Rivian Is Living Up to Its Promises. Is This Top EV Stock Worth the Risk?

Rivian Automotive (NASDAQ: RIVN) is no Tesla, at least not yet, anyway. Tesla, right or wrong, is the target that most investors have in mind when they look at an electric vehicle (EV) maker. That positions Rivian as both an opportunity and a risk, however. This company is living up to the promises it has made to investors but still has a long road ahead before it is a sustainably profitable company.

So is this EV stock worth the risk? Let's find out.

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Rivian has achieved a lot

Tesla took a long time traveling the path from little more than a concept to a sustainably profitable EV maker with production of roughly 1.7 million vehicles per year. The first step was turning the concept into an actual car. Rivian has achieved that goal, too, with award-winning trucks and a large contract with Amazon.com for delivery vehicles.

Image source: Getty Images.

Tesla's path also required it to build out its manufacturing facilities so it could scale up production. That's the step at which Rivian has now plateaued. In 2023, it produced roughly 57,000 EVs. In 2024, it produced around 49,000, a drop that requires a little discussion. This is because the big goal in 2024 was not to keep ramping up production in an attempt to catch larger peers like Tesla and some of the legacy automakers that are also producing EVs.

Rivian entered 2024 with two main objectives. The first was to turn a gross profit in the fourth quarter of the year. The second, which was in service to the first goal, was to revamp its production facility to reduce the cost of making its trucks. There's no point in continuing to increase production if the process isn't creating enough value. That's the position Rivian was in, with each vehicle it sold costing more to produce than it brought in the door in revenue.

It has succeeded on both fronts, notably turning a gross profit in the fourth quarter of the year right on schedule.

The year ahead goal is more of the same

Rivian's big 2025 goal is for a gross profit across the entire year. That basically means it is looking to extend the success of the fourth quarter of 2024 into 2025. That may not seem like a huge expectation, but it is a vital step for the company as it looks to be sustainably profitable on the bottom line. In fact, management's production target is roughly flat, which will give it more time to work on improving its processes to position the company for long-term success.

That said, Rivian is also being realistic about the future, specifically highlighting "changes to government policies and regulations, and a challenging demand environment" as potential headwinds. These are not small issues since one of the big selling points for EVs has been driven by government subsidies. If, perhaps when those go away, EVs may be less competitive with combustion engine vehicles. And there's already a price point issue on the demand side with Rivian's trucks, given that they reside at the high end of the market.

Rivian successfully faced down internal challenges in 2024, including parts constraints following its manufacturing revamp. There's no way to know if it will overcome the obstacles it faces in 2025. But at the same time, the company has deep-pocketed partners, including Amazon and Volkswagen. It is burning through cash as it continues to invest in its business, but such partnerships suggest that there's more money than it seems if you look at the company's balance sheet and the roughly $7 billion in cash it has on it.

RIVN data by YCharts

Tesla had to do all of this, too

Tesla, meanwhile, proves that everything Rivian is trying to do has already been done before. There's a roadmap, if you will. While it is true that Rivian has to face far more competition, nothing it is doing is really unique. And then there's the stock price, which has fallen 90% from its peak back when Wall Street was a little, perhaps a lot, too enamored with EV stocks.

It seems very much like investors have given up on Rivian even though it has proven to be a survivor capable of hitting the goals it sets out. While it isn't the kind of stock a conservative investor should be looking at, those with more risk tolerance might want to give it a second chance as it steadily works to replicate Tesla's success.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Tesla. The Motley Fool has a disclosure policy.