Rivian Shares Surge 19%

"It is one of the stock market's little mysteries. Shares of troubled and small electric vehicle (EV) company Rivian Automotive Inc. ( NASDAQ: RIVN) are up 19% in the past month. Because of heavy competition and the expiration of the $7,500 EV tax credit at the end of this month, the stock should be headed the other way. Rivian has actually had a good year overall."

"Rivian did announce it would build a $4 billion plant in Georgia. The move is a huge risk. The facility will not open until 2028. By that time, competitors will have had more than two years to advance sales, and perhaps build vehicles that compete directly with Rivian's. However, one reason for the extra manufacturing is to build Rivian's new, inexpensive R3 crossover."

"The base price of its vehicles is $70,000. Some are closer to $100,000. The EV industry is trying to bring down prices to better compete with combustion-powered cars. With the $7,500 credit ending, that will be even harder. R3 represents a real big market unlock for us. It gets you into that category of purchases and prices that's meaningfully below the average. However, the segment is already crowded by vehicles like Ford's Mustang Mach-E, which is already priced below $40,000."

Shares of Rivian rose 19% in the past month and are up 16% year-to-date, yet the five-year performance is down 87% while the S&P 500 is up 41%. Rivian plans a $4 billion Georgia plant that will open in 2028 to produce a lower-cost R3 crossover, but the later opening risks competitors advancing. Current vehicle base prices cluster around $70,000 to $100,000, creating affordability concerns as rivals offer models below $40,000. Deliveries may total as few as 40,000 this year; June-quarter revenue was about $1.3 billion with continuing large losses and persistent cash burn.

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