Electric Vehicle (EV) maker Rivian (NASDAQ:RIVN) stock is being hailed as “the new Tesla (NASDAQ:TSLA).”
The idea is it has cool cars, it has a clear path toward scaling and profits, and it doesn’t have a crazy CEO. Instead, it has R.J. Scaringe, a 41-year old Florida native and the son of an engineer.
But as a stock, the new Tesla is not much different from the old one. Shares are down 57% this year, the market cap below $10 billion. The problem isn’t supply, but demand.
Nice Car You Got There
I got to see a Rivian R1T truck in Atlanta recently. It’s impressive and, unlike the Tesla Cybertruck, it looks familiar. That is, until you look inside. Then it becomes very simple indeed. Open the hood and you don’t see an engine, just a front-end trunk.
All EVs are simple machines. A low-level platform holds the batteries that power it, the motor is just a rotor spinning inside an electromagnet.. The transmission is simple, supporting just 1-2 gears.
All the moving parts of the EV rest at the platform level, so the top can be anything you want. (The platform is usually called a skateboard.) The R1T looks like a truck because people are accustomed to trucks. Change the body and it’s a Sports Utility Vehicle (SUV), the R1S. Change it again and it’s a delivery van, which may be more important.
Rivian’s main task now is downsizing the platform. A smaller R2 platform will lead to cars costing just $45,000. Rivian believes the even-smaller R3 platform will deliver cars at $35,000. This is what most excited people at its recent press conference. The passenger car version of the R3 is a “crossover,” like my Toyota (NYSE:TM) Scion XB of blessed memory.
Reviewers are excited.
Getting From Here to There
Rivian’s challenge is getting from the R1 to the R3.
Despite a lot of hype, RIVN stock made fewer than 14,000 vehicles in the last quarter. The production target for 2024 is just 57,000. It’s a tiny fraction of the 387,000 Tesla made, a result that tanked the stock and overwhelmed demand.
Rivian lost $5.4 billion last year, ending the year with $7.8 billion in cash. It lost $4.86 billion of cash on operations, raising $3.13 billion, mainly convertible notes.
You can see why RIVN stock put off development of its Georgia plant, preferring to continue operations in Normal, Illinois, where it has 8,000 employees.
It doesn’t have the money.
Getting the Cash
Key to getting the cash will be re-tooling the Normal plant for the R2 this summer. The hope is this will result in a gross profit on the cars by the fourth quarter. Half the savings would come from unspecified “design changes, supplier negotiations, and lower raw material costs.”
A gross profit should raise the stock price, and make stock easier to sell. Tesla now sells at 5 times sales, Rivian at 2 times, because Tesla makes money at scale and Rivian does not.
The Bottom Line
It’s going to be tight.
Amazon (NASDAQ:AMZN) has only gotten 10,000 of the 100,000 delivery vans it ordered five years ago. That, and stock purchases from Amazon and Ford Motor (NYSE:F) (Ford has since sold out), put Rivian on the map.
Exclusivity on the vans ended late last year, prompting a big order from AT&T (NYSE:T). To get to 2025, Rivian must make money on the vans.
The van’s design illustrates the hope I still have in the EV market. It’s built on the same skateboard platform as the R1T. As battery costs decline, this simple design will overpower complex ICE machines and change the world.
Whether Rivian will be part of that world will be answered in 2024. If it is, you’re speculating near the lows. If the numbers let it commit to Georgia, then you buy with both hands.
As of this writing, Dana Blankenhorn had a LONG position in AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com, tweet him at @danablankenhorn, or subscribe to his free Substack newsletter.
