Rivian (RIVN 6.10%) arguably exited 2023 with as much momentum and optimism as any young electric vehicle (EV) maker. That optimism faded pretty quickly when the company later announced its 2024 production numbers would likely be flat compared to the prior year.
Despite investors' dwindling enthusiasm, Thursday, March 7th was a big day for Rivian as it revealed the upcoming R2 crossover and surprised investors with news of a smaller R3 crossover and a R3X performance version.
Home run moment
It's pretty safe to say that early adopters for EVs have long been on the market, and that high-priced EV segments are saturated. As automakers are hurrying to introduce more-affordable EVs for consumers loudly demanding lower prices, Rivian's R2 platform could be the company's home run moment when it begins to reach the scale needed to become a great EV stock.
The pessimism surrounding Rivian is due to its production guidance, which failed to inspire investors expecting significant growth in 2024. The lack of demand likely stems from the company's prices, which start at $71,700 for the R1T and $76,700 for the R1S -- and that's after recent price cuts.
High price tags are something Rivian hopes to partly reduce with the next generation R2 crossover that starts around $45,000. The compact R2 will have up to 330 miles of range, seating for five, and is very similar in size to the Tesla Model Y, the best-selling EV in the U.S. market.
The R2 could open the door to a much broader and more mainstream consumer, distancing itself from the luxury price tags on the two versions of the R1.
"I'm so excited about what this vehicle represents in terms of achieving scale," CEO R.J. Scaringe said during the reveal, according to Automotive News. "R2 represents not only a vehicle but a platform."
One more thing
The biggest surprise at the R2 reveal might have been two previously unheard-of vehicles, the R3 crossover and R3X performance version. In a world of endless data leaks, the R3 introduction caught investors off guard.
Left to right, R2, R3, and R3X crossovers. Image source: Rivian.
While details and specs on the R3 are practically nonexistent, it leaves intrigue with investors if it could lower the price tags a little more, slide into a different segment, or offer new trims.
What might be of even more interest to investors is that the company is accelerating the R2 timeline by starting production at its original factory, rather than waiting for the upcoming Georgia factory to be completed.
That change of plans will enable Rivian to roll out production of the R2 in the first half of 2026.
Is Rivian a buy?
With investors already disappointed in production guidance for 2024, the focus now shifts to the company's cost-cutting and efficiency efforts. Management has planned a second-quarter production shutdown to fine-tune the production line and swap in some new suppliers, which will help reduce costs.
Those adjustments and lower lithium prices give management confidence the company will still become gross-profit positive late in 2024, even without increasing production. The broader EV industry has hit a speed bump with slowing demand. So the faster that Rivian can cut costs, reach its gross-profit goals, and begin production of the R2, the faster the company can reignite investor enthusiasm.
Rivian has a lot of work to do, and 2024 is shaping up to be a bumpy ride. The company remains highly speculative with its rapid cash burn, but if its R2 models boost sales significantly, this could prove a great time to buy the stock, which has shed 87% of its value since its initial public offering.
