24/7 Wall St. Insights

• Rivian Automotive Inc. (NASDAQ: RIVN) remains too small and loses too much money to survive, even if its vehicles are well-regarded.
• Also: 2 Dividend Legends to Hold Forever.

Rivian Automotive Inc. (NASDAQ: RIVN) stock is down 15% for the past month and 56% in two years. The market, which might have given up on the stock earlier in the year, has completely abandoned it recently. The fact that a fire damaged or destroyed about 50 Rivian vehicles is not the reason. The company remains too small and loses too much money to survive, even if its vehicles are well-regarded.

Investors became excited when Volkswagen said it would invest $5 billion in Rivian. It is worth looking again. The sum is $1 billion, with some investment to come later. The operative phrase in the announcement is “up to $5 billion.” If the venture’s early results disappoint VW, it may pull back. The investment does not negate that Rivian loses about $40,000 on each vehicle it builds.

Rivian’s revenue in the most recently reported quarter rose by a fraction year over year to $1.2 billion. It lost $1.4 billion, adding to several quarters in which it has lost $1 billion or more. It produced a tiny 9,612 units.

Rivian needs to be bigger, and its mid-range vehicles are too expensive to compete with Tesla or the mass of legacy car companies entering the EV sector. They cost about $80,000. To clear out inventory or drive demand, the company has resorted to 2.99% loans for 60 months. Loans of this kind usually carry an interest rate of 6% or higher.

There are no signs Rivian can be a success.

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