Will Higher Production Volumes of R2 Boost Rivian's Gross Profit?

Rivian Automotive, Inc. RIVN reported a gross profit of $206 million in the first quarter of 2025, marking its second consecutive quarter of positive gross profit and its highest gross margin to date. This milestone reflects the company’s ongoing efforts to enhance cost efficiency across its operations. Rivian had recorded a gross loss of $527 million in the first quarter of 2024 while it posted gross profit of $170 million in the fourth quarter of 2024, driven by reductions in variable costs, increased revenue per vehicle delivered and improved management of fixed costs.

With record gross profit, Rivian has also met the gross profit milestone with Volkswagen Group following the formation of their joint venture, Rivian and VW Group Technology, LLC and expects to receive $1 billion in funding by the end of June.

The company maintains its outlook of delivering a modest positive gross profit for the full year 2025. Looking ahead, Rivian anticipates a quicker path to profitability with the upcoming launch of R2 in the first half of 2026. The expected higher production volumes of R2 at the Normal facility are projected to reduce fixed costs per unit across all vehicles produced at the plant, boosting margins. Rivian carries a Zacks Rank #2 (Buy) at present. 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A Glance at the Gross Margin of Rivian’s Competitors

Tesla TSLA posted a gross profit of $3.15 billion in the first quarter of 2025, which fell from the gross profit of $3.7 billion recorded in the year-ago quarter. The year-over-year decline came despite growth in gross profit of Tesla’s Energy Generation and Storage, as well as Services and Other businesses. Declining volumes and generous discount offers are expected to have impacted Tesla’s profits. Tariff troubles could disrupt the company’s supply chain and impact gross margins further.  

Lucid LCID incurred a gross loss of $228.5 million in the first quarter of 2025. Despite reporting a gross loss, Lucid delivered a significant improvement in gross margin. On a GAAP basis, Lucid posted a first-quarter gross margin of negative 97.2%, an improvement from negative 134.3% in the same quarter last year. This progress was due to increased revenue from regulatory credits, ongoing cost-reduction efforts and disciplined operational execution.

Rivian’s Price Performance, Valuation and Estimates  

Rivian has outperformed the Zacks Automotive-Domestic industry year-to-date. RIVN shares have gained 2.5% against the industry’s decline of 27.2%.

YTD Price Performance

From a valuation perspective, Rivian appears undervalued. Going by its price/sales ratio, the company is trading at a forward sales multiple of 2.37, lower than its industry’s 2.62.
 

EPS Estimates Revision

The Zacks Consensus Estimate for 2025 and 2026 EPS has moved up 42 cents and 15 cents, respectively, in the past 60 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