Rivian Could Be a Surprise Robotaxi Winner After Scoring a $1.25 Billion Partnership With Uber

The robotaxi industry is still in the early stages, but it could expand rapidly over the next decade. Investors are tipping several companies to emerge as leaders in this market, including Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), which owns Waymo, and Tesla (NASDAQ: TSLA), which has ramped up its fleet of robotaxis over the past year. However, Rivian (NASDAQ: RIVN), an electric vehicle (EV) maker, could be a surprise winner in this industry, given the deal it signed with Uber Technologies (NYSE: UBER) earlier this year. Here's why investors shouldn't discount Rivian's chances in the race to the top in the robotaxi market.

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A wide range of possible outcomes

In March, Rivian agreed to deliver up to 50,000 autonomous units of its new R2 models to Uber through 2030. In exchange, Uber will invest up to $1.25 billion in Rivian through 2031, including $550 million this year. This is a great deal for Rivian for several reasons. First, the company receives a substantial cash infusion that will help it achieve certain goals. Notably, the EV maker needs to train its self-driving software and achieve full autonomy (at least in certain regions) with its R2 for this partnership to be as lucrative as possible.

That will require some work and some money. And if Rivian can achieve full autonomy in time, it will likely have a positive impact on its business beyond its deal with Uber. It could increase demand for its cars among other large corporations or generate higher recurring revenue from self-driving software subscriptions. Second, Uber is one of the leading ride-hailing platforms. It benefits from a strong brand name, a large user ecosystem, and a deep moat due to network effects.

Uber could leverage these advantages to quickly scale its robotaxi service. If Uber's robotaxis become very popular, the company may order even more EVs from Rivian.

But what happens if Rivian fails to achieve full autonomy in time? The company's shares will likely fall off a cliff. The good news is that Rivian is finally delivering its R2 to customers, and the more of them it has on the road, the more data it will have to train its self-driving software. The R2 has a much more approachable price than Rivian's previous models and is a direct competitor to Tesla's Model Y, the best-selling car in the world (EV or not) for three years running.

Higher sales volume may more than offset the lower per-unit price of the R2, leading to steady revenue growth for Rivian over the next few years. Rivian is also expanding its manufacturing footprint. These efforts may help the company achieve lower per-unit manufacturing costs and help boost its margins. However, if the R2 flops, the company's shares will plummet. So, Rivian's medium-term outlook hinges on several things going just right. If they do, expect strong returns. If they don't, the stock will underperform broader equities. Investors should keep that in mind before initiating a position.

Prosper Junior Bakiny has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Tesla, and Uber Technologies. The Motley Fool has a disclosure policy.