or high-priced vehicle sales.
In fact, consider General Motors' Chevrolet brand, which sells an absurd amount of high-priced full-size Silverado trucks. It has a lease rate topping 50%. Further, other high-priced luxury brands, such as BMW and Audi, top 70%.
This matters a lot because potential Rivian customers have been asking for a leasing program to buy Rivian vehicles, which often start around $78,000. In a way, this is nearly a no-brainer move for the automaker that could spark demand by tapping into an incremental customer base. A bonus for customers is that leasing makes it easy for the manufacturer to wrap the federal tax credit into the purchase price.
Rivian is forecasting its full-year production to hit 54,000. At such a low volume of sales, a small boost from leasing could easily create more demand to fill its accelerating production or perhaps replenish its backlog of orders.
Savvy investors would be wise to keep tabs on Rivian's brand-new leasing program, which at the beginning will only be available for the R1T -- customers will have to wait for leases on the R1S SUV -- and only in 14 states that favor Rivian customer demographics.
While investors would be wise to temper expectations that leasing will boost demand early in 2024 -- and management hasn't indicated it will -- there's a fair argument to make that throughout next year, leasing could boost sales incrementally by 10% or more, which could easily spark a Rivian rally.
Brand new world
Rewind back to 2019, when Rivian and Amazon signed off on a deal for the former to deliver over 100,000 electric delivery vans to the e-commerce juggernaut. Amazon touted that over 10,000 were on the road and had delivered over 10 million packages.
Obviously, investors would still love Rivian and Amazon's partnership to remain strong and for orders to keep flowing, but the good news for investors is that this agreement is no longer exclusive. That means the doors are now open for Rivian to sell its electric vans to other consumers looking for delivery fleets.
Now, this was always the plan -- it's just been accelerated. The original agreement called for the exclusivity to end after the total 100,000 electric vans were delivered by 2030, essentially giving Amazon first dibs on the green fleet.
This development could be massive for Rivian, which has been building relationships with multiple commercial operators with a focus on delivering last-mile retail. Imagine if Rivian was able to ink another large fleet deal for its electric vans, or even a handful. That news alone would pump optimism into the company's long-term future, and the sales boost could potentially spark a stock price rally.
Is 2024 Rivian's year?
It's been a bumpy ride for Rivian, but the company has momentum going into 2024, and if either of these potential catalysts gains serious traction next year, it would be a boon to the stock's price that has spiraled downward by roughly 80% since its initial public offering.
