Electric vehicle makers are facing an uphill battle right now, as high material costs, elevated interest rates, and weak consumer demand are stalling EV sales.
Still, the long-term prospects for EV success, and Rivian Automotive (RIVN +8.08%) in particular, haven't completely vanished. Rivian recently began selling its new R2 vehicle, which could be a pivotal move for the company's success.
So, is Rivian stock worth buying now, while it's below $20 per share? Here's what you should know.
Image source: Getty Images.
The case for Rivian
The biggest bull case for Rivian comes from the company's new R2 lineup. The smaller SUVs are part of a larger plan to gradually roll out a lower-priced vehicle to expand Rivian's customer base.
The new R2 starts around $58,000 right now, but by late 2027, a base version of the vehicle will be on sale for just $45,000. That's an important number because it means the R2 will cost roughly $4,000 less than the average new vehicle price.
Most automakers rely on economies of scale to make their businesses profitable, and Rivian needs to sell a lot of R2s, share parts and technology across its vehicle lineup, and produce vehicles efficiently to generate recurring profits. It's already made some progress on this front, retooling its R1S and R1T vehicles to reduce parts and equipment, improving sourcing to lower costs, and lowering other expenses.
Rivian has also formed a joint venture with Volkswagen in 2024, in which Rivian provides software to Volkswagen in return for funding. That deal has helped Rivian report $1.6 billion in sales and $576 million in gross profit from its software and services segment last year, helping it achieve two quarters of gross profitability.
With R2 sales and production underway, the company is now trying to prove that its vehicles can appeal to a broader customer base and that it can sell enough of them to be profitable. It's a gamble, to be sure, but early indications are that the R2 is a success.
Rivian delivered 12,194 vehicles in the first quarter, outpacing its guidance of 9,000 to 11,000 vehicles. The company also raised its production guidance for 2026 from its previous estimate of between 62,000 and 67,000 to 65,000 to 70,000. That's great news for the company and its shareholders, and ideally, the first of many positive updates for Rivian's lineup.
NASDAQ: RIVN
Key Data Points
Rivian stock is a buy, but only if you're OK with the EV risks
If you think electric vehicles are the future of automotive transportation and want to own stock in a potential leader in this space, buying some Rivian shares is a good way to do it. But investors should understand that the EV market is going through a difficult period. Many traditional automakers have backed away from ambitious EV plans because government tax incentives for buying an electric vehicle were prematurely eliminated.
Rising consumer costs due to tariffs and high interest rates are also dampening sales. What's more, many automakers are releasing more hybrid models, which have proved appealing to car buyers and have likely cut into some EV sales.
I don't think all of this means EVs are doomed or that Rivian can't succeed, but it's important to understand that the road ahead for the company could be long. Still, with electric vehicles at the starting line of a potential automotive transformation -- and Rivian already seeing some initial success with its R2 -- buying the stock now and holding it could be a good idea over the long term.
