In a crowded field of competition, Rivian Automotive (RIVN 2.44%) has risen to become one of the more prominent names in the electric vehicle (EV) industry. The company's suite of SUVs and trucks fills a gap badly missing in the EV market and holds the potential to become the leading choice for outdoor enthusiasts looking to ditch fuel pumps.
While the long-term potential is clear, Rivian has some work to do before it can solidify itself as a leader in the EV industry. Things seem to be trending in the right direction but before investors consider the stock a buy, some serious problems need to be fixed.
Image source: Rivian.
Encouraging production and delivery increases
The primary way to measure success in the EV industry is by evaluating production and deliveries. From this standpoint, Rivian is progressing nicely and is on a promising trajectory.
Last year was the company's best year in its short history. It smashed its previous record by producing more than 54,000 vehicles and delivering 50,000 of them. These numbers demonstrated significant growth compared to 2022, increasing by 135% and 147% respectively.
It's hard to imagine, but back in the fourth quarter of 2021 the company manufactured barely 1,000 cars. It's safe to say that Rivian might just be getting the hang of mass producing EVs.
Where the rubber meets the road
Rivian's increases in production and delivery are encouraging. But they mean little without considering them from a financial perspective. Unfortunately, this is where Rivian struggles.
As of the most recent earnings statement, Rivian reported a net loss of more than $1.3 billion. That means for every car it sold, it lost an average of around $33,000. While this number is down considerably from when it was losing nearly $125,000 per vehicle in Q4 2022, increases in production don't mean much if they don't translate into considerable financial improvements.
The Achilles' heel for Rivian seems to be expenses. They have consistently risen and currently sit at an all-time high of more than $2.77 billion. With revenue of just $1.3 billion, Rivian's lack of income has forced it to utilize cash reserves to keep operations running.
As a small silver lining, it did have one of the largest initial public offerings (IPOs) for an American company in nearly a decade when it debuted on the Nasdaq Stock Market in November 2021. By going public, Rivian raised nearly $13 billion and amassed a total cash position worth $19.9 billion. But since then, the absence of profits has reduced this number by more than 60%, and it is worth just $7.9 billion today.
You should keep Rivian on your radar
While Rivian's current financial status is concerning, ongoing developments could help it reverse course. The most apparent is the construction of a massive state-of-the-art factory outside Atlanta, Georgia. Construction is set to begin this year with phase 1 expected to be complete by 2026 and to increase production by 200,000 vehicles. Once fully operational in 2030, Rivian expects the factory will pump out 400,000 cars a year.
Furthermore, the prospects of new in-house battery development could lower costs significantly. Executives believe that the new cheaper and lighter battery pack unveiled in December 2023 will "take thousands of dollars of costs" and "additional mass out" to help streamline production.
It likely isn't time to ring the alarm bells on Rivian. But until these developments begin to take hold and provide tangible results, it might be best to avoid the stock for 2024. I plan on keeping a close eye on Rivian moving forward as there is considerable reason to be hopeful of its long-term potential. When the time comes, I will gladly reconsider giving it a spot in my portfolio.
