Did the R2 Just Mark a Turning Point for Rivian Stock?

Rivian Automotive (NASDAQ: RIVN) hosted its next-generation vehicle presentation the morning of March 7, and its stock proceeded to pop 15.7% in the next two days. The rebound comes shortly after Rivian closed at an all-time low of just $10.07 per share on Feb. 23. As of market close on March 8, Rivian is still down over 45% year to date.

Investors who have suffered through holding the stock probably want to know if Rivian is finally turning things around. And those who have been watching Rivian may want to know if now is a good time to buy the electric car stock.

Here are key takeaways from Rivian's latest presentation, how it fits into the broader investment thesis, and whether Rivian is a buy now.

A person closes their eyes and takes a deep breath on a street.

Image source: Getty Images.

Building a brand

Rivian is building a brand that addresses multiple aspects of the energy transition. Everything, including its vehicles, merchandise, accessories, facilities powered with renewable energy, and in-house charging network, enhances its brand. A strong brand can help justify pricing power and sustain a loyal customer base.

For example, Rivian will power 7 billion miles of renewable driving every year by 2030. It has developed its own line of products and accessories to pair specifically with its vehicles such as tents, bike racks, and kitchen rear storage ports for camping. Rivian's brand identity is adventure, which is different than Tesla's (NASDAQ: TSLA). But the strategy is similar to how Tesla started out with a focus on showrooms and getting customers excited about the product and trusting electric vehicles (EVs).

The only issue with building a brand when a company is not yet profitable is that it takes a lot of money. Rivian has dozens of showrooms, over 54 service centers, over 500 trucks and vans to service vehicles off-site, and over 600 charging stations. This month, it will gain access to Tesla's Supercharger network. The Rivian Adventure network will also be available to all EVs, not just Rivian vehicles.

Rivian understands that credibility and reputation are invaluable resources. Long-term, it is most certainly making the right decisions to set it up for decades of growth. But the added expenses that come with building its brand are accelerating its cash burn.

The R2 unveil was a great success

Rivian can't accomplish any of its goals if it doesn't make money. It isn't making money today, and probably won't next year either. Its next-generation vehicles should help fix that.

Most of the March 7 presentation centered around the R2, which is Rivian's first midsize SUV. It is smaller than the existing R1S SUV, and there is no truck version on R2. R2 features a 4695 battery cell (46 mm in diameter, 95 mm tall) which is larger than R1's 21 mm battery cell.

The starting price is only $45,000. For comparison, the R1S starts at $74,900. Trim options include single-motor, dual-motor, and tri-motor, with the most expansive option able to go 0-60 mph in under three seconds. R2 has 11 cameras and five radars with a higher compute platform and more sophisticated software for self-driving.

Perhaps the most impressive part of the announcement was that all configurations of R2 will have over 300 miles of range and that deliveries will begin in the first half of 2026.

R2 is Rivian's way to address affordability and accessibility by entering a larger market. Beyond R2, Rivian unveiled the R3 and the R3X. R3 is a crossover, with a shorter wheelbase but the same battery pack as R2, the same motor options, and other similar features. The platform flexibility between the battery packs will be key for simplifying manufacturing. R3X is the premium version of the R3 and is, in my opinion, the coolest vehicle Rivian has ever made, but it will likely come at a higher price point.

Rivian said that it can leverage existing capabilities at its facility in Illinois to produce the R2, which is excellent news. Rivian is building a massive manufacturing space in Georgia, but it is an expense that Rivian can't realistically afford right now. Putting a pin in Georgia and using what Rivian already has to produce the R1 platform, its electric delivery vans for customers like Amazon, and the R2 platform should help lower costs.

The stakes have never been higher for Rivian

R2 will be the make-or-break vehicle for Rivian. If it goes well, it could chart a path toward profitability, manufacturing expansions in Georgia, funding future projects with positive cash flow, and more. The R2, R3, and R3X are all incredibly impressive vehicles. But so are the R1T, R1S, and its electric delivery vans.

The issue has never been vehicle performance, it has been Rivian's financials. To make it through 2024 and 2025, Rivian has to keep cutting costs and drum up demand for its R1 vehicles, while also filling the R2 backlog. It's a fine line.

Overall, the R2 presentation was a net positive for Rivian, and that was reflected in the stock price. But it is anything but smooth sailing from here.

Five years from now, we could look back on this moment as the darkest times for Rivian, similar to Tesla's struggles scaling up Model 3 production in 2017. When the story ends well, these moments are remembered with a sigh of relief and even fondness of what was overcome. But there's another possible outcome where Rivian simply runs out of dry powder and falls short.

Rivian is one of the most intriguing high-risk/high-potential-reward companies out there because of its product excellence and the multidecade runway for the EV market. But investors interested in the stock must take its financial situation seriously, and understand that Rivian is racing against the clock with no margin for error.

Should you invest $1,000 in Rivian Automotive right now?

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Daniel Foelber has positions in Rivian Automotive and has the following options: short March 2024 $15 puts on Rivian Automotive and short March 2024 $17.50 calls on Rivian Automotive. The Motley Fool has positions in and recommends Amazon and Tesla. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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