Electric vehicle (EV) maker Rivian Automotive (RIVN 6.10%) is experiencing some growing pains. After more than doubling vehicle production in 2023, the company now says it doesn't expect any production growth in 2024. Rivian surprised investors with that news, and the stock took a major hit. Shares of the EV start-up were trading at an all-time low after its latest quarterly report.
There's one area where investors now need to focus to determine if Rivian can achieve its anticipated long-term growth.
Rivian's focus on profit
Rivian's disappointing guidance for 2024 vehicle production showed the limited market for its luxury-priced EVs. The company touts the fact that it had the top-selling EV priced over $70,000 in 2023. While that indicates some early success, it isn't enough.
The company will try to expand its market with the March 7 release of its next-generation R2 platform, a lower-priced offering. But it needs to make it to 2026, when that vehicle is expected to be available for sale. While cost savings helped the company cut more than $500 million in cash burn in 2023 versus 2022, it still reported negative free cash flow of about $5.9 billion for the year.
Yet Rivian believes a continued focus on expenses in 2024 will allow it to achieve a positive gross profit in this year's fourth quarter. It is cutting 10% of its salary workforce as one step to trim costs.
Rivian's operating expenses have soared as it has ramped up its business. But in 2023, it was able to keep operating expenses flat for the second year in a row, even as it increased revenue almost 170% year over year.
Data Source: Statista
That focus on costs is what investors need to keep watching. If Rivian's $9.3 billion in cash can get it to the launch of its R2 platform in 2026, today's share price could look like a bargain.
