Rivian Automotive Faces Market Challenges Despite Production Growth

Analyst Downgrades Rivian Stock Amid Demand Concerns

Rivian Automotive, a key player in the electric vehicle (EV) market, has seen its stock downgraded to ‘Hold’ from ‘Buy’ by Wolfe Research analyst Rod Lache.

The downgrade reflects concerns about the company’s future growth, given that new models essential for maintaining this growth are still years away, reports Barron’s.

The Issue of Sustaining Demand

Lache’s decision is primarily driven by uncertainties around Rivian’s demand growth in 2024 and 2025, ahead of the launch of its second-generation vehicles on the R2 platform.

Despite being impressed with Rivian’s production system improvements, Lache remains cautious about the company’s growth trajectory in the coming years.

Rivian’s Production and Sales Growth

• In 2023, Rivian produced 57,232 units, a significant increase from 24,337 in 2022.
• The company sold 50,122 units in 2023, up from 20,332 in 2022.

Market Saturation and Pricing Challenges

Rivian’s growth in 2023 wasn’t a problem, but its reliance on luxury EVs, typically costing around $80,000, poses a challenge.

The luxury EV market in the U.S. is becoming saturated, with about 25% of all luxury cars sold in Q3 being all-electric.

Rivian’s high price point might hinder its competitiveness, especially as the market expects sales growth to decelerate below 50% between 2024 and 2025.

Anticipated Reacceleration with R2 Platform

Despite the near-term slowdown, analysts expect Rivian’s growth to reaccelerate to around 55% in 2026 and 2027 with the arrival of the more affordable R2 platform.

This strategy mirrors Tesla’s approach of initially selling higher-priced models before introducing more affordable options.

Rivian’s Market Share and Analyst Outlook

In 2023, Rivian captured about 5% of the EV market share in the U.S., an increase from 3% in 2022.

With the new Hold rating, approximately 67% of analysts covering Rivian still rate its shares as ‘Buy,’ above the S&P 500 average of 55%.

The average analyst price target for Rivian is around $26, indicating a potential upside from its current levels.

While Rivian Automotive has shown impressive production and sales growth, the company faces challenges in sustaining demand in the luxury EV market.

The upcoming R2 platform offers hope for future growth, but the immediate future presents hurdles in maintaining the momentum achieved so far.