Many electric vehicle (EV) companies are still struggling to find their footing in an increasingly competitive automotive market. This means that investing in EV stocks can feel like a huge gamble right now.
While it's far from a sure bet, I think Rivian Automotive(NASDAQ: RIVN) is one company that's on the right track. I bought shares months ago and plan to hold onto the stock for several years as the company grows.
Here's why I think Rivian could be a good place to invest $1,000 right now.
It's getting closer to profitability
EV start-ups burn through piles of cash and sometimes wind up with little to show for it. Just ask Fisker, which recently filed for bankruptcy.
While Rivian reported a net loss of $1.4 billion in the second quarter, it is taking big steps to stop the hemorrhaging. It recently reengineered its R1T pickup truck, R1S SUV, and delivery vans to use fewer electronic control units and less wiring. The result was a material cost reduction of 35% for its EV vans and a "similar" reduction in costs for the R1T and R1S.
It was a decisive move by management, and came at a time when many EV makers are trying to figure out the best ways to make their vehicles profitable. Rivan's management appears laser-focused on becoming gross profit positive, and says that will happen by the end of the fourth quarter.
Rivian's tech is getting interest from an auto industry giant
Rivian not only makes its own vehicles, it also designs the software that goes into them. Some of that technology has caught the attention of Volkswagen, the world's second-largest automaker.
Volkswagen recently started a joint venture with Rivian through which the EV start-up will receive up to $5 billion in investments in exchange for VW being able to use some of Rivian's tech in its vehicles.
The cash infusion, $1 billion of which has already been received, is great for Rivian as it prepares to begin production of its new R2 and R3 vehicles next year. The joint venture is also proof that Rivan is making valuable technology that established automakers can't ignore.
Image source: Rivian Automotive.
Customers love its vehicles, and more are on the way
Recent Consumer Reports data shows that 86% of Rivian customers say they would buy another vehicle from the company. Not only is that an impressively high percentage, but Rivian ranked at the top of the list for customer satisfaction among all car brands, not just EVs.
That bodes well for the company as it gears up to sell two new models, the mid-sized R2 and R3. With these smaller vehicles, Rivian will enter new -- and less expensive -- product segments. The R2 will start at around $45,000 -- far cheaper than its full-sized R1S SUV, which starts at around $76,000.
The new models will go on sale in 2026, so it'll be a little while before the company sees any benefit from them, but the R2 and R3 could be catalysts that help increase EV adoption among average consumers.
In this still very new industry, patience is a virtue
Investing in a small EV start-up adds a certain amount of risk to your portfolio. If you don't have a large portfolio diversified across other investments, spending $1,000 on Rivian's stock may not be the best move for you right now.
But, if you can afford to put $1,000 toward a riskier bet, I think Rivian is a good option. The company has made smart cost-cutting moves, attracted significant investments, and is building a strong brand with fantastic EVs. And trading at a price-to-sales ratio of just 2.8, its stock is relatively inexpensive.
Just remember that you'll likely have to be patient with Rivian stock while the company moves toward profitably and ramps up the production of its future models.
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Chris Neiger has positions in Rivian Automotive. The Motley Fool has positions in and recommends Volkswagen Ag. The Motley Fool has a disclosure policy.
