Stock Market

Analysts are pounding the table for Rivian (NASDAQ:RIVN) stock.Shares are down 16% so far in 2023. They have lost more than half their value in the last year. The company is losing money hand over fist. Rivian loses $33,000 per car and delivered just 15,564 in the third quarter.

Yet there are people still telling investors to buy it. Rivian’s down but not out, they say.Are they right?

Why They Say Buy

RIVN stock has two big backers. Their names are Andy Jassy and Brian Kemp.

Jassy is the CEO of Amazon.Com (NASDAQ:AMZN). Amazon placed an order for 100,000 electric delivery vans with Rivian in 2019. About 10,000 have arrived. This means, according to the bulls, that there’s still plenty of runway, that cash will still come in. Amazon also bought 20% of Rivian’s stock and is hanging onto the stake even after it helped crash its own results.

Kemp is the Governor of Georgia. Kemp put $1.5 billion of taxpayer money into Rivian’s plan to make its cars, trucks, and vans at a new plant outside Atlanta. It’s one of several “green” plants my taxes have helped attract to the state. Since his re-election in 2022 he has been conducting a victory lap on it.

What it adds up to, according to 12 of 20 analysts following Rivian at Tipranks, is success. They see the stock rising 69% over the next year. Combine an assurance of sales with low-cost, greenfield manufacturing and how can you miss, goes the argument.

The Other Side of RIVN Stock

Rivian’s flagship is the R1T truck. I’ve seen a few in my Atlanta neighborhood. The mayor drives one. It’s a nice truck. But it costs $73,000. The standard model gets 270 miles on a charge. In practical terms you’re looking for a plug every 200 miles.

Rivian also makes an SUV, the R1S, with similar specifications. You don’t see the R1S mentioned in many Rivian stories. That’s because they’ve made just 354 of them.

Rivian does promise lower prices. The R2T, due to be announced next year, will start at $40,000. The problem is that, while they will announce the R2T next year, they won’t deliver it until 2026.

CFO Claire McDonough talks about getting material costs down. There’s also an assumption that labor costs will be low, given Georgia’s status as a non-union state. The United Auto Workers might have something to say about that.

The Competition

The 2026 EV market will look a lot different than it does now. EV prices are already crashing, especially for used vehicles. Some models from Tesla (NASDAQ:TSLA) are already available at the price point Rivian is targeting.

It’s not just Tesla. Most car companies are going to ramp up EV production by 2026. Rivian’s Georgia plant will likely have to compete with Polestars (NASDAQ:PSNY) made in South Carolina , Volkswagens (OTCMKTS:VWAGY) made in Chattanooga, and Kias (OTCMKTS:KIMTF) made in West Point, Georgia.

The Bottom Line

The EV market is a moving target.

By 2026, when Rivian’s Georgia plant starts producing $40,000 cars, competition will be fierce. General Motors (NYSE:GM), Ford Motor (NYSE:F), Stellantis (NASDAQ:STLA), as well as German, Japanese and Chinese companies will all be there.

Rivian was created when it was assumed making an EV was difficult. It’s not. An EV is mostly a battery on wheels. Teslas are complex because, five years ago, you needed complexity to make up for high battery costs and short driving ranges.

Those days are gone. EV costs are declining fast. Power is moving from car makers toward battery producers. The Georgia plant may well become Brian Kemp’s albatross and Rivian’s bridge too far.

As of this writing, Dana Blankenhorn had a LONG position in AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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