In the crowded field of electric vehicle (EV) companies, Rivian Automotive (RIVN 6.10%) is making a name for itself. Its lineup of trucks and SUVs offers a suite of options for outdoor enthusiasts looking to make the switch from gas to electric.
Estimates project that by 2030, 2 out of every 3 cars sold globally will be electric. Naturally, Rivian could be a great way for investors to ride the wave of EV adoption. But before buying Rivian stock, here are three things you need to know.
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1. Profits evade but production is increasing
In Rivian's short history, 2023 was arguably its best year. It produced more than 57,000 vehicles and delivered just over 50,000. These numbers were significant increases compared to 2022, increasing by 135% and 147%, respectively. Considering the company manufactured only 1,000 cars back in the fourth quarter of 2021, Rivian has come a long way.
Yet, despite the progress, Rivian continues to operate at a loss. Based on the most recent earnings report from the third quarter of 2023, it reported a total loss of $1.3 billion. That means for every car it sold, it lost an average of more than $30,000.
While financial data from Q4 are yet to be published, based on the lack of income reported in Q3, investors shouldn't expect much to change. At best, the margin might narrow but there is little chance the company reaches profitability with expenses sitting at an all-time high of more than $2.75 billion and continuing to grow.
RIVN Net Income (Quarterly) data by YCharts
2. New factory planned for construction
Currently, Rivian operates out of just one factory in Normal, Illinois. But that is expected to change in the coming years. Slated to begin construction this year, Rivian will break ground on a $5 billion state-of-the-art facility 40 miles outside Atlanta, Georgia.
Construction will be split in two phases. With phase 1 planned for completion sometime around 2026, it should bump total production up to 200,000. By 2030 when all construction is finished and the factory is at full capacity, executives expect it will raise production to more than 400,000 vehicles a year.
Taking on a project of this scale while still operating at a loss holds some inherent risk. Notorious for unforeseen costs and delays, construction projects of this scale could deal a blow to Rivian's financial position quickly if things don't go smoothly. The hope is that the strategic financing agreement reached with the state of Georgia, which is chock-full of incentives, will offset this possibility, but only time will tell.
3. A new commercial van deal with AT&T
Though not as widely known as its SUVs and trucks, Rivian also produces vans for commercial business. And it's arguably the one arena Rivian is finding considerable success.
In 2019, Rivian announced an exclusive deal with Amazon to produce 100,000 vehicles by 2030. Due to the fact that it owned a stake in Rivian, this deal meant that Amazon was the only company to purchase the electric vans. But that changed recently, as the exclusive deal expired, opening Rivian up for new business.
AT&T recently announced an agreement with Rivian to start a pilot program and give its commercial fleet an electric makeover, becoming the second company to ink a partnership with the automaker. The details of the agreement have yet to be disclosed but this is undoubtedly a win for Rivian and could open the door for new business in the future.
