As the great Warren Buffett once said, it's wise "to be fearful when others are greedy and to be greedy only when others are fearful."
There are certainly reasons to be fearful as an investor in the electric vehicle (EV) industry right now, with high interest rates, a lack of affordable EV options, charging infrastructure challenges, and a slowdown in demand.
But despite those headwinds, here are two reasons long-term investors can still believe in Rivian (RIVN +2.08%).
Gearing up
While there's a lot of investor attention on the status quo and the challenges facing Rivian, and that's fair, the company is clearly gearing up for its home run moment as it plans to unveil its R2 platform this spring.
It seems clear that the high-priced EV market is saturated and that consumers are pleading for more affordable EV options. Rivian finally gave in and joined its competitors in price cuts, which it had refused to do in 2023 despite numerous price cuts from Tesla (TSLA 0.09%) and nearly every other competitor on the market.
But Rivian's $3,100 price reduction won't solve its affordability issues, as the vehicles' price tags still start at $71,700 for the R1T and $76,700 for the R1S.
However, Rivian has been on a hiring spree for key talent to gear up for its home run moment as it unveils its R2 platform this spring and builds its second factory to produce the vehicles in 2026, assuming there are no delays, setbacks, or cost overruns.
Rivian hired Jennifer Prenner away from her three-year stint at Facebook's parent company Meta as Rivian's chief marketing officer. Another big hire included DJ Novotney, an Apple veteran who spent 25 years developing a long list of first-generation products. Last September the company hired Porsche's former North America CEO Kjell Gruner as Rivian's chief commercial officer, overseeing sales, marketing and service.
Rivian even hired auto industry veteran Carlo Materazzo from Stellantis North America as the company's vice president of manufacturing, and he's expected to play a big role in setting up the company's second production facility in Georgia.
Rivian hopes its R2 vehicles will be a home-run moment for the company, and it's clear the company is determined to hire the talent to make it happen. That's great news for long-term investors.
Positive gross profit
Investors were almost certainly disappointed with Rivian's 2024 production guidance, which is expected to be flat from the prior year at 57,000 vehicles. Many assumed the company's production would take a substantial step forward on its path to becoming gross-profit positive late in 2024.
Despite the lack of production growth, the company still plans to become gross-profit positive this year, which is a silver lining in an otherwise downbeat fourth-quarter earnings report.
The road to becoming gross-profit positive will now be paved by its planned second-quarter production shutdown, when the company will fine-tune the production line, swap in some new suppliers, improve efficiency, and reduce costs.
Furthermore, along with those production line improvements, the company will start to recognize lower raw material costs, including lower lithium prices, which will help the company become gross-profit positive late in 2024 despite the lack of production growth.
What it all means
For investors, it's clear that the short-term outlook in the EV industry is a little downbeat, and growth will come slower than originally anticipated. But EVs taking over the roads and replacing internal combustion engines was always going to be a long-term story, and Rivian is still on track to deliver once macroeconomic headwinds subside and its second factory begins churning out more affordable R2 vehicles.
