Rivian Stock: The EV Recovery Play to Watch​

Electric vehicle (EV) start-up Rivian (NASDAQ: RIVN) has made impressive strides in its attempt to break into the auto sector. It has an award-winning vehicle and has achieved scale production of its high-end trucks. It has important partners, like Amazon (NASDAQ: AMZN) and Volkswagen. What it doesn't have are profits. This is what you need to watch if you own or are thinking about buying Rivian.

Rivian's next step

Rivian currently makes delivery vehicles and expensive consumer trucks. Operating at the high end of the consumer market makes complete sense, given the company's low production volumes, since it is still just building out its EV business. Making cars is capital-intensive, and building factories even more so. If a company has only a small number of vehicles to spread its costs over, it will have to charge a lot for each car.

Image source: Getty Images.

The problem is the market size. There are far fewer people who can afford to buy expensive cars than there are people who can buy cheaper cars. This is why Rivian, having achieved production scale with its high-end vehicles, is now set to introduce a mass-market vehicle called the R2.

The right move, but will it work?

This is exactly what Rivian should be doing. More importantly, it is almost certain to get the R2 to market in 2026, as planned, thanks to the roughly $7 billion in cash it had on its balance sheet at the end of the third quarter of 2025. That's the good news.

The bad news is that there's no way to know if consumers will buy the vehicle in large enough quantities. If sales are too low, Rivian's business model may not work over the long term. And after spending so much money building out its manufacturing base, there may not be enough cash left over to shift gears. In a worst-case scenario, the company's recovery opportunity could turn out to be a bust, with Rivian struggling to remain a going concern.

Rivian hasn't arrived just yet

At the end of the day, Rivian is making huge strides, and it could turn out to be a big EV recovery story if the R2 is a hit with consumers. However, most investors should probably wait to see how well the R2 sells before making a sizable commitment to Rivian's stock. If the R2 is well received, the investment opportunity here could last for years.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon. The Motley Fool recommends Volkswagen Ag. The Motley Fool has a disclosure policy.