Is Rivian Stock a Buy?

Rivian Automotive (NASDAQ: RIVN) investors got some meaningful and important news in late June: German automaker Volkswagen announced it was planning to invest up to $5 billion in the electric vehicle (EV) maker as part of what could be a game-changing partnership for the startup.

Investors will next hear from Rivian when it delivers its second-quarter report on Aug. 6. Considering the Volkswagen news, investors might be wondering if they'd be well-advised to buy Rivian stock ahead of that update.

For most stocks, one can usually find arguments in favor of buying or selling. Investors can only weigh those factors and decide what they see as the best course. Investors didn't have many good reasons to buy Rivian over the last year. But the stock has gained momentum in recent months as the buy case has begun to get clearer, and the stock has gained nearly 90% from its 2024 low. Here are three good reasons why I think Rivian still looks like a buy now, and one big hill the EV start-up will need to climb.

Notable Rivian investors

Rivian doesn't just make electric trucks and SUVs -- it has also started supplying Amazon with electric delivery trucks from the multiyear 100,000 vehicle order the tech giant placed with it back in 2019. It's not only a customer -- it was also an early investor in the EV maker.

As of April 29, Amazon owned over 158 million Rivian shares , or almost 17% of the company. But it might be its role as a customer that is most important for Rivian's long-term success. While thousands of Rivian's electric delivery vehicles are out on Amazon's truck routes, the e-commerce giant is no longer the exclusive buyer of them. And now, Volkswagen's contributions could help launch Rivian to its next phase of growth.

A leader in EV technology

Rivian management says it only aims to approximately match its 2023 production level in 2024, but holding off on boosting its output now looks to be a shrewd business decision. Rivian has conserved capital by pulling back on its expansion plans. It now plans to postpone the construction of a multibillion-dollar plant in Georgia, and will instead expand its existing facility in Illinois.

The company has instead been retooling some production capacity as it moves toward building its next-generation R2 and R3 models. Volkswagen's initial investment of $1 billion will help the company fund that initiative. Another $2 billion will be for Volkswagen to tap into Rivian's EV technologies through a joint venture that the companies hope will advance "next-generation electrical architecture and best-in-class software technology." Rivian owners already seem to be pleased with its vehicles' technology.

One example is a responsive air spring suspension system that automatically adjusts to driving conditions. Ground clearance is lower for highway driving to boost efficiency and higher when you go off-road. The company says automatic "ride-height leveling" also helps to balance the vehicle for improved handling when towing. While EV leader Tesla also has air suspension, its high-end Model S still requires manual adjustment for suspension height.

Image source: Rivian Automotive.

Building the Rivian brand

The company's technology has helped it build a respected EV brand. Its next step will be to use its current capital position and Volkswagen's investment to launch what it hopes will be more-mainstream models. The R2 SUV is expected to begin production next year, with deliveries starting in early 2026. The base price is currently expected to be about $45,000 -- meaningfully lower than the R1.

For an investment in Rivian stock now to pay off will require the R2 and R3 models to attract broad followings among customers. The question is whether the company has what it needs to get to the point where the R2 can bring in meaningful revenue.

It's not surprising that the company has been burning cash as it ramps up production and sales. Rivian has gone through more than $4 billion of its cash hoard in the last year -- and that's with no efforts underway to boost production volume in 2024.

The investment from Volkswagen may be the bridge it needs. But that's the question, and one factor that could lead investors to lock in recent gains and sell Rivian shares. For long-term investors who now see Rivian as having the means to successfully launch the R2 and R3, the investment case remains positive, though.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Howard Smith has positions in Amazon, Rivian Automotive, and Tesla. The Motley Fool has positions in and recommends Amazon, Tesla, and Volkswagen Ag. The Motley Fool has a disclosure policy .