Rivian: A Most Peculiar Prospect

Rivian, that purveyor of electrically propelled vehicles, finds itself in a situation not entirely unfamiliar to those who observe the vagaries of the market. The shares, after a spirited advance of some 36% over the past year – a phenomenon one might attribute to optimism or, more charitably, desperation – remain a considerable distance from their former glories. Ninety percent, to be precise, having receded from the peaks of late 2021. One is tempted to ask whether the entire exercise was merely a rather elaborate folly, but such questions are rarely answered with satisfying clarity.

The electric carriage trade, it appears, has lost some of its initial momentum. The proliferation of competitors, particularly those hailing from the East, adds a distinctly unappetizing flavour to the outlook. Is Rivian, then, a relic of a bygone enthusiasm, or might it, against the odds, establish a position of enduring – and, crucially, profitable – significance? The question, as ever, is less about engineering and more about the prevailing winds of fashion and the availability of capital.

The Illusion of Recovery

The third quarter witnessed a revenue increase of 78% year-on-year, reaching approximately $1.56 billion. A gross profit of $24 million was also reported, an improvement of $416 million over the previous year’s lamentable showing. Positive gross margins, one gathers, are now being achieved, a development to be greeted with a restrained acknowledgement of competence. However, these margins remain, shall we say, fragile, and are offset by substantial net losses. The company, it seems, is still burning through capital with an enthusiasm that would impress a pyromaniac.

Automotive gross profits, alas, remain in negative territory – a mere $130 million in the red. This represents a shrinking loss compared to the previous year, but the cost of production continues to exceed revenue. A state of affairs one might describe as unsustainable, were one inclined to be blunt.

Some 13,201 vehicles were delivered in the third quarter, followed by 9,745 in the fourth. A decline, it is noted, resulting in a lower total for 2024 than for either 2023 or 2024. The peak of 15,564 units delivered in the third quarter of 2023 remains, for the moment, an unrepeated high-water mark. Such fluctuations, one suspects, are less about engineering prowess and more about the capricious nature of consumer demand.

The impending arrival of the R2 SUVs offers a glimmer of hope – or, at least, a potential distraction from the prevailing gloom. These models, significantly cheaper than the existing R1 range, are intended to reinvigorate deliveries and expand the customer base. A surge in demand, if it materializes, might provide some economies of scale. However, one should not anticipate a swift return to profitability. The pursuit of volume, as any seasoned observer knows, often comes at a price.

The R2 launch edition is expected to retail for around $60,000, with a more affordable configuration priced at $45,000 following later. The current R1 models, by contrast, command an average selling price of $86,500. A considerable difference, and one that suggests a deliberate shift in strategy.

The more affordable R2 options are likely to constitute a substantial portion of overall sales. While designed with efficiency in mind, they may, paradoxically, depress gross and operating margins. A curious outcome, but not entirely unexpected. The pursuit of market share, one finds, often entails a sacrifice of profitability.

Given the current softness in EV demand and the risk that the R2 rollout will exacerbate margin pressures, one might be forgiven for adopting a cautious stance. A comeback, while not entirely impossible, appears, at present, to be more wishful thinking than a reasoned expectation. The market, after all, rarely rewards optimism without a corresponding display of competence.

2026-01-17 22:53

The Illusion of Recovery

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