Shares of the electric vehicle (EV) maker Rivian Automotive (NASDAQ: RIVN) rose sharply this week after a report surfaced that the company has been stockpiling battery materials to fend off some of the negative effects from President Donald Trump's tariffs.
Investors may have also been optimistic after the Trump administration said that it would soften some of its auto tariffs, though many are still in place.
As a result, Rivian's stock jumped 9.8% this week, according to data compiled by S&P Global Market Intelligence.
Rivian has been preparing for tariffs
Bloomberg reported this week that Rivian has been stockpiling lithium-iron phosphate (LFP) battery cells since late last year. The company apparently began setting aside extra battery material from China-based Gotion High-Tech in an effort to soften some of the impact of Trump's tariffs.
Rivian investors were understandably excited to learn that the company made a bold move to somewhat insulate itself from import tariffs. It's still unclear just how much it will save by making the pre-emptive move, but with Chinese import tariffs currently as high as 145%, it could be significant.
Rivian investors were also likely responding to the Trump administration's pullback on some auto tariffs this week. The administration said some auto-parts import tariffs will no longer stack on top of each other; for example, an automaker may not have to pay a steel tariff and aluminum tariff on the same part.
Rivian produces its vehicles at its Normal, Illinois, plant but it sources parts from U.S. and foreign suppliers. Any move, then, by the administration to reduce tariffs on auto part imports could potentially help Rivian.
A long road ahead
Investors are right to be pleased with Rivian's proactive battery sourcing, but it's also important to note that the auto industry is facing a very difficult environment.
There are still a lot of unknowns for automakers right now, and many companies, including General Motors and Stellantis, recently cut their guidance due to tariffs. If President Trump's tariffs cause a slowdown in the economy, consumer spending could drop significantly. And if Rivian is affected by some tariffs in the near future, its vehicle prices could still increase.
All of which means that investors shouldn't be too optimistic until the tariff dust settles and there's a clearer view of how the economy has been affected.
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Chris Neiger has positions in Rivian Automotive. The Motley Fool recommends General Motors and Stellantis. The Motley Fool has a disclosure policy.