How Is Rivian Balancing Efficiency With Its Push Toward R2?

Rivian Automotive, Inc. RIVN continues to double down on its philosophy to drive efficiencies across the organization to help self-fund the technologies that set it apart. Per Rivian’s third-quarter earnings transcript, the company remains committed to channeling resources into strategic differentiators, most significantly, its autonomous driving training, without losing sight of disciplined spending.

This approach will remain central as Rivian navigates its next phase of growth. It is continuously seeking new efficiencies and opportunities to streamline expenses, particularly as preparations ramp up for the highly anticipated R2 model scheduled to arrive next year. Scaling the business to support that increased volume is a priority, and cost discipline is playing a key role in making that possible.

R&D spending will naturally rise in the months leading up to the R2 launch. The increase is largely driven by the development of prototypes currently in progress. The company is already deep into design validation builds and manufacturing validation builds at its Normal, IL, plant, which are set to begin by the end of the year. 

Rivian expects some of its external spending to taper off once the R2 enters production. By 2026, R&D levels should normalize even as the company continues to invest in its long-term autonomous training initiatives. RIVN carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Operational Challenges Faced by Rivian’s Competitors

Lucid’s LCID adjusted EBITDA losses and negative free cash flow reflect its ongoing investment phase, primarily due to R&D, marketing, midsize program development, and autonomy initiatives. Elevated SG&A and R&D spending to support product launches and brand expansion are weighing on Lucid’s operating margins. Capital expenditures for 2025 are projected at $1-$1.2 billion. High capex and lack of profitability are likely to keep free cash flow negative in the near term.

Ford F Model e segment continues to struggle amid stiff competition, pricing pressure and significant costs associated with new-generation EV development. After having incurred losses of $4.7 billion in its EV business in 2023, Ford’s loss from Model e widened to $5.07 billion in 2024, exacerbated by ongoing pricing pressure and increased investments in next-generation EVs. The company is expected to incur huge losses in its EV business this year as well.

RIVN’s Price Performance, Valuation and Estimates  

Rivian has outperformed the Zacks Automotive-Domestic industry year to date. RIVN’s shares have gained 32.4% compared with the industry’s growth of 16.2%. 

 
From a valuation perspective, RIVN appears overvalued compared to the industry. Going by its price/sales ratio, the company is trading at a forward sales multiple of 3.25, higher than the industry’s 3.42. 

 
The Zacks Consensus Estimate for RIVN’s 2025 and 2026 loss per share has narrowed by 2 cents and 5 cents, respectively, in the past 30 days. 

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research