Rivian Automotive (RIVN -4.26%) has had no bother promoting its widespread electrical automobiles (EVs) for the reason that firm went public again in 2021. What it had been unable to do was promote its vehicles and SUVs for greater than it value to make them. That every one modified in 2024’s fourth quarter when the corporate lastly posted a constructive gross margin.
That was a giant accomplishment, and it places the younger firm on the street to turning into a extra sustainable enterprise. Nevertheless, it nonetheless has a protracted option to go, and 2025 is prone to be each a transitional and transformative yr. With that in thoughts, is that this a great time to purchase the inventory?
Optimistic gross margins
That first-ever quarterly gross revenue Rivian simply turned in was a modest $170 million. Its gross margin charge in This fall was 9.8% in comparison with unfavourable 46% a yr in the past. It generated $110 million in gross income from its vehicle phase and $60 million for its software program and companies phase. This fall automotive phase margins had been 7%, whereas software program and repair margins had been 28%.
The corporate mentioned it was capable of scale back the price of manufacturing its EVs by $31,000 per automobile yr over yr. One of many largest elements was that it lowered its materials prices, together with by means of its new zonal structure, which considerably decreased the variety of digital management models and the quantity of wiring in its automobiles. Nevertheless, the corporate additionally credited greater common promoting costs and a rise in regulatory credit score income to its potential to get to a constructive gross margin.
Rivian’s Q5 income climbed by 32% to $1.73 billion, with automotive income rising 26% to $1.52 billion and software program and companies income doubling to $214 million. It delivered 14,183 automobiles within the quarter, up 2% from the 13,972 it delivered within the prior yr interval. Nevertheless, it manufactured solely 12,727 automobiles — properly under the 17,541 automobiles it produced a yr earlier — because it handled provide constraint points. In the meantime, it mentioned enhancements to its Join+ providing — which gives media, connectivity, Wi-Fi hotspot, and stay safety — helped enhance its software program and companies income.
Adjusted EBITDA (earnings earlier than curiosity, taxes, depreciation, and amortization) improved from a lack of $1 billion within the prior yr interval to a lack of $277 million this time. The corporate generated $1.18 billion in working money stream within the quarter, though it nonetheless booked an outflow of $1.72 billion for the total yr.
Rivian ended the quarter with $7.7 billion in money and short-term investments on its books in opposition to $4.4 billion in debt. In the meantime, it closed a mortgage with the Division of Power’s Mortgage Applications Workplace for as much as $6.6 billion to assist the development of its new manufacturing facility in Georgia. It additionally launched a three way partnership with Volkswagen that may see the enormous legacy automaker make investments as much as $5.8 billion within the EV upstart.
The following key steps in Rivian’s transformation will probably be for it to begin producing its extra inexpensive R2 SUVs and constructing its new manufacturing facility. Administration mentioned the R2’s supplies are 95% sourced already and that it’s going to value tens of hundreds of {dollars} lower than its R1S SUV fashions. It goals to launch the brand new mannequin within the first half of 2026.
Rivian will shut down its present plant for a month this yr as a way to put together for the launch of the R2. With the shutdown, the corporate expects to ship between 46,000 and 51,000 automobiles this yr, and is ramping up manufacturing in Q1 to construct stock forward of the shutdown. It’s trying to generate a modest full-year gross revenue in 2025, with unfavourable adjusted EBITDA of between $1.7 billion and $1.9 billion.
Administration mentioned its outlook contains tons of of tens of millions of {dollars} of unfavourable affect to its EBITDA from laws, tariffs, and the lack of federal incentives.
Picture supply: Getty Photos
Is Rivian inventory a purchase?
Rivian is making good progress, and reaching gross margin and working money stream positivity had been huge milestones. The following huge step for it is going to be getting its R2 SUV to market. The corporate expects it to have a base worth of round $45,000, which ought to give it far more mass enchantment than the R1S SUV, which begins at just below $76,000.
As Rivian builds its new manufacturing facility and continues to realize scale, it is planting the seeds that would develop into eventual profitability. Its partnerships with Volkswagen and Amazon, for which it makes EV supply vans, strengthen its monetary basis.
That mentioned, the corporate continues to be burning by means of money, and it faces potential headwinds from rising tariffs, falling federal incentives, and shifting laws. In the meantime, the CEO of its largest EV rival has develop into very influential throughout the U.S. authorities — a singular added threat that’s onerous to quantify.
Rivian is headed in the proper course, however there will probably be some bumps alongside the best way. The inventory stays a speculative funding.
John Mackey, former CEO of Complete Meals Market, an Amazon subsidiary, is a member of The Motley Idiot’s board of administrators. Geoffrey Seiler has no place in any of the shares talked about. The Motley Idiot has positions in and recommends Amazon. The Motley Idiot recommends Volkswagen Ag. The Motley Idiot has a disclosure coverage.
