4 great reasons to buy Rivian now

While the growth in electric vehicle (EV) sales in the US has not been as explosive as anticipated, the truth is that electric vehicles are here to stay and are set to thrive for years to come. If you accept the long-term EV thesis, it is compelling to try to find the next one adze– as an investment.

Here are some reasons why the EV manufacturer Rivian Automotive (NASDAQ: RIVN) could be next in line to make a name for themselves in this budding industry.

Branding

“If you build it, they will come” might work in the movies, but not so much in the automotive industry. In the highly competitive field, your product must speak volumes or consumers will abandon the brand in droves.

Fortunately, Rivian has built a great brand early in its history, earning Best Owner Experience in JD Power’s 2023 US Electric Vehicle Experience Ownership Study. Conformable Consumer ReportsRivian tops the list of automakers for top brands customers would buy again, with over 86% of consumers saying they would buy another Rivian.

By all accounts, Rivian’s R1T and R1S are well-received, well-designed and well-built, and a strong brand will allow the company to build on its early success.

Rate reduction

The Federal Reserve announced it would cut the overnight lending rate by 50 basis points, or half a percentage point, thanks in part to lower inflation and lower jobs. This does several positive things for Rivian. First, it will help lower borrowing costs as the company continues to burn through cash and will almost certainly need to raise capital at some point in the future.

The rate cut will also help the company’s emerging leasing program. Leasing can allow consumers to reduce upfront costs, lower payments and stay in new models for less money. Rivian started its leasing program last November and has expanded to 33 US states. It will continue to expand, and can now offer better rates to attract even more consumers.

Perhaps best of all, the Fed’s interest rate cut will help push back fears of an impending recession, which would surely have hit Rivian’s sales hard.

More than meets the eye

If you’re interested in Rivian as an investment, you’ve no doubt heard about the deal it closed Volkswagen. It is a massive deal that could lead to a total investment of $5 billion. But there is more to this business than meets the eye.

Sure, it’s a huge bonus that Rivian is attracting investment, and the potential $5 billion deal will help fund the company’s many ambitions. But this deal is as much about Rivian’s ability to develop proprietary technology, software and hardware that it can sell to other automakers.

The story continues

Volkswagen’s agreement to enter into a joint venture to use Rivian’s proven hardware and technology platform in its vehicles is confirmation that the start-up EV maker can indeed pursue this strategy.

The big tease

Most investors know about Rivian’s initial exclusive contract Amazon to deliver 100,000 electric delivery vans to the e-commerce juggernaut by 2030. Most also know that this deal was made non-exclusive at the end of 2023, but we have yet to really see the fruits of the decision. Rivian had a big new client, AT&Tbut a wave of customers could come in the next two years.

The main reason is that once this agreement between Rivian and Amazon becomes non-exclusive, it will take time for other companies to sign up for pilot programs and testing. With nearly a year since the deal went non-exclusive, 2025 and 2026 could be the years we see a number of customers showing up for the company’s electric delivery vans, and could be a good incentive to lock in general deliveries.

Scratching the surface

These are four solid reasons for Rivian investors to remain optimistic about the future, and we’ve only scratched the surface. Note that Rivian has the R2, R3, and R3X on the way in 2026, continues to cut costs and move toward gross margins in the fourth quarter, refreshed and introduced the next-gen R1T and R1S, and has enough cash for the latest by launching the highly anticipated its R2.

Rivian’s stock may have lost 42% of its value over the past year, but things are much better than they seem, and the stock could offer aggressive investors — remember, Rivian will remain highly speculative with large price swings — a way to buy into the future of electric vehicles.

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

4 Big Reasons to Buy Rivian Now was originally published by The Motley Fool