Categories Analysis, Industrials

Rivian (RIVN) reaffirms production goals. Will it be a smooth ride?

In the second quarter, the company manufactured 4,401 vehicles and delivered a total of 4,467 units

The evolution of the electric vehicle industry accelerated in recent years even as innovations in battery technology and affordability brought EVs into the mainstream. Encouraged by the success of market leaders like Tesla, many new players have entered the market looking to tap into the growing demand. The companies often follow the strategy of specialization to focus on a particular vehicle segment.

Rivian Automotive Inc. (NASDAQ: RIVN), the company that hit the market with a new breed of battery-powered pickups and trucks, recorded a sharp increase in second-quarter sales. The steady uptick in Rivian’s revenue performance underscores the fast-paced adoption of electric vehicles, but rising losses indicate the company has a long way to go before achieving sustainable growth.

Investing in RIVN

The company’s stock experienced weakness soon after trading started this week, paring most of its post-earnings gains. The value has more than halved since the beginning of the year, continuing the downtrend experienced since the company’s Wall Street debut last year. However, in a sign that the worst is probably over, the stock stabilized in recent weeks and is expected to hit the recovery path in the near future.

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Road Ahead

Rivian’s successful model and experts’ positive outlook on the broad industry, combined with the low valuation, make the stock an attractive bet. But lingering macroeconomic uncertainties and high inflation call for caution as far as investing in a loss-making company like Rivian is concerned. It would be a good idea to keep an eye on the stock and wait for the management to come out with a clear-cut strategy for achieving profitability.

Read management/analysts’ comments on quarterly reports

Currently, the Irvine-based tech firm is looking to make around 25,000 vehicles this year, and the management is confident of achieving that goal. Nevertheless, considering the high raw material prices and freight costs, the company might need to tighten its belt when it comes to investing in the business.

Strong Sales

In the second quarter, Rivian manufactured 4,401 electric trucks/pickups and delivered a total of 4,467 units, which is sharply higher than the prior-year levels. It generated $364 million of revenues but incurred a loss of $1.7 billion, significantly wider than last year’s $580-million loss. The numbers topped expectations, driving up the company’s stock following the announcement last week.

From Rivian’s Q2 2022 earnings report

Our core focus remains on ramping production. The demonstrated production rates within our production facility continue to give us confidence in the systems, equipment, and team members’ ability to ramp the production lines in our Normal Factory. However, we believe that supply chain constraints will continue to be the limiting factor of our production. Given the economic outlook, we continue to closely monitor market factors and are taking actions to optimize our product roadmap and associated spend.

Tesla, Inc. (NASDAQ: TSLA), the EV giant that dominates the market, last month reported double-digit growth in second-quarter earnings and revenues. The numbers also exceeded estimates, while production and deliveries declined sequentially.

RIVN closed the last session sharply lower, after trading below its long-term average throughout the day. In what could be a positive change, the stock moved up 20% in the past thirty days.


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