Rivian’s $45K R2: The Make-or-Break EV for the Struggling Startup

Stock Market

Rivian (NASDAQ:RIVN) stock has fallen more than 40% this year and could easily slide further. It has made only about 100,000 electric vehicles so far. Though the company is based in Irvine, California, it has plans to build a $5 billion production facility east of Atlanta.

The Atlanta plant aims to produce the R3, a crossover that wowed reporters at its unveiling. But it won’t be built if Rivian can’t make the R2, also announced this month, at a profit.

The R2 and RIVN Stock

The Rivian R2 is described as “a $45,000 electric off roader for the masses.” While prices for the current R1 line start at $70,000, the R2 is set to start at $45,000. That’s similar to the Tesla (NASDAQ:TSLA) Model Y.

The R2 will be about 15 feet long, which is two inches shorter than the Model Y. Because it’s electric, it has a “frunk” (front trunk), big enough for a small suitcase, and its own bike mount system. It has a steering wheel, which CEO R.J. Scaringe calls a “scroll wheel,” with haptic feedback. Both seats fold down so you can sleep in it.

You can get a single motor with rear-wheel drive, or 2-3 motors with all wheel drive. It will go 300 miles on a charge. All this makes it a direct competitor to the Ford Motor (NYSE:F) Mustang, the Hyundai (OTCMKTS:HYMTF) Ioniq 5, and the Kia (OTCMKTS:KIMTF) EV6.

The R2 Marketplace

Comparisons to existing cars, however, are a little fake because the R2 won’t arrive until 2026. By that time the car market may look very different which makes one wonder about the longevity of RIVN stock.

General Motors (NYSE:GM) should have a full line of electrics in 2026, able to power your home. Ford says it will be able to build 2 million EVs that year, and Toyota Motor (NYSE:TM) should have 10 electrics by that year.

Hyundai and Kia will be heard from, as will German carmakers Volkswagen (OTCMKTS:VLKAY) and BMW (OTCMKTS:BMWYY). It can make EVs and gas-powered cars on the same production line.

We haven’t even talked about China. Half the global market for EVs is due to be Chinese in 2026. BYD (OTCMKTS:BYDDY) already makes cars that cost under $25,000. The three EV makers traded in New York–Li Auto (NASDAQ:LI), Nio (NYSE:NIO), and XPeng (NASDAQ:XPEV), will all have refreshed product lines by 2026.

Even if the Biden Administration keeps all these Chinese EVs out of the U.S. market, BYD is building a plant in Mexico. That could close off a lot of export markets by 2026.

The Bottom Line

Rivian reported its 2023 results in February. RIVN stock lost $5.4 billion on revenue of $4.4 billion for the year. It ended the quarter with almost $10.5 billion in total liquidity.

The company said it will need to raise another $15 billion of debt to finance the Georgia plant.

It already has $1.5 billion in tax breaks from the state government. The new taxable bonds will be offered through the state and local governments.

Scaringe insists he’s cutting costs by delaying the Georgia plant and has already chopped 10% of his existing staff. The company says it already has 68,000 reservations for the R2 but that’s a commitment of just $100.

Will all those people buy when the car comes out and they see what else is available? That’s the question hanging over Rivian stock now. That’s why, despite the R2 and R3 announcements, shares are down 41% in 2024.

On the date of publication, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.