Upstart electric vehicle (EV) manufacturer Rivian (NASDAQ:RIVN) finally gave stakeholders something to cheer about with its exclusive global partnership with MEVCO, which stands for Mining Electric Vehicle Company. Under the deal, Rivian will provide EVs to the mining, mining services and mining equipment industries. While a compelling opportunity, RIVN stock faces a cloud of skepticism amid the underlying sector’s demand fallout.
Mevco — which specializes in providing sustainable and efficient EV fleets to the mining industry — noted that the collaboration “signals a new standard for responsible and forward-thinking mining practices.” It could also serve as a catalyst for positive change in the target industry. Company CEO Matt Cahir stated the following:
The Rivian R1T is widely acclaimed for its on and off-road capabilities, and its robust design and adaptability make it the ideal candidate to meet the many challenges mining presents. The integration of Rivian’s technology with MEVCO’s proven track record in mining-specific electric vehicles is poised to yield a fleet that exceeds the requirements of the most demanding operators.
For both RIVN stock and Mevco, what makes the partnership so innovative is the fostering of safer mining environments. Specifically, the elimination of tailpipe emissions in subterranean settings is paramount. As the Mine Safety and Health Administration notes, carbon monoxide represents “one of the most common and serious hazards in mining operations, both surface and underground, all types of confined spaces, and in the cabs of vehicles.”
RIVN Stock Still Faces Significant Challenges
Another positive element for RIVN stock is the underlying organic marketing opportunity that the deal presents. Per Mevco’s press release, the company will customize the Rivian R1T to mining specifications. Such customization will enable the R1T to “operate in the harshest of conditions in both surface and underground mines.”
Subsequently, Rivian should be able to showcase these capabilities to prospective customers. That’s especially important because the EV sector recently encountered a credibility crisis. Earlier this year, extremely cold winter weather in certain regions left many EV drivers stranded. So, it’s imperative to demonstrate that the mobility platform can operate in inclement conditions. That could be a huge positive for RIVN stock.
Nevertheless, Rivian — along with its peers — faces significant hurdles. For one thing, EV battery performance can degrade due to extreme temperatures. On incredibly hot days that require maximum air conditioning, driving range can decrease by 17%. Therefore, it’s not entirely clear if EVs will become the standard platform for mining operations.
More critically, automakers are scaling back or delaying their electric transition plans amid falling demand. Exacerbating the situation is hybrid vehicle sales, which have boomed as plug-in EV sales cool. Fundamentally, the problem is that as hybrid sales rise, it may diminish the total addressable market for Rivian and the competition for the next few years.
Why It Matters
While there are questions about the forward viability of Rivian, for now, analysts are generally bullish on RIVN stock. They rate shares a consensus moderate buy with a $16.91 average price target, implying 92% upside potential.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
