Long-term Rivian (RIVN 0.85%) investors might be experiencing some angst. The stock is down 85% since its late-2021 IPO. But while the electric vehicle (EV) industry trudges along with slower-than-anticipated growth, it's still rapidly evolving with cost cuts, vehicle launches, and improved battery technology, among other developments.
The question facing Rivian investors is, how does the company bridge the gap between now and what seems like an eternity before the R2 Rivian SUV launches its next growth phase? The answer for investors is hopefully something many have forgotten all about.
Remember electric delivery vans?
With all the developments surrounding Rivian and its path toward the R2, R3, and R3X, investors can be forgiven for forgetting all about the company's first big win: Its agreement with Amazon to deliver 100,000 electric delivery vans (EDVs) by 2030. Over the past nine months, Amazon has increased its U.S. EDV fleet by 50%, to 15,000 delivery vans. But that's not the current selling point for Rivian investors.
The current selling point is that the agreement with Amazon is no longer exclusive, which isn't new news. However, since the agreement went non-exclusive, the only major customer to sign on to start accepting deliveries of EDVs from Rivian has been AT&T. There was no wave of major customers beating down Rivian's door the moment the agreement went non-exclusive. So what's the deal?
Management noted a few quarters ago that the process for this doesn't happen overnight. Companies need to assess the viability of an electrified fleet saving costs and improving efficiency through data collection and reduced maintenance costs. They also have to test if it will have enough charging infrastructure and other capabilities to make the move a successful return on investment.
These pilot programs take time, and management noted that it would probably take a year of company testing before Rivian started inking more large deals similar to the one with Amazon. Investors could see some of these deals hopefully inked sometime in 2025, the seemingly uneventful year between the R1 refresh completed earlier this summer and the R2 launch during the first half of 2026.
Already, Rivian has 300 EDVs on the road in Germany, which could help spur additional overseas orders, in addition to the primary U.S. market.
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It's also likely that investors will reap the benefits of Rivian ramping up to fulfill Amazon's original and ambitious order. Years ago, Amazon pledged to buy 100,000 EDVs by 2030. It took Rivian a year to deliver the first 5,000 units, followed by a four-month period to deliver another 5,000 units, and then nine additional months to deliver the next 5,000 units. Management still says it's on track to deliver its commitment and plans to ramp up larger fleet deployments such as Amazon's ahead of small-scale deployments starting in 2025.
Speaking of increased production and improved efficiency, Rivian plant retooling generated a 35% reduction in the cost of materials for vans and pushed the rate of assembly on the manufacturing line up roughly 30%. Rivian said earlier this summer that its overall cost across all lines has improved dramatically through removing over 100 steps in the battery-making process, 52 pieces of equipment from the body shop, and over 500 parts from the designs of its vehicles.
As Rivian continues to improve its production efficiency, reduce costs, and introduce more customers to its EDVs, it could be lighting the spark the company and investors need in 2025.
