Rivian Automotive (RIVN 6.10%) stock has bounced off a recent low, but the electric vehicle (EV) maker's shares are still down by more than 45% this year. That's because investors see several signs that EV demand has slowed. The big blow to Rivian stock came after the company released its outlook for 2024.
Management said it plans to produce just 57,000 EVs, or about the same number of units it made in 2023. That's not what investors wanted to hear from what they considered a growth investment. But two weeks after that announcement, Rivian shocked the market with several news items, including a new plan that would save it more than $2 billion. Now investors want to know if Rivian stock is a bargain after its decline.
A surprise EV on the way
The latest news from Rivian came at a launch event on March 7 for its R2 next-generation EV platform. As expected, management unveiled its new mid-size SUV that it previously said would be a lower-priced option thanks to new efficiencies from the R2 design platform.
The new R2 SUV will also be priced about $30,000 lower than Rivian's R1S. The $45,000 base price should bring in more potential customers. It also will have a battery range of over 300 miles and will accelerate from zero to 60 miles per hour in under three seconds. Shipments are expected to begin in early 2026.
The new R2 SUV will have a starting price of $45,000. Image source: Rivian Automotive.
But two additional announcements shocked investors and sent Rivian's stock higher. Rivian introduced a crossover SUV model dubbed R3 that will follow production of the R2. That should give investors confidence that Rivian has a concrete plan to expand its potential market. Thus far, the company could only cater to wealthy consumers looking for luxury-level trucks and SUVs.
Allaying concerns about bankruptcy
The other factor driving Rivian shares off recent lows was the company's new strategy to initially produce the R2 from its existing Normal, Illinois facility. Previously it said those vehicles would come from its future Georgia plant. Pausing construction in Georgia will save the company more than $2.25 billion, it noted. In a press release, the company said, "The savings are expected to come from capital expenditures, product development investment, and supplier sourcing opportunities."
Rivian ended the fourth quarter of 2023 with more than $9 billion in cash and equivalents on its balance sheet. But the company used more than $5 billion in growth capital last year and was expected to need about the same for 2024.
Saving nearly half of those capital expenditures puts a much different perspective on its financial picture. One of the biggest risks investors needed to consider when buying Rivian stock was the potential that it would run out of money before it could scale up its vehicle sales with its lower-priced models. That put the potential of a new capital raise or even bankruptcy as key investment risks.
While Rivian still needs to execute on its plan and attract buyers for its new products, that key risk has been meaningfully lowered. If it successfully does those things, the stock will look like a bargain at recent prices.
