Rivian Automotive (RIVN 1.83%) is attempting to break into the automotive sector by leveraging new technology to compete and partner with large automakers. That is a very tall order, but if it succeeds, the company could help set investors up for life.
The massive price gains in the shares of Tesla, an electric vehicle (EV) pioneer, hint at the possibilities. There's just one problem. Here's what that is.
What does Rivian do?
Rivian does three different things right now, all of which are important. Most prominently, it makes an all-electric truck for the consumer market. The vehicles are award winning, but they sit at the high end of the cost spectrum. So there is a fairly limited customer base. That's not a bad thing, however, because it is the same approach that Tesla used when it started out.
Image source: Rivian Automotive.
The second important business within Rivian is its delivery vehicles, designed for business customers. The big story there has long been the company's partnership with Amazon. The EV sales have helped to generate revenue as Rivian builds out its consumer business and showcases its technology. Rivian is now selling its delivery trucks to other business customers.
The third business inside Rivian is centered on licensing its technology to other automakers. The major partner is Volkswagen, which has been providing capital to Rivian in exchange for access to the upstart EV company's tech.
All in all, while Rivian is following Tesla's lead in some ways, it has taken a much broader approach to building its business. That's a good thing, given that Tesla entered the auto sector when there was little to no competition in the EV niche. Now, every major automaker and a host of EV start-ups are competing with each other in the EV market.
Big things could be ahead for Rivian, or not
The next significant step for Rivian is the introduction of a mass-market truck known as the R2. That vehicle is expected to be launched in 2026. With roughly $7 billion in cash on the balance sheet at the end of the third quarter of 2025, it should have more than enough money to finish out the massive capital investment required to see the R2 effort through to completion.
There's just one issue: Sales of EVs have weakened as government subsidies have fallen away. It is unclear whether the R2 will be as big a success as previously hoped. Rivian's goal is to increase its sales volume so it can spread its costs over more vehicles. If that doesn't happen to the extent hoped, it could be difficult for the company to turn a profit selling consumer-oriented vehicles.
NASDAQ: RIVN
Key Data Points
This is why the company's recent technology showcase was so important. Rivian highlighted important technological advances, including an internally generated chip and autonomous driving software, that it can sell to other automakers. This is essentially what it is working on with Volkswagen, and the technology appears to be quite advanced. Whether or not the R2 is successful, the company's technology could become an important source of revenue in the future.
The big problem with the current news is the uncertainty. If the R2 does well, Rivian could be a winning investment. The same is true if Rivian's technology platform is strong enough to attract carmakers. If the R2 doesn't perform well and/or the company's technology doesn't catch on, the business's future would be less bright for both the business and its investors. Rivain is only appropriate for risk-tolerant growth investors.
Rivian: High risk/high reward
Most investors should probably wait until Rivian achieves a few more milestones before buying the upstart EV company. If everything goes well, the business could be highly valuable, and the stock price could move sharply higher. There's just a lot of uncertainty about the outcome of very important business moves the company is making. Until there is more clarity, only aggressive investors should probably consider investing in Rivian.
