I Am Still Long Rivian
Despite certain hiccups that have caused shares of the electric vehicle maker Rivian to dive 60% from its blockbuster IPO back in November of last year, I still believe that there is long-term value in the company.
It's essentially a start-up, and as such it is expected to experience a few stumbles along the way. Really the question here becomes how well can they deal with the stumbles and remain on track to deliver on their promises and the vision they have for the company?
One also has to keep in mind the environment in which they are currently operating, and how that environment has changed quite dramatically when they made certain projections, both in terms of cost of manufacturing and the availability of parts in the supply chain to actually produce the vehicles.
Many of the issues Rivian is having to deal with are not unique to Rivian, of course. These are widespread issues every company is facing. Rivian just has to be more careful and more calculated every step along the way.
One key factor I am keeping a close eye on is their relationship with Amazon. Amazon has close ties with Rivian in that they are Rivian's largest investor, and of course Rivian is also working to fulfill an order for 100,000 delivery vans to be produced by Rivian. They are supposed to deliver these by 2025.
In order for the company to be on track to meet this obligation, they are going to have to be able to produce the sum total of the 150,000 of all vehicles across their product family by 2023 that they have said they believe they can do. So, production is a huge thing to keep a focus on, and watching what they do here is very important.
They were only able to produce around 2,600 vehicles last year. So, getting to 150,000 is a very tall order. One thing is clear for me though. They have to meet this number.
Reservations are also a thing to watch since it gauges the consumer's interest in the products they are making, and also gauges consumer's confidence that people are placing orders for vehicles they will actually one day have parked in their driveway.
Despite some angry consumers initially when Rivian decided, due to rising costs of raw materials, to raise prices for certain pre-orders, which they quickly reversed course on, reservations for Rivian were actually up 28.2%.
Short term things not to be too concerned about are operating losses. It is anticipated that the company will operate at losses for some time. One has to remember that it took 18 years for rival Tesla to finally make a profit, something they only accomplished two years ago.
Granted, what an investor looks for when it comes to losses are of course less losses over time which are a direct result of better production capability, increasing demand for the products they are selling, and the speed at which they can deliver their product to market.
Key things for me in explaining why I am still hot on Rivian as opposed to Tesla is many fold, which I have discussed in the past. But it mainly comes down to the types of vehicles the company is focused on, which are in high consumer demand. Plus, their commercial vans which I think can provide a viable and attractive alternative for many companies. Not just Amazon. On top of that, Rivian is onboard with a universal charging apparatus that will be used on all electric vehicles manufactured by the other major automakers while Tesla continues to rely on a unique charger.
Rivian undoubtedly has a long way to go to prove itself as a potentially profitable and long-lasting company. But I think it has the right vision and attitude about its business, and I am confident in the leadership to drive the company forward and become a major player in the EV space long-term.
It is the reason why I am still long Rivian, and willing to ride out potentially many bumps along their road to success.
Lead image courtesy of digitaltrends. Amazon Orders 100,000 Electric Delivery Vans from Rivian | Digital Trends
