Is Rivian the Smartest Investment You Can Make Today?

Electric vehicle (EV) manufacturer Rivian (NASDAQ: RIVN) is following the game plan championed by its rival Tesla (NASDAQ: TSLA). So far, Rivian seems to be executing very well. With several large and important backers, this EV start-up is showing signs that it will be a survivor.

If you are an investor with a more aggressive investment approach, Rivian stock could be a smart addition to your portfolio today.

What does Rivian do?

From the top-level view, Rivian is an automaker. Right now, it specializes in making electric SUVs, pickup trucks, and delivery vans, which sets it apart from the pack to some degree. It offers a commercial-focused delivery truck and high-end consumer-oriented SUVs and pickups.

The big problem it faces in its attempt to scale up is that the auto sector is already mature and highly competitive. Rivian is effectively a tiny upstart trying to use a technological innovation to break into the auto business. That's a tall order.

Image source: Rivian.

It's made even harder because Tesla has already done what Rivian is trying to do. Before Tesla, electric vehicles (EVs) weren't a mainstream product. Tesla effectively forced the auto world to treat EVs seriously. It built its business from the ground up, starting with high-end sports cars and eventually branching out to mass-market vehicles. Along the way, it built manufacturing facilities and honed its production processes so that it could turn a sustainable profit.

Rivian is a follower, not a leader, and that's OK

Along its growth path, Tesla seemed to revel in being the outsider. Rivian is following a similar playbook but is trying to partner more with other companies. For example, Amazon.com (NASDAQ: AMZN) has been an important early customer for Rivian, which builds delivery trucks for the online retailer. This relationship provided Rivian with reliable demand so it could justify building out its manufacturing facility. As it worked to fulfill the delivery truck order, Rivian used some of what it learned to also produce high-end consumer vehicles.

Rivian's early focus was on ramping production up to scale. Rivian is now shifting its focus to streamlining the manufacturing process. The early goal was simply to get to the point where it turned a gross profit, which it achieved in late 2024. A gross profit just means that it generated more revenue from selling its vehicles than it cost to build them. But management knows there are more costs below the gross profit line that will likely keep Rivian's bottom line in the red for years to come.

One effort to resolve the profit issue is Rivian's plan to introduce a mass-market SUV with a more reasonable price point within the year. That will broaden the customer base and, assuming it continues to make progress on the cost front, get the company closer to turning a more consistent profit based on scale of production. This plan is the same type of thing Tesla did, but there's an important difference here, too.

Unlike Tesla, Rivian is looking to partner with other automakers. Its agreement with Volkswagen (OTC: VWAGY) gets it valuable funding to use in building out its production facilities in exchange for providing Rivian's technology, which could someday find its way into Volkswagen cars. So, Rivian has at least two notable corporate partners to lean on as it grows and attempts to become profitable.

Rivian has a long way to go, but it is moving in the right direction

Rivian isn't likely to be an attractive choice for risk-averse investors. It is still in the start-up phase, and execution will be vital. A material enough misstep could lead to a very bad outcome for investors. So far, Rivian has been executing well, and its corporate partners have been pleased, with both Amazon and Volkswagen continuing to provide important financial support.

Despite the company's operational and financial progress, Rivian shares have fallen dramatically from their early highs and have only managed to limp along at a relatively low level. More aggressive investors who believe Rivian will follow the Tesla business model and reach a point where it is a sustainably profitable company might want to jump on Rivian stock now while it is still trading at a low level. Assuming Rivian keeps executing well (and you can handle the risk), it has real potential to be a smart long-term investment decision right now.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Tesla. The Motley Fool recommends Volkswagen Ag. The Motley Fool has a disclosure policy.