Every manufacturer in the electric vehicle (EV) realm dreams of following in the illustrious footsteps of the giant, Tesla. Since its initial public offering in 2010, Tesla’s shares have skyrocketed in value by an astounding 15,700%. In comparison, the S&P 500 only managed a humble rise of 600% during the same period.
Investors of Rivian Automotive (NASDAQ: RIVN) are placing their bets on the company’s ability to emulate the success and growth trajectory of Tesla. Several key factors support this optimism, shedding light on Rivian’s promising future.
The Crucial Role of Capital in the EV Industry
The electric vehicle realm is littered with the wreckage of failed ventures. Fisker’s recent bankruptcy declaration serves as a grim reminder of the sector’s challenges. Even Tesla faced the brink of insolvency during its early days, particularly in 2020 when production woes surrounding the Model 3 sedan threatened its existence.
The EV arena demands massive capital investments due to the intense competition and intricate nature of vehicle manufacturing. Without access to substantial funds, survival as an automotive company is untenable. Rivian, however, stands out in this regard.
Back in 2019, tech behemoth Amazon spearheaded a $700 million financing round for Rivian. Subsequently, in 2021, the company closed a hefty $2.5 billion funding round with contributions from both Amazon and Ford. Just recently, Rivian secured a $1 billion investment from Volkswagen, with the potential to balloon to $5 billion through strategic collaborations and achieving predefined milestones.
While economic downturns could hinder Rivian’s access to capital, the company’s robust funding history positions it favorably to pursue the next critical phase – launching new vehicle models.
The Road to Growth Lies in Product Expansion
Tesla’s revenue hovered around $7 billion in 2016, the year the Model 3 debuted. Fast forward to today, and Tesla’s revenue has soared to approximately $95 billion, propelled by the success of newer models like the Model 3 and Model Y.
Rivian, bolstered by generous capital reserves, aims to replicate Tesla’s surge in sales. Earlier this year, Rivian unveiled plans to introduce a midsize vehicle lineup featuring the R2, R3, and R3X models. Priced at $45,000, the R2 is slated to hit the market first, with the R3 following suit at a lower price point. Despite their expected release in 2026, Rivian’s growth trajectory hinges on the commercial reception of these upcoming models.
Financial Viability as the Ultimate Litmus Test
Currently, Rivian incurs a loss of approximately $39,000 per vehicle sold. Although this marks an improvement from the initial $67,000 loss per vehicle in early 2023, continuous losses could strain market tolerance over time.
Like Tesla during its nascent stages, Rivian is swiftly narrowing this gap. Claire McDonough, Rivian’s CFO, expressed optimism earlier this year by stating a near-term goal to achieve profitability on a per-vehicle basis by the fourth quarter. While this objective seems ambitious, reaching this milestone is imperative for Rivian’s sustained success.
Embarking on a journey to potentially dethrone Tesla is no stroll in the park for Rivian. Yet, the company possesses fundamental elements necessary to navigate this high-octane industry. Monitoring the three critical aspects outlined above will offer investors real-time insights into Rivian’s quest to cement its status as a premier EV brand.