Electric vehicle (EV) producer Rivian (RIVN +3.44%) is an intriguing investment for many reasons, but part of it is simply because it's in such early innings of a long game and every development is such a big deal for the company. Investors (and potential investors) are looking for what comes next for the company to help them determine if it is worth taking a chance on.
The next big thing for Rivian potentially won't happen until the first half of 2026 when it launches its next vehicle model. That seems like a lifetime away. The next not-so-big thing for investors to get excited about is Rivian reaching positive gross profit in the fourth quarter. However, that catalyst for growth could be put in danger by a third-quarter production snag.
Rivian hits a speed bump
Rivian experienced a production disruption in the third quarter due to a shortage of a shared component between its R1 and RCV platforms. That caused a slump in deliveries (see graphic below).
Data source: Rivian production and delivery releases. Chart by author.
That production snag filtered through to the bottom line as well, with Rivian's adjusted EBITDA loss checking in at roughly $760 million, much worse than the $650 million projected by consensus analysts. Worse yet, when it comes to Rivian's upcoming gross profit catalyst, gross margin checked in at a negative 45%, much steeper than the negative 22% expected by analysts.
Despite the speed bump of a third quarter, management reaffirmed its forecast of 47,000 to 49,000 production units and deliveries between 50,500 and 52,000. However, management did also revise its 2024 EBITDA loss to a range between $2.825 billion and $2.875 billion, compared to the previous estimate of a loss of $2.7 billion.
Reasons to remain optimistic
There are two primary reasons to believe Rivian can still achieve gross profit margins in the fourth quarter, which again is probably the biggest catalyst for the stock in the near term. The first reason is simply the improvements in variable costs. When management reengineered hundreds of hardware and software improvements to the R1 vehicles and unleashed the second generation, many cost improvements were implemented that will have a positive effect during the fourth quarter. Another reason to believe Rivian can achieve positive gross profits is that its results will be boosted by roughly $300 million in regulatory credits for the full year, with $275 million expected in Q4 alone.
NASDAQ: RIVN
Key Data Points
What this all means
The biggest takeaway for investors is to temper your expectations. Yes, reaching positive gross profits in the fourth quarter will be a big deal for Rivian, but it's also not as black and white as it seems, thanks to the regulatory credits. In fact, investors should probably expect 2025 to be a mix of quarterly gross profits and losses, with the full year ending up in positive territory. As this graph shows, progress isn't always in a straight line, although the EV maker has strung together three sequential quarters of gross profit improvement even as deliveries stall.
Data source: Rivian quarterly reports. Chart by author.
Ultimately, for Rivian investors, 2025 is going to be about a year of process improvement and cost reductions. The fourth quarter will be our first glimpse of how management is executing, and if it produces a positive gross profit, it'll kick 2025 off on the right foot.
