Very recently, Rivian (NASDAQ: RIVN) made an astonishing, big reveal of its new R2 SUV vehicle, but it didn’t stop there, as it made a surprise reveal of the new R3 vehicle, then the R3X vehicle, making it a total of three new vehicles that were revealed during the launch event. This wasn’t the only good news for investors, as the company announced that it had more than $2 billion in savings, which came after it paused construction on a new manufacturing plant in Georgia.
As a result, RIVN stock has surged by around 11% ever since, showing that investors are now choosing to back Rivian, and many think that this marks the turning point for the struggling EV company.
The Launch Event
Out of the three EVs that Rivian revealed, two of them came as a complete surprise to both consumers and investors, as the R2 SUV is the one that was actually anticipated, while the R3 and R3X came as a complete surprise. The R2 will be Rivian’s fourth product after a commercial delivery van and larger, more expensive R1S SUV and R1T pickup for consumers.
The R1 vehicles start at roughly $70,000 and can go up to $100,000, while the new R2 is more affordable, as its price is expected to start at about $45,000 when it goes on sale during the first half of 2026. As for the R3 crossovers, very little details were shared about them during the launch event, but the company’s CEO, RJ Scaringe, said that they will be priced lower than the R1. Additionally, many have speculated that they’re future products that will be launched way after the R2.
The R2 SUV
The R2 will operate on a new EV platform, but looks like a smaller version of the R1S SUV. It will come with options for three different electric powertrain setups, and the most powerful one, the tri-motor, will be capable of more than 300 miles of all-electric range on a single charge and hit from 0 to 60 miles per hour in under 3 seconds. The batteries are going to be 4695-style batteries, and this means that their diameter is going to be 46 millimeters, and their height will be 95 millimeters, making them structural batteries similar to Tesla’s (NASDAQ: TSLA).
Rivian has also talked about opening up its own charging network, and said that 90% of the new vehicles’ charging can be done at the owner’s home. Additionally, the company said previously that it’s working on its own Supercharger technology, but it also confirmed that Rivian vehicles will have access to Tesla’s supercharger network sometime in March, as part of an agreement signed between the two companies back in June of 2023.
Scaringe said that the R2 represented the essence of Rivian’s brand, and it’ll be targeting the significant mid-size SUV segment, which he called a massive market with limited compelling EV options beyond Tesla.
A Slowdown in the EV Industry
The announcements of the new vehicles come at a crucial time for Rivian as the company attempts to expand its customer base in the midst of slower-than-expected EV sales in the United States, which came after automakers flooded the first-adopter market in recent years, and now, it seems like the EV market is slowing down a bit after it boomed. In fact, even the U.S. market leader, Tesla, saw its fair share of ups and downs, and in its Q4 earnings call, the company forecasted “notably lower” sales for the full year of 2024, which many saw as a sign of the company recognizing that there’s a slowdown in the industry.
It’s not just Tesla that’s seeing a negative outlook for the industry, as Ford (NYSE: F) announced that it is scaling back its electric F-150 Lightning truck, Apple (NASDAQ: AAPL) canceled its EV plans, and EV maker Fisker (NYSE: FSR) warned that it anticipated “another difficult year” earlier in March. For Rivian, the company’s sales pace has slowed in recent quarters, and it also largely disappointed investors in Q4 by missing quarterly estimates and forecasting slightly lower production this year compared to 2023 due to plant downtime.
And so, the Amazon-backed company has been burning a lot of cash to improve its current EV production and reduce losses, and one way it’s doing that is by shifting production of the R2 from the under-construction $5 billion plant in Georgia, to the company’s plant in Normal in Illinois. According to the company, this decision will save $2.25 billion, and will also allow the vehicle to begin production earlier. The plant faced a lot of challenges, which could be part of the reason why the company paused construction on it, saying that construction will resume “later” without specifying an actual date.
Rivian’s Earnings
RIVN stock went down last quarter because guidance disappointed investors, as it basically said that the company wasn’t expecting to grow in 2024. Not only that, but the company’s gross margin declined from a negative 36% in Q3 to a negative 46%, and its gross profit per unit also declined to a negative $43,000 from a negative $30,500. It also made a net loss of $1.5 billion, compared to $1.37 in Q3. The company reported that it currently has $7.86 billion in cash, down from the $9.1 billion it had at the end of Q3, so if these massive losses go on, the company would have around six quarters left before it completely runs out of cash.
This scenario would absolutely kill Rivian, as many investors’ bull case for the company right now is for it to not go bankrupt. If the company doesn’t go bankrupt and uses its cash wisely, then it might end up becoming a massive success and survive, but if it doesn’t become a success, then there’s still hope of it getting acquired at a premium by another company, and if that doesn’t happen, Rivian would lose everything and its investors will too.
RIVN Stock Forecast
There are a few things that are positive about Rivian. First of all, the company said that there will be a production line upgrade happening in the summer, which should improve its margins in the future. This could also mean that the R2 margins will be better than the R1’s, which would increase Rivian’s profit per vehicle. Another good thing about Rivian is that it knows exactly how to market its vehicles, as its ads are focused on their core audience and include families, which are the people most likely to be interested in buying SUVs.
Still, we don’t know how profitable the R2 and even the R3 will be, even though they come at a fairly great price for the consumers as they cost much less than the R1. Notably, the R2 has already brought in more than 68,000 reservations, but these reservations are made through $100 deposits that are fully refundable, so they don’t really guarantee demand or revenue. Therefore, the only thing that can really save Rivian is a huge improvement in its production, which will improve its margins and make it more profitable.
Rivian has a lot of potential because it focuses on a niche and a certain target market, but a great launch event and a great product might not enough to entice investors. Maybe the company will do an investor’ event where it’ll talk more about the R2’s margins and how it expects the R2 to perform and impact its profitability, since the launch event was more of a product reveal, rather than something for investors.
Therefore, it might be a good idea for RIVN stock shareholders to hold onto the stock, and for investors interested in buying RIVN stock and don’t mind a bit of risk, you probably shouldn’t allocate a big part of your portfolio to it, and then you could add to that part if Rivian is able to deliver better production and increase its profitability.
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