Rivian Secures $1.5 Billion In Incentives For Georgia Plant; Is Rivian Stock A Buy Now?

Rivian Automotive (RIVN) rolled out the first all-electric pickup truck, the R1T, on Sept. 14, 2021. On Nov. 9, 2021, the much-anticipated RIVN IPO priced strong. The EV startup had a monster IPO, however shares have fallen well below their IPO price recently, amid an overall market downturn. Rivian now has a market cap of $27.324 billion. Is Rivian stock a good buy?




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The Rivian IPO priced an upsized 153 million shares at $78 a share Nov. 9, 2021, above the expected range. The RIVN IPO raised $11.9 billion, giving Rivian an initial valuation of roughly $77 billion. Shares soared to 179.47 on Nov. 16, 2021, but then sold off sharply over the following weeks and months.

Rivian picked a good time to go public, as it is among the few startup EV makers actually producing and delivering vehicles. Lucid Motors (LCID) more than doubled in the first four months after going public in July 2021, as it began deliveries. LCID stock came public via a SPAC merger. LCID stock has since pulled back to around $19.

Post-IPO Expansion

Rivian announced Dec. 16, 2021, that it will open a vehicle assembly and battery plant near Atlanta. The $5 billion project is slated to break ground in the coming months.

On May 2, Rivian and Georgia officials announced a $1.5 billion state and local incentive package for the EV maker that includes  tax credits, according to a Reuters report.

However, local residents oppose the new factory, saying they were assured in 2017 that the area would remain largely rural.

In response, on Feb. 22, 2022, Georgia officials said the state is taking over the controversial development project, which will allow officials to bypass local rezoning hearings. Georgia will take ownership of the 2,000-acre site, to “streamline” the development process, according to a local report.

Next, Rivian plans to open a plant in Europe to start building vehicles by the end of 2023. A site in the U.K. is also possible, as well as locations in continental Europe.

On Dec. 3, 2021, The Financial Times reported that the U.K. was offering Rivian more than 1 billion British pounds — $1.32 billion — to build a plant in Somerset. The 635-acre site could be used for battery production, car assembly or both if the plans are approved, the report said.

Amazon Reveals 18% Stake In Rivian

The Amazon (AMZN)- and Ford-backed Rivian’s R1T beat Tesla and General Motors auto to the punch, as the EV market for electric trucks heats up. But production has been slow, while its R1S SUV has largely been pushed out to spring 2022.

Rivian makes its vehicles at its plant in Normal, Ill. The plant has a production capacity of 150,000 units annually.

The company is prioritizing production of electric vans for Amazon, according to a recent Bloomberg report. Amazon has ordered 100,000 of Rivian’s electric vans. And while Rivian’s R1T pickup has grabbed headlines recently, Amazon’s vans are more likely to be revenue drivers in the near term.

Amazon said on Feb. 2, 2022, that it had a roughly 18% stake in Rivian. However, Amazon is also looking elsewhere to electrify its fleet, On Jan. 5, 2022, Amazon and Stellantis (STLA) said they’re are partnering to develop vehicles with Amazon software in the dashboards. Stellantis will also make electric delivery vans for Amazon.

Rivian Stock: Billionaire George Soros, Top Pension Funds Invest

Rivian stock has garnered the attention of other top investors too. Billionaire investor George Soros bought nearly 20 million shares of Rivian stock worth $2 billion in the quarter ended Dec. 31, 2021, according to a Feb. 11, 2022, financial filing. The purchase makes Soros Fund Management one of Rivian’s top investors.

The country’s top pension funds are also snapping up Rivian stock. Seven state government employee pension funds including CalPERS, the largest U.S. pension plan, have invested in Rivian, according to a Reuters report. CalPERS, with around $492 billion under management, bought a little more than 305,000 RIVN shares. The $191 billion Teacher Retirement System of Texas fund took a 33,000-share stake in the company.

Shares popped 10% in the days following the news.

Rivian Hikes Prices

Rivian is hiking the price of its R1T electric pickup around 17%, which will increase the base cost to about $78.975 from $67,500. The price of the R1S SUV will jump about 20%, bringing the new base price to about $84,000 from $70,000. All prices are before federal tax credits of $7,500.

The previous price points will apply to dual-motor versions of both the R1T and R1S, which are expected to be available starting in 2024.

The new prices originally applied to both new and existing reservations, drawing the ire of some who took to social media to complain and threaten to cancel their pre-orders.

As a result, on March 3, Rivian reversed its decision to apply the price increases to existing orders. RIVN stock fell 25% in the two days after the price hikes were announced.

