3 Things You Need to Know About Buying Rivian Today

Investors who got into the electric vehicle (EV) bandwagon early are looking for reasons to hold on, as demand and sales growth have slowed and costs remain high. In fact, the shares of Rivian (NASDAQ: RIVN) they are down 56% year to date, and Fisker it has everything but it has closed its doors amid a severe shortage of funds.

But Rivian could offer a solid opportunity for long-term investors who believe in the future of electric vehicles taking the road and are comfortable with the risk. If you’re ready to take the plunge, here are three things you need to know about buying a Rivian today.

1. The dangers of modifying tools

The second quarter of 2024 will bring much-needed updates and renovations to Rivian’s sole production plant. The good news: R1 system changes, new suppliers, and improved production efficiency will increase production levels by approximately 30%.

As Rivian continues to overhaul its plant, it shows how the company is focused on improving costs and profitability. In fact, Rivian was able to improve its gross profit per vehicle by about $81,000 from the fourth quarter of 2022 to the fourth quarter of 2023.

But with good news comes bad, or at least potential danger. It is a risk that investors should be aware of, and if something goes wrong during the planned shutdown and maintenance, it will leave the company with a near-term problem of production and shipping.

While there’s nothing to suggest the reorganization will go awry or face challenges, it’s certainly something to listen to during the next conference call.

2. Accelerated schedule

One of Rivian’s biggest moves recently was its announcement to accelerate the production schedule for its R2 sedan. Initially, the plan was for the R2 to be produced at the upcoming factory in Georgia. The plan was renewed, and now Rivian will bring the R2 to its original Illinois plant, filling the excess capacity and saving the company about $2.25 billion.

Saving $2.25 billion is a big deal for a company with about $10.5 billion in cash, and with Rivian’s cash used in operating activities reaching $4.87 billion by 2023. More importantly, however, is that the next R2 will launch at the lowest. than its R1 cars — about $30,000 cheaper. That low price will appeal to consumers who have been on the fence about buying a Rivian but weren’t willing to spend more than $70,000.

3. General profit

Investors would normally look to Rivian’s production and deliveries for signs of demand and healthy growth, but we already know that the startup EV maker’s forecast for both is flat compared to last year.

That means investors’ focus for 2024 will be whether the company can turn a profit, as it aims to do. Although implementing this will come with a small margin of error, given that production will not increase significantly this year, plant restructuring and supplier negotiations should improve efficiency and reduce costs.

Additionally, Rivian’s gross profit was negatively impacted by inventory write-downs and losses on the company’s purchase commitments in 2023, and those are expected to decrease over time. In fact, management believes that the losses will not be significant until the fourth quarter of 2024, enabling the company to finally become profitable.

What does it all mean

Investing in Rivian is a high-risk, high-reward investment, which remains highly speculative amid a massive cash burn in an industry with declining demand. EVs. However, if the company can shut down its plant and fix tooling without errors, speed up the schedule for its R2 cars while using excess capacity at its original plant, and be profitable in 2024, it could be enough to convince Rivian investors to stay on board. business for a long time.

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Daniel Miller has no position in any of the shares mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has disclosure policy.

3 Things You Need to Know About Buying Rivian Today originally published by The Motley Fool