KEY POINTS

  • Investors were concerned that the company would fall short of its production target of 25,000 EVs this year.
  • The manufacturer now believes it will be able to do so.
  • That will, however, necessitate a rapid expansion in production over the next several months, which implies significant expenditures and cash outlay.

Rivian Automotive (NASDAQ:RIVN) experienced a terrible first half of the year, but is now the time to buy Rivian stock? The stock lost 75% of its value in the first six months of the year. In addition, Rivian’s attempt to raise vehicle prices sparked anger among customers; its full-year production projection unveiled in March came far short of expectations, and a significant investor sold off its stock.

With critical inputs like semiconductor chips still in short supply and material costs rising rapidly, many were uncertain if Rivian would be able to manufacture 25,000 vehicles this year as planned.

The firm may have just answered the question that every investor is wondering about.

Production and deliveries are on the rise

The second-quarter reports from Rivian are not due until August, but the company’s statement today has done enough to raise investor expectations.

Tesla produced 4,401 vehicles and delivered 4,467 units during the second quarter of this year. Here’s why these two figures are so significant.

In its first quarter, Rivian produced 2,553 cars but only delivered 1,227. That difference perplexed investors, and while the firm’s figures improved during the fourth quarter, the growth rate was not what they had anticipated.

Addressing worries

Rivian’s latest results for Q2 addressed two of investors’ most pressing worries.

The first is that the company has increased capacity, which is critical to achieving its full-year goal. Second, its deliveries have picked up the slack and actually increased by almost four times in Q2, which is crucial to maintain customer confidence and attract new bookings.

Rivian hosted its first annual shareholder meeting since going public last year on June 6. At that point, the EV firm had a backlog of more than 90,000 units between its R1T pickup and R1S SUV, as well as 100,000 commercial delivery van orders from e-commerce behemoth Amazon (NASDAQ:AMZN).

Finally, Rivian claimed it is now confident in delivering 25,000 vehicles throughout all its models this year.

Is it time to buy Rivian stock?

The most significant issue facing Rivian is a lack of supply, not demand.

Rivian has a significant competitive advantage because its R1T pickup trucks have already hit the road ahead of Tesla‘s (NASDAQ:TSLA) Cybertruck. General Motors (NYSE:GM) has more than 75,000 orders for its GMC Hummer EV, but the output is sluggish. Aside from Ford‘s (NYSE:F) all-electric F-150 Lightning pickup truck, which is in high demand and offers the most competitively priced vehicle on the market today, there is no major competitor in sight for Rivian. The F-150 Lightning, unlike R1T’s adventure marketing, appeals more to businesses as a commercial vehicle.

All Rivian has to do is turn out as many vehicles as it can from its factories to maintain a lead over upstart competitors. Right now, nothing else matters for Rivian. From that standpoint, the second-quarter output and delivery figures from Rivian are encouraging.

Sustaining rate

However, the greatest struggle for Rivian is yet to come since it will have to sustain at twice its Q2 rate for the remainder of 2022 to fulfill its full-year objective. It can do so, but at what cost?

Rivian’s manufacturing facility in Normal, Illinois, can produce 150,000 cars yearly. Despite that fact, the firm has acknowledged that scaling up manufacturing is difficult. That’s because “each unit represents a complicated symphony of component supply.”

Future outlook

Given the continuing supply and price constraints, it’s likely that Rivian is burning through a lot of cash to manufacture more cars.  It will take a long time for the firm to break even.

Rivian has big ambitions to open a second manufacturing facility in Georgia and release the R2 mid-size SUV by 2025. To do so, it had over $17 billion in cash as of March 31. However, it’s more important to concentrate on its near-term manufacturing rate, costs, and cash flows before risking money on a stock with a market capitalization greater than $26 billion. One quarter of solid production and deliveries from a firm with prior mistakes is insufficient to make now the time to buy Rivian stock.

(Visited 15 times, 1 visits today)