With shares already down 14% year to date, Rivian Automotive (NASDAQ: RIVN) is off to a bad start in 2025. While the company has finally achieved its goal of gross profitability, the market remains skeptical about the long-term outlook as competition in the electric vehicle (EV) industry mounts.

Let's dig deeper to determine if there is any light at the end of the tunnel for Rivian.

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Fourth-quarter earnings look fantastic

Rivian reported fourth-quarter earnings on Feb. 20, and the results were compelling. Total revenue surged 32% year over year to $1.73 billion, and the company delivered on CEO Ryan Scaringe's promise with a gross profit of $170 million compared to a loss of $606 million in the prior-year period. That's an improvement of $776 million.

Furthermore, Rivian's operating loss dropped by 58% to $740 million, which could reduce the company's cash burn and reliance on external financing techniques like debt issuance or shareholder dilution. For the first time, Rivian looks like a viable business with a pathway to net income if it can continue scaling up its operations while controlling costs.

The market isn't impressed

Despite Rivian's success at establishing what I believe is a clear pathway to profitability, the market was much less impressed by these fourth-quarter results. The stock received a downgrade from Bank of America, which bumped its rating from "neutral" to "underperform," citing risks from competition as other automakers like Lucid Group and General Motors are expected to release new electric SUVs into the market in 2026 and 2027.

The analysts also expect EV demand to slow because of the Trump administration's less interventionist approach to the sector. The new president has revoked several Biden-era EV incentives, and some believe he could eventually seek to repeal the $7,500 tax credit for EV purchases. That outcome could be disastrous for Rivian because, unlike some of its larger rivals, the company might not have the scale or cash reserves to absorb a potential hit to demand and margins.

Image source: Getty Images.

However, Rivian's guidance might be the biggest red flag. Management expects to deliver just 46,000 to 51,000 vehicles in all of 2025, which is a decline from the 51,579 deliveries in 2024. While the political uncertainty likely accounts for some of this forecast, it shows that Rivian still faces an uphill battle as it attempts to scale up its business model.

What could the next five years have in store?

Over the next five years, Rivian's survival will depend on its ability to spur growth while controlling cash burn. The swing to gross profitability will make this much easier. Furthermore, a recent partnership with Volkswagen and a loan from the Department of Energy could provide up to $10 billion in incremental capital.

With $7.86 billion in cash and equivalents already on its balance sheet, Rivian has a substantial runway to pursue growth opportunities, including the R2, R3, and R3X, which are built on its new, more affordable midsize platform. The cheapest of these vehicles (the R3) is expected to start at just $37,000 when it becomes available in 2027. That's substantially lower than its current flagship SUV, the R1S, which starts at $77,700.

Lower-priced options could open the floodgates of demand for Rivian and transform it from a niche EV maker into a real mass-market contender, similar to the role the Model Y played for Tesla. But while there certainly is light at the end of the tunnel, Rivian will face massive challenges in 2025 and 2026 as it struggles with sluggish (possibly non-existent) growth and an uncertain regulatory environment. Investors may still want to wait for several more quarters of data before buying the stock.

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Bank of America is an advertising partner of Motley Fool Money. Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bank of America and Tesla. The Motley Fool recommends General Motors. The Motley Fool has a disclosure policy.