Near All-Time Lows, There Is Finally Positive News for Rivian

It’s been a tough few years for the stock Rivian Cars (RIVN -2.27%)which has fallen from over $179 when it debuted in November 2021 to less than $10 today.

Rivian’s problems and why EV stocks are down

Rivian has been making progress in vehicle sales, as it more than doubled production and shipments in 2023. However, the electric vehicle (EV) maker has been selling vehicles at a loss, as evidenced by its negative $2 billion profit last year. .

Rivian’s gross profit is the difference between the price at which it sells its vehicles versus its manufacturing cost. This does not include any marketing, research and development, or organizational costs, and mostly involves the costs of materials and labor to manufacture the vehicles. Rivian’s negative output gap is a sign that it currently lacks the scale and manufacturing efficiency to compete with the larger automakers.

Recently, overall EV sales have started to decline. According to Kelley Blue Book, US EV sales increased just 2.6% in the first quarter. That compares to an increase of 46.4% in Q1 2023.

Amazon offers good news for Rivian

Although Rivian has been dealing with issues, there has been some good news that has been revealed recently for the company. Bloomberg recently reported that Amazon (AMZN -2.56%) has become the largest private operator of EV charging stations in the United States

Why is that good news for Rivian? Because the company is a provider of Amazon electric delivery vehicles (EDVs). Amazon aims to achieve zero emissions by 2040, and Rivian’s EDVs are one of its keys to achieving that goal.

Amazon has ordered 100,000 vehicles from Rivian in 2019 and plans to have them on the road by 2030. However, so far, only about 13,500 have been delivered. One big reason for this is because the big e-commerce company didn’t have the charging infrastructure.

However, the company now has 17,000 chargers in 120 warehouses across the United States. This will pave the way for more EDV shipments to Amazon in the coming years.

Notably, Amazon is also Rivian’s largest shareholder, owning around 17% of the company. It is therefore keen to ensure Rivian’s success.

Just as importantly, Amazon has also laid out a roadmap for other companies looking to convert their fleets to EVs. The Amazon-Rivian EDV deal was once exclusive, but that exclusivity has ended. AT&T It will be the first company besides Amazon to run a pilot program with Rivian this year, adding the automaker’s EVs to its fleet.

More good news

While overall EV sales declined sharply in Q1, Rivian sales were quite strong, increasing by nearly 59%. The company produced 13,980 vehicles, while delivering 13,588. That growth outpaced overall EV growth in the US

Meanwhile, the Rivian R1S was the fourth best-selling electric car in Q1, behind only two cars. Tesla examples and Ford Mustang Mach-E. Rivian has introduced a new affordable electric EV, the R2, last month. It starts at $45,000, and the company is looking to become a more mainstream car. The new car received over 68,000 bookings within the first 24 hours of its launch.

A flip game

With negative earnings numbers, Rivian still has a lot of work cut out to prove it’s a viable business. In turn, the company announced that it will shut down its consumer and commercial lines for several weeks to implement cost-saving technologies at its factory that will include new design and engineering changes to its R1 platform. It will also increase its line rate by approximately 30% to improve the vehicle’s production efficiency.

As production grows and the company becomes more efficient, it should be on its way to positive margins and future profits. Although it may not be easy, having the support of Amazon helps a lot.

Rivian is certainly speculative, but for investors looking for high-reward investments, the stock has potential and is finally seeing good news for a turnaround.