Rivian Automotive (RIVN 8.41%) stock surged on Wednesday, rallying 11.5% in early morning trading. In a fireside chat at the Barclays Global Automotive and Mobility Tech Conference, Rivian CFO Claire McDonough provided crucial insight into the electric vehicle (EV) maker’s plans, including a big update that sent the markets into a tizzy today.
Rivian’s new battery pack to lower EV cost
Rivian reiterated its goal to turn gross-margin-positive in 2024. Aside from moves to cut costs, Rivian expects to launch its standard battery pack in its R1 vehicles — the R1S SUV and R1T pickup truck — and believes this proceed could open up a large addressable market for the company.
The bigger update, though, is Rivian’s scheme to present a new battery aside from the standard pack for its R1 vehicles. McDonough said the simpler battery pack and module structure is not only easier to manufacture, but will also eradicate “thousands of dollars of costs.”
That could mean more affordable Rivian EVs for customers and, therefore, higher sales for the company. Rivian’s R1 EVs currently sell for a starting price of a little over $70,000 per unit. Its cost-efficient new battery technology should also likely play a key role in helping the EV maker accomplish its gross margin goal.
With its new battery packs, Rivian hopes to furnish its customers with more available options to boost sales. As it introduces the battery packs in R1 vehicles in 2024 and upgrades its assembly lines, Rivian expects production to take a hit in the second and third quarters.
Rivian is headed in the right direction, and its stock price could follow
Rivian has faced its fair share of challenges over the past couple of years or so ever since its first R1T pickup truck rolled off its production line in September 2021. Production delays and slow deliveries hit the company’s bottom line and cash balances and made investors jittery.
Rivian’s CFO, however, believes many of the challenges are behind the company; and she could be right. Rivian is finally ramping up production and recently increased its 2024 production outlook by 2,000 units to 54,000 units. Rivian is also focused on delivering 100,000 electric delivery vehicles to e-commerce giant Amazon.
In its third quarter, Rivian’s revenue surged 149% while its operating loss narrowed by 19%, both year over year. Its gross profit per vehicle improved by $2,000 per unit sequentially, and the EV maker ended the quarter with nearly $9 billion in cash, cash equivalents, and short-term investments. Rivian expects to begin construction of its Georgia plant in early 2024 and start producing vehicles on its new platform, R2, by 2026.
Long story short, most of the numbers propose that Rivian may have hit an inflection point, and there’s possibly more upside to the battered EV stock than downside from here — Rivian stock is still down almost 80% since its public debut in late 2021 as of this writing.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon. The Motley Fool recommends Barclays Plc. The Motley Fool has a disclosure policy.
