Make no mistake, Rivian Automotive (RIVN -0.42%) has been a punishing investment for its early investors, with shares down a whopping 90% since their public debut in late 2021. That said, the embattled company has now become a relatively affordable way to bet on the future of the U.S. EV industry as it pioneers its truck and SUV-focused business model.
What will the next half decade have in store? Let's explore the pros and cons of Rivian to decide if the stock has finally become a good buy.
Image source: Getty Images.
The near term is challenging
Rivian's second-quarter earnings highlight its ongoing challenges with building a sustainable automotive business. Total revenue rose by a modest 12.5% year over year to $1.3 billion, but this was driven by a jump in software and services revenue instead of its core automotive sales. Software and services are becoming an increasingly important part of the company's long-term value proposition and strategy.
The rising number of Rivian vehicles on the road will create more service revenue related to maintenance, repairs, and optional software updates. The company will also generate licensing through its partnership with Volkswagen, which involves the two automakers working together to build electrical architectures and software. According to senior management quoted by Reuters, other automakers are in talks with the joint venture about supplying these platforms, which suggests Rivian and Volkswagen have established a strong economic moat in this industry niche.
But while Rivian's burgeoning software business is exciting, investors shouldn't lose sight of the main goal here: selling cars.
Rivian is struggling to actually sell cars
While Rivian's software business performed well in the second quarter, automotive revenue dropped roughly 14% year over year, which is the last thing you want to see in a small company that hasn't yet scaled into consistent gross profitability. The cost of producing and delivering Rivian vehicles is still higher than the revenue earned by selling them. And the company generated an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss of $667 million.
These problems look unlikely to be resolved any time soon. While third-quarter deliveries jumped 32%, this was likely due to a temporary spike in purchases as consumers tried to get ahead of the end of a $7,500 U.S. tax credit designed to support the industry. Rivian has lowered its 2025 delivery forecast by 500 units (at the midpoint) to between 41,500 and 43,500 vehicles. And investors should probably brace for the worst in 2026, when the full impacts of the tax credit removal become clear.
What will the next 10 years have in store?
Loss of the EV tax credit comes at a particularly bad time for Rivian because the company was undertaking a transition away from expensive full-sized vehicles to more affordable compact options (such as the 2026 R2, expected to start at $45,000), which would have benefited more from the government support. That said, the next few years will be a make-or-break period for the company, where we will see if it successfully transitions into a mass-market automaker or goes the way of the dodo.
The situation is challenging. But there is a chance that Rivian can power through the industry's stagnation by taking market share from its rivals.
Tesla is still facing huge uncertainty related to its CEO, Elon Musk's volatile politics, and Rivian's European/Asian EV rivals could have their U.S. market access limited by the Trump administration's aggressive protectionist tariff policy. But while Rivian belongs on every automotive investor's watchlist, the company's near-term uncertainty and weak fundamentals mean that it might make more sense to wait for more information before considering a position in the stock.
