Even before the market’s recent volatility, Rivian Automotive (RIVN -0.83%) has been a stock accustomed to seeing large price fluctuations. At one point last year, it fell about 65% from January to April after poor delivery numbers, only to soar more than 100% from its lows on the news of a partnership with Volkswagen. When the dust finally cleared, the stock ended 2024 down about 42%.
Rivian’s stock started 2025 on a positive note, quickly spiking higher. However, with the market downturn, it is now down about 15% on the year as of this writing.
If history is any indication, shares are likely to remain volatile. The question, though, is whether the long-term prospects are enough to make the stock a buy right now.
Can Rivian take advantage of Musk’s missteps?
Elon Musk’s foray into politics and DOGE (the Department of Government Efficiency) has clearly hurt Tesla and opened the door for electric vehicle (EV) rivals like Rivian. Musk’s actions have ked to a significant portion of its consumer base souring on the brand both in the U.S. and overseas.
To make matters worse, the segment of the population he has angered are people who were likely more apt to buy an EV in the first place.
The declining favorability of Musk and the Tesla brand could be seen in its latest first-quarter unit delivery numbers, which fell 13% in the quarter. However, Rivian saw an even sharper decline, with deliveries down 36% to 8,640 vehicles.
Still, its deliveries came in ahead of analyst expectations for 8,200 vehicles. On its fourth-quarter earnings call in February, management said it expected first-quarter sales to decline to around 8,000 vehicles due to seasonality, a challenging demand environment, and the impact of the fires in Los Angeles, which has historically been one of the company’s biggest markets.
This could be both a transitional and transformative year for Rivian, and the damage to the Tesla brand could help the company over the long run. But it first must deal with the impact of tariffs. Although the company does its manufacturing in the U.S., it sources many of its components and raw materials from outside the U.S., like other automakers.
The company just managed to turn gross-margin positive last quarter, when it produced a modest gross profit. Its fourth-quarter automotive segment’s margins were a slim 7%, while its software and service margins were 28%.
As such, it doesn’t have much wiggle room to absorb increased costs. Management has already gone to great strides to lower its production and manufacturing costs. It switched to a design that significantly reduces the number of electronic control units and the amount of wiring in its vehicles, while it also reworked its factory.
At the same time, the current demand environment and the economy may also not lend itself to increasing prices. Rivian is already selling a luxury-priced vehicle at a slim margin, which indicates that it doesn’t have a huge amount of pricing power without hurting deliveries. This puts the company in a tough position in the near term.
However, Rivian is also in the midst of a big transformation. It will shut down its factory for a month this year to prepare for the launch of its new R2 SUV in 2026. Before the tariffs, this new model SUV was expected to start at a price of around $45,000. The R2 is meant to bring the brand to a much wider audience of buyers. From there, it will look to scale up with a new factory in Georgia.
Image source: Getty Images.
Is the stock a buy?
With the backing of Volkswagen and Amazon, Rivian does have a runway to continue to invest in and scale up its business. However, given its early-stage nature with its sub-scale and cash burn, there remains considerable risk. The current trade war with China and uncertainty over tariffs with other countries just adds another layer to this risk.
However, if the company can navigate this environment, it will be in a pretty good position given the damage suffered by the Tesla brand. This isn’t something that Musk is going to be able to walk back, so there is a clear opportunity for another company to step into the luxury EV market and take share. With Rivian turning gross-margin positive, scaling up its manufacturing, and set to offer a lower-priced model, it is one of the companies best positioned to do this.
All in all, Rivian is a speculative stock. It has solid potential upside, but it’s also a boom-or-bust type of stock. As such, investors can consider buying the stock here, but they must size positions accordingly.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Tesla. The Motley Fool recommends Volkswagen Ag. The Motley Fool has a disclosure policy.