Table of Contents Hide
EV startup Rivian (NASDAQ: RIVN) caught the market’s attention recently when it revealed that its vans would no longer be exclusive to Amazon as the four-year exclusivity agreement between the two companies ended.
This opened the door for other companies to do business with the EV company, and AT&T quickly jumped on the opportunity, signing an agreement to include Rivian vehicles in its fleet as soon as early 2024. The news boosted RIVN stock, and even though it closed 2023 up almost 40%, there’s still a lot of potential for future growth that could reward investors.
Ending its Amazon Deal
Rivian became a public company in 2021, the same year it launched the world’s first electric pickup truck. It was met with great fanfare in the market, but the company has been on a roller-coaster ride since its IPO.
Troubles started for the company in 2022, when its stock tumbled after it had to recall nearly all of its 13,000 vehicles on the road to fix a steering defect. Following a roughly 140% rally over the course of three months in August 2023, RIVN stock began dropping with profit taking. While the stock closed 2023 up almost 40%, so far this year RIVN stock is down 29% and is still trading 79% below its IPO price of $78.
Against this tumultuous backdrop, investors were relieved to get some good news in Rivian’s Q3 results. One important development announced during its Q3 results was that Rivian will allow customers other than Amazon to purchase its commercial electric vans. The agreement with Amazon, its 17% shareholder, in 2019, included provisions preventing Rivian from selling its commercial vans to other customers, giving Amazon exclusive access to them for four years.
Following this news, on December 14th, telecommunications giant AT&T announced that it will begin adding the Rivian Commercial Van and R1 vehicles to its fleet in early 2024. In addition to that, the partnership between the two companies makes AT&T the exclusive provider of connectivity to all Rivian vehicles, in the U.S. and Canada.
AT&T had previously revealed that it’s committed to achieving carbon neutrality by 2035, and according to the telecom company, integrating Rivian’s electric vehicles into its fleet is part of its plan to cut transport emissions and reduce its carbon footprint.
With AT&T also bcoming the provider of connectivity to all Rivian vehicles in the U.S. and Canada, the automaker is provided with a more connected driving experience, using over-the-air software updates to consistently improve its vehicles with new features that elevate the driving experience for its customers.
RIVN Stock Q3 Results
Adding to the good news, the company’s Q3 results were better than expected, recording a revenue of $1.34 billion, a 149.44% increase from the same period in the previous year, and beating estimates by $22.36 million. Even though Rivian is still operating on a loss, with an EPS of negative $1.19 in Q3, it still beat estimates by $0.13.
The news caused RIVN stock to surge almost 60% in December, as interest in electric pickup trucks increased following the release of Tesla’s Cybertruck.
RIVN Stock Catalysts
Aside from this partnership, there are other factors that could lead to massive growth for Rivian. The most important is how Rivian is positioned in the market compared to its peers. For instance, while Rivian announced better than expected Q3 results, automaker Ford announced that it would cut production of its F-150 Lightning in half. Even though the Lightning is the electric version of its best-selling pickup truck, the company only sold 3,503 F-150 Lightning pickups in Q3, compared to 186,974 vehicles of its non-electric F-150 model. Ford cited “changing market demand” as the reason for its production cut.
Meanwhile, Rivian raised its 2023 production guidance to 54,000 electric vehicles, up from 52,000 in August. The company stated that this increase is due to progress on its production lines, the ramp-up of its in-house motor line, and the supply chain outlook.
According to the company’s Q3 earning call, it delivered 15,564 vehicles out of 16,304 vehicles produced in the quarter, recording a loss of $30,648 per vehicle delivered. Despite that, it’s still an improvement from last year’s 6,584 vehicles delivered, with a $139,277 loss per vehicle.
Declining Lithium Prices
Another factor that could help Rivian in the future is the expected improvement in the company’s gross margin thanks to declining lithium prices. Although lithium prices may vary by region, a price index tracked by Benchmark Mineral Intelligence fell 81% in 2023 and analysts expect further declines in 2024.
Also, the conclusion of Rivian’s four-year partnership with Amazon opens the door for partnerships with other companies. Even though its agreement with Amazon ended, Rivian still remains committed to delivering 100,000 vans ordered by Amazon by 2030.
This ongoing relationship with Amazon, coupled with the new deal with AT&T, shows Rivian’s growing influence in the EV market and provides potential growth opportunities in the future.
Another advantage Rivian has is its focus on electric pickups, which could position it as the dominant company in that market.
Other EV startups, such as Lucid and Fisker, are struggling to compete in the market of sedans and SUVs, delivering 1,457 vehicles and 1,097 vehicles in Q3 respectively. Whereas legacy automakers like Ford delivered 20,962 vehicles – the second highest number of EV sales in Q3 after Tesla’s 435,000 vehicles. Newcomers like Lucid and Fisker struggle to gain market share in a field swamped by well established players.
Now, these EV startups seem to recognize the opportunity which the electric pickup market presents. Fisker announced its own pickup truck, Fisker Alaska, which is set to be released in 2025, and Lucid previously revealed plans to release an electric pickup truck by 2030.
However, Rivian has a first mover advantage that allows it to compete with legacy automakers in the electric pickup segment. Its focus on this segment could also help it outpace other EV startups.
Even though electric pickups are still a fairly new concept in the EV industry, with just 2% of all pickups sold in the US in 2023 being electric, the market shows potential for long-term growth. In fact, the electric truck market was expected to grow at an annual growth rate of 34.2% from 2022 to 2023, fueled by governments’ increased focus on emission-free vehicles and new policies in commercial and logistics sectors.
This segment of the EV market will likely be helped along by policies like the Biden administration’s goal of having 50% of all new vehicle sales be electric by 2030. Other initiatives like the EV Acceleration Challenge, are meant to encourage industry stakeholders to make commitments to support the transition to electric vehicles. As time passes, these governments and stakeholders will target the broader truck market for transitioning to electric – benefiting RIVN stock in the long-run.
But this is not to say that Rivian is without its challenges. For starters, Rivian is continuing construction on a $5 billion plant in Georgia, which is intended to be the company’s largest production facility. But this comes with a risk.
The state of Georgia and local governments planned to provide Rivian with $1.5 billion in subsidies. Unfortunately for Rivian, these subsidies were met with a legal challenge that has halted it for the time being at least.
Despite this legal battle, Rivian is still moving forward with construction on the plant and is expected to begin producing cars at this location as early as 2024. Rivian also had to cancel an agreement with Mercedes Benz to produce electric vans in Europe, stating that it decided to focus on developing and producing Rivian’s own vehicles.
RIVN Stock Forecast
With all of these factors in mind, Rivian could be a great investment opportunity for long-term investors who don’t mind the fact that the company still has a few years to go to reach profitability as long as it’s poised for strong future growth.
RIVN stock saw impressive growth in December 2023 due to great Q3 earnings results and the conclusion of Rivian’s exclusivity agreement with Amazon. Now, the door is open for the EV startup to do business with other companies, the first of them being the United States’ leading telecommunication company, AT&T.
Rivian is set on increasing its production and dominating the EV market’s small electric pickup trucks segment, which could lead to the company reaching profitability and completely owning the segment. There’s a long road ahead before RIVN is in a position to achieve this, but if you’re a patient investor who doesn’t mind waiting, then RIVN stock could be a promising opportunity at its current price.
Please visit and read our disclaimer here.