Scaringe said the price increases are due to rising costs of the components and materials that go into building its vehicles.

“Everything from semiconductors to sheet metal to seats has become more expensive and with this we have seen average new vehicle pricing across the U.S. rise more than 30% since 2018,” he wrote.

Also, Rivian is scrapping the 5-seat R1S electric SUV. It will only be offered in a 7-seat version.

Rivian’s price hikes suggest its original R1T/R1S pricing was “structurally unprofitable,” said Exane BNP Paribas analysts when it initiated coverage of Rivian with an Underperform rating and a $35 price target on April 11, according to TheFly.com.


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Road To Ramp-Up ‘Choppy’

Morgan Stanley’s Adam Jonas initiated Rivian coverage in December 2021, with an outperform rating and a price target of $147.

Jonas still believes Rivian is “‘the one’ that can challenge Tesla.” However, in a note to clients Jan. 26, 2022, Jonas said: “The road to ramping production will be choppy, but we expect largely due to supply rather than demand.”

Jonas said Rivian’s stock decline is a “reality check” of the impact of bottlenecks and other growing pains.

That said, Jonas said in a March 25 note that while fiscal 2022 is a year of challenges related to ramping production, he is confident in Rivian’s strategy, including the entire value chain from “up to the mine down to the delivery of an Amazon package to you front door or a back-country excursion.”

Jonas believes Rivian’s joint ventures to secure a greater supply of cells and enabling materials to make battery packs in-house is what sets it apart from legacy automakers that are expanding their EV offerings.

“Over time, we believe investors will reward those EV makers that can control their own destiny with battery supply at scale,” he wrote.

Jonas adds that the current share price significantly underestimates the strategic value of Rivian’s relationship with Amazon.

JPMorgan has an $85 price target for Rivian stock and an overweight rating.

However, in a March 31 regulatory filing, Rivian raised a few red flags. It said Covid and the war in Ukraine had significant impact on its business, “from facility construction to equipment installation to vehicle component supply.”

Management also said it expects the “very sizable increases in recent months in the cost of key metals, including lithium, nickel, aluminum, and cobalt” to persist. 

Furthermore, it stated that rising oil prices have resulted in “significant increases in freight charges and raw material costs.”

And the global chip shortage continues to be a problem.

“We do not have long-term agreements with all of our semiconductor chip manufacturers and suppliers,” management said.  And if these manufacturers or suppliers become unwilling or unable to provide an adequate supply of semiconductor chips, Rivian says it would not be able to quickly find alternative sources.

Production Picks Up In Q1

Rivian produced 2,553 vehicles in the first quarter, including a mix of the Rivian R1T pickup truck, R1S SUV and commercial vans headed to its main customer, Amazon.

The company said in a statement Tuesday it’s on track to meet its production goal of 25,000 EVs for 2022, but that’s half it’s original estimate  of 50,000. Rivian delivered 1,227 vehicles in the first quarter.

Rivian’s production challenges earlier this year forced the EV maker to revise estimates.

On Jan. 26, 2022, Bloomberg reported Rivian was ramping up production at its Normal, Ill., plant, after the factory had been shut down for a week earlier in the month. The report also said Rivian is now on pace to have nearly 200 delivery ready vehicles a week.

As of Dec. 15, 2021, Rivian produced 652 R1Ts and delivered 386. It also produced and delivered its first two R1S, a three-row seven-passenger SUV. Volume production of the R1S is slated for the spring.

The company said Dec. 16, 2021, that it expected to be “a few hundred vehicles short of our 2021 production target of 1,200.”  On Jan. 10, Rivian reported it had sold 1,015 by the end of 2021 vehicles and delivered 920.

Rivian said it had around 71,000 preorders for its R1T pickup and R1S SUV in North America as of Dec. 15, 2021. Preorders require a $1,000 refundable deposit.

Rivian says it doesn’t expect to be profitable for the foreseeable future. The company intends to use net proceeds from the Rivian IPO for working capital, to fund growth and for other general corporate purposes.

CEO Scaringe said at a Wolfe Research conference on Feb. 24 that production ramp-up at Rivian’s Normal plant is “absolutely making progress,” but supply-chain issues are still slowing production.

Scaringe said the global semiconductor chip shortage is the “most painful” constraint in ramping up production.

Covid also hobbled Rivian’s workforce during the omicron peak. Scaringe said that for a number of weeks there had been days where up to 800 workers were out sick.

Despite all the current challenges, Scaringe says the aim is to take 10% of the EV market space by 2030.

Rivian’s Financials

Rivian missed Q4 earnings views when it reported on March 10 a loss of $2.43 per share. Analysts expected a $1.58 per share loss.  Sales came in at $54 million, above Zacks Investment Research analyst views for $50.4 million.

Rivian delivered 909 vehicles in Q4. For fiscal year 2021, total revenue reached $55 million, supported by 920 total vehicle deliveries.

As of March 8, Rivian has produced 1,410 vehicles in 2022, and 2,425 vehicles since the start of production.

The company expects to produce 25,000 vehicles this year, as it grapples with supply-chain issues and production slowdowns.

Rivian’s RS Rating is just 4 out of a best-possible 99. Institutional investors hold around 38% of its stock. As of March 2022, 764 funds have a stake in RIVN stock.


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Solar Energy Partnership

On April 28, Rivian said it was partnering with Nashville-based Clearloop to bring online Rivian’s first megawatt of renewable electricity.

Rivian provided upfront financing for one megawatt of the 6.75-megawatt project. The company’s investment will cover electricity used by Rivian Waypoints chargers planned for Tennessee state parks as well as other clean energy commitments in the region.

Rivian Faces Fierce EV Pickup Competition

The Rivian R1T is the first electric pickup to market, but not the last.

“Several traditional automakers and EV new entrants have announced plans to launch EV pickups in the 2021 through 2024 time frame,” Goldman Sachs told clients in April 2021.

GM plans to begin deliveries of its high end EV Hummer later this year. General Motors will follow up with a Silverado EV as well as a GMC electric pickup for 2023. Ford’s first electric pickup, the F-150 Lightning, is coming in spring 2022. It has a targeted range of 300 miles vs. the Rivian’s truck’s 314-mile range per charge.

Rivian Vs. Tesla

Meanwhile, Tesla CEO Elon Musk said Cybertruck production won’t begin until “hopefully” sometime in 2023. That could reflect issues with mass producing 4680 batteries, key to making the Cybertruck and the long-delayed Semi and Roadster viable.

Tesla filed a lawsuit against Rivian and a number of former Tesla/current Rivian employees in July 2020 in California alleging trade secrets misappropriations. It recently added to that lawsuit. Rivian says it will fight the charges vigorously.

Rivian Throws Weight In Large SUVs

In the full-size EV SUV space, Tesla led the way with its Model X. But a Model X refresh has gone slowly, while sales are relatively small. The Rivian R1S will have an opportunity to make inroads. But GM is coming out with the luxury Cadillac Lyriq this spring.

In the commercial market, Rivian has a deal to make 100,000 electric delivery vans for Amazon.com. It plans to deliver the EDVs to Amazon by 2025. Rivian says it expects to deliver at least 10 vehicles in December 2021. But Rivian’s reliance on one big customer is risky.

GM and Ford have begun shipping out EV delivery vans to customers.

Direct-To-Consumer Model

Rivian’s direct-to-customer model allows it to manage all sales, deliveries and service operations in-house without relying on a franchised dealership network or other third parties. So far, 22 states and the District of Columbia allow Rivian to sell directly to consumers. Those states include California, Florida, Arizona and Illinois.

But several states are challenging Rivian’s DTC model, citing dealership laws. In March, several auto dealership groups in Illinois sued both Rivian and Lucid over their DTC sales model, which they say is illegal.


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Ford Leaves Board, Scraps Joint EV Plan

Meanwhile, Ford recently vacated its seat on Rivian’s board of directors.

“Rivian is a strategic investment and we’re still exploring ways for potential collaboration with them,” Ford spokesman Ian Thibodeau said told Reuters on Oct. 13, 2021.

Additionally, on Nov. 19, 2021, Automotive News reported Ford and Rivian are scrapping plans to make an electric vehicle together. Ford originally announced its intention to make a Rivian-powered EV in 2019 when it first invested $500 million into the startup. Ford and Rivian have already canceled a vehicle they planned to make for the Lincoln luxury brand in 2020.

Is Rivian Stock A Buy?

Deliveries are getting underway, meaning Rivian will start generating revenue, with rapid growth from essentially zero seen. But heavy losses are likely to continue for some time.

Until RIVN stock has some sort of track record following the Rivian IPO, investors won’t have a clear buy point.

Bottom line: Rivian stock is not yet a buy. RIVN stock plunged after missing earnings on March 1o. Shares are trading well below their IPO price at around 31. Its RS Rating is just 4 out of a best-possible 99. But keep an eye on this intriguing EV startup as it works through production ramp-up issues.

Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.

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