While share prices of Rivian (NASDAQ: RIVN) remain down on the year, a spate of good news has helped the stock solidly rally off its lows. The stock is still down over 25% on the year, but its price has now more than doubled from its recent lows.
With Rivian stock now gaining momentum, should you buy shares while they're still trading below $20?
Rivian deal with Volkswagen creates a needed cash infusion
The biggest recent positive development for Rivian was the company getting an investment from Volkswagen (OTC: VWAGY) . The German automaker will initially invest $1 billion in the electric vehicle (EV) maker in the form of a convertible note that will later convert into Rivian common shares.
Later this year, the two automakers will then potentially form a 50/50 joint venture (JV) that includes another $1 billion Volkswagen investment. The joint venture will focus on developing software and electronics for EVs. In 2026, Volkswagen will provide a $1 billion loan to the JV in 2026. The German automaker also plans to invest another $2 billion directly into Rivian shares in $1 billion increments in 2025 and 2026. The first equity investment will be based on Rivian reaching certain financial milestones, while the second will be based on Rivian reaching certain technological milestones.
The deal will give Rivian a nice cash infusion to help make investments to scale its business as well as provide it with Volkswagen's manufacturing know-how. In return, the company will provide the JV with its expertise in electronic architecture for software-defined vehicles and allow Volkswagen to use its current electronic architecture in its own vehicles.
Shortly after the announcement, the German newspaper Handelsblatt reported that the two companies were already exploring expanding their partnership to possibly include hardware and joint production. It also said adding Volkswagen's EV brand Scout to the JV was being considered as well.
In more good news for Rivian, the company also announced that it had delivered 13,790 vehicles in the second quarter. That was an increase of 9% versus quarterly production totals a year ago and well ahead of estimates looking for 12,000 deliveries. The company said it produced 9,612 vehicles in the quarter. That was down 30% from a year ago, but it still reiterates its guidance to produce 57,000 total vehicles this year.
Image source: Getty Images.
Should investors buy the stock with it trading under $20?
Rivian thus far has seen strong demand for its luxury electric SUVs, and its Q2 delivery numbers show that its appeal remains. The issue the company has faced has been being able to sell its vehicles for more than the cost to make them. In fact, in the first quarter, the company's gross loss per vehicle delivered was an abysmal $38,784.
That obviously is not a sustainable business model, and the company has been working to take out costs in the production of its vehicles. The big innovation on this front is the company's new zonal architecture, which will reduce the number of electronic control units (ECUs) and wiring in its vehicles, thus lowering costs. This technology was incorporated into the second-generation models that Rivian introduced in June. The company is also looking to improve its material costs while increasing its line rate to leverage its fixed production costs.
Given this, the investment from Volkswagen is a big deal as it will provide the cash necessary for the company to help scale up its production and build out a new manufacturing facility in Georgia. The company also recently introduced its lower-priced R2 SUV models, which it plans to begin delivering in the first half of 2026, and thus will need to ramp up production.
While things are looking up for Rivian, the company is still very much in its early days. It still needs to show that not only can it begin to have positive gross margins, which it is aiming to do in Q4, but also that it can generate free cash flow and turn a profit as well. Those latter two metrics still appear to be a ways off in the future.
Fortunately, the company is now backed by both Volkswagen and its largest shareholder, Amazon , for whom it makes electric delivery vans. The backing of these partners should give it plenty of runway to scale its business over time.
That said, Rivian is still a speculative stock. It has a lot of potential upside, which can justify buying the stock at current levels, but it also carries a lot of risk. As such, interested investors should size their positions accordingly and expect above-average volatility in the price.
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 Volkswagen Ag. The Motley Fool has a disclosure policy .
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