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Far from being the darling of markets that they once were between 2020 and 2021, startup electric vehicle (EV) companies have fallen off the radar in 2023 - and not without reason. Almost all of the names in this once sought-after group are struggling with execution, and multiple companies have scaled back their production plans.
On top of being demand-constrained, almost all EV companies – including the formidable Tesla (TSLA) – now find themselves saddled with excess capacity. The huge wait for much sought-after EV models has now given way to cars piling up at dealers, while multiple companies have cut output to what they typically describe as levels meant to “better align production with market realities.”
The EV Industry is Going Through Turmoil
To me, the execution at Rivian Automotive (RIVN) stands out amid the tide of production cuts that we’ve seen from names like Lucid Motors (LCID), Polestar (PSNY), and Fisker (FSR). Even legacy automakers like Ford (F) and General Motors (GM) - who, until not long ago, were overly optimistic about their EV businesses and committed billions of dollars towards building electric cars - have scaled back. To put it bluntly, electric cars are not flying off the shelves – or more aptly, off the dealer lots - as automakers expected.
As for Rivian, the company is among the best-positioned of the startup EV companies, many of which might not survive beyond a couple of years. RIVN has proved its mettle in the short term, and has the balance sheet strength to fund its cash burn until at least 2025.
But can Rivian make it big in the EV space and go beyond merely “surviving” the current slump? We’ll discuss this in this article.
Rivian Stock 2030 Forecast: Will It Achieve a 10% Market Share?
In February 2022, Rivian’s CEO R.J. Scaringe said at the Wolfe Research conference that the company is aiming for a 10% EV market share by 2030. However, the company is currently nowhere near that number on a global level, even as Cox Automotive estimates that RIVN had a 5% share of the U.S. EV market in Q3 2023.
As expected, Tesla led the U.S. market with a 50% share in Q3. Ford came in second with a 6.7% share, while Hyundai took the third spot with a 6.3% share. General Motors was fourth on the list, with a 5.1% share.
Rivian has gradually increased its market share in the U.S. EV market since it started delivering cars, and is now among the top 5 companies in terms of market share. However, it is worth noting here that electric cars in the U.S. currently account for less than 10% of total car sales. While the jury is still out on how much market share electric cars can capture by 2030, even the most pessimistic estimates call for over 25% penetration by the end of the decade. This would mean that to achieve a 10% market share in the U.S., Rivian would need to grow its deliveries exponentially from current levels.
Rivian Is Building Its Next Plant in Georgia
Rivian has an Illinois plant with a capacity of 150,000 units, which it intends to increase to 200,000 units. Its next plant will be located in Georgia, with an initial capacity of 200,000 vehicles, which the company will increase to 400,000 units by 2030.
Ahead of Rivian’s IPO in 2021, Scaringe said that the company plans multiple assembly plants outside the U.S. to support its goal of building 1 million cars by 2030. But then, a lot has changed since 2021, and many startup EV companies have backed down from the rosy projections that they provided before their listings.
For instance, Lucid Motors (which also went public in 2021) forecasted that it would produce 49,000 cars in 2023, but recently said that it would only produce 8,000-8,500 cars in the year – which is even below the 12,000 that it projected at the beginning of the year. And this is not to single out Lucid, as the situation there is not much different from other startup EV companies; they were also just among the most talked about EV names, too, like Rivian.
Can Rivian Make It Big in the EV Industry?
In my view, to make it big in the EV industry and survive the onslaught from Tesla, legacy automakers, and pure-play names, successful EV companies will need the following:
- A strong product proposition with attractive pricing, as “me-too” products might not gain traction
- A brand that can take on Tesla and other established automakers
- Ample financial resources to fund capex, as well as continued operating losses
- A credible management team that has the vision to take the company to the next level. Sadly, a lot of EV leaders have been more talk than substance - and worse, some have been guilty of misconduct and overhyping their capabilities (think Nikola (NKLA) and Lordstown Motors (RIDEQ)).
I believe that Rivian scores well on all of these parameters. Its vehicles have received encouraging reviews from auto analysts and initial owners - and it has also established a credible brand for itself.
As for financial resources, it is among the most well-funded startup EV companies, and has the backing of Amazon (AMZN) – its biggest stockholder. And in terms of the leadership team, those following Rivian’s earnings calls might agree that the company has not fallen into the trap of perennially overpromising and underdelivering, unlike many other EV names.
Overall, while these are still early days, Rivian has stood out in the first round. As things stand today, I don’t have any reason to believe that the company won’t be able to make it reasonably big in the EV market, especially as it starts producing R2 vehicles, which will be much more affordable and mass-market than the current R1 series.
On the date of publication, Mohit Oberoi had a position in: RIVN , AMZN , F , GM . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
