Rivian stock is roaring back to life—here’s why

Rivian stock (RIVN) is soaring to multi-month highs on growing optimism that the EV manufacturer would shore up its cash position.

On Monday, the RIVN stock price rallied 11% to $14.5, its highest in nearly three months. RIVN stock has rallied 22.8% over the past month, helping to offset a mostly negative 2024 that has seen the stock lose more than 44%.

As of this writing, Rivian has a total market capitalization of $14.8 billion, placing it fourth among publicly traded EV manufacturers.

Still, Rivian is trading 83% lower than its initial public offering price of $78 in November 2021.

Over that period, the company’s cash position has plunged from $18 billion to less than $6 billion, raising fears that the EV manufacturer would struggle to maintain its high cash burn rate.

Some of the worry faded after the company secured a conditional loan of up to $6.6 billion from the U.S. Department of Energy.

German automaker Volkswagen has also announced a $5.8 billion investment in Rivian over the next three years as part of a joint venture to develop EV technology.

The new funding commitments are essential for Rivian to sustain its operations.

Despite seeing a surge in car sales in recent years, Rivian has a lot of ground to make up if it wants to compete in the crowded EV market.

EV competition heats up

Founded in 2009, it wasn’t until late 2021 that Rivian began delivering its first pickup trucks.

The daunting production timeline isn’t unique to Rivian but highlights the capital-intensive process EV manufacturers face in getting a viable product to market.

Rivian’s car sales surged by 219% between 2022 and 2023, from 15,700 units to 50,122 units. A majority of those sales (47,203) were in the United States.

However, this accounted for less than 4%% of the record 1.2 million EVs that were sold in the U.S. last year, based on Cox Automotive data.

Meanwhile, Elon Musk’s Tesla remained the undisputed leader of EV sales in the country, capturing 55% of the market. German luxury brands like BMW, Mercedes, and Audi have all lost market share to Tesla, but they still account for at least 11% of total U.S. EV sales.

Analysts generally agree that Rivian must lower production costs and develop better in-house capacity to boost its competitiveness.

For its fiscal third quarter, Rivian announced that it lost around $39,130 for every vehicle it produced, much higher than the $32,700 loss it booked one year earlier.

In the meantime, the company downgraded its full-year production forecast due to a “component shortage” in its production line.

“This supply shortage impact began in Q3 of this year, has become more acute in recent weeks, and continues,” Rivian said in October.

High production costs costs partly explain the $70,000 price tag for Rivian’s R1T pickup truck. Meanwhile, Tesla’s basic Model 3 starts at around $40,000.

At current prices, Rivian cars remain out of reach for the average customer.