Rivian (RIVN 8.41%) recently reached a long-held goal in its development. It is producing its electric trucks at scale. Building a factory from the ground up to support a new vehicle brand was a huge task, and Rivian pulled it off with a sustainable annual production of around 50,000 vehicles.
But that achievement is in no way the final goal. That said, in a year, Rivian is likely to be another step closer to the long-term goal of becoming a sustainably profitable company.
Production was the first step for Rivian
Making cars and trucks is a highly competitive business. There is a small collection of entrenched competitors who have global businesses and well-respected brands. Building a new car company of any kind is an incredible success, noting the huge costs involved in the capital-intensive carmaking process and the need to win over buyers in a crowded field.
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To be fair, Rivian is making all-electric trucks, which is a less-crowded market, but it isn't devoid of competition. Tesla (NASDAQ: TSLA) has a huge head start in the EV space. At this point, almost all of the legacy automakers are starting to build EVs. So, Rivian's success so far has not been an easy win. Quality, innovation, and design have all been key features of its success so far, to go along with good execution.
The big "moment," however, was really the fourth quarter of 2024. That was the quarter in which Rivian managed to achieve a gross profit. This just means that Rivian brought in more revenue from the sale of its trucks than it cost to build those trucks. And the gross profit was, as the company admits, modest. But a gross profit is the first step toward being a sustainably profitable company (meaning positive earnings).
One year from now, the news should be even better
Achieving a gross profit in one single quarter is obviously not the end goal for Rivian. The next step is to achieve a gross profit for all of 2025. There are likely to be some ups and downs along the way, as the company produced more EVs than it sold in the first quarter. The reason for that is that Rivian expects to shut down its production line later in the year so it can make profit-enhancing improvements as it prepares to launch a new version of its trucks.
NASDAQ: RIVN
Key Data Points
Overproducing in some quarters so the company can have the inventory it needs to sell during the period in which its factory is shut down will likely lead to a negative gross profit in those quarters. So this is, once again, an execution story. Can management's efforts to prepare for this vital business shutdown offset the impact of the shutdown? If it can, then Rivian is likely to post a gross profit for all of 2025. That would put it one step closer to the goal of a sustainable profit on the bottom line of the income statement.
Given the strong execution so far at this upstart EV maker, it seems highly likely that it will achieve its full-year goal. Note, for example, that the fourth-quarter 2024 gross profit was achieved despite the company having to deal with a parts shortage. Basically, management was able to pivot production to models that weren't impacted by the parts shortage when faced with adversity. That's the kind of thing investors in a fast-growing small company will be happy to see.
The finish line is still far away for Rivian
It seems likely that Rivian will achieve a full-year gross profit in 2025, given the efforts already being taken to support that goal (namely, overproducing to prepare for a factory shutdown). But this stock is still only appropriate for more aggressive growth investors, given that a gross profit is just a stepping stone along the way to a sustainably profitable business. Rivian should be proud of the progress it is making, and investors should be pleased. But the finish line is still years away here, and there is always the risk that positive earnings don't materialize.
