Should Rivian Worry About Its Brand New Competitor? Hint: Not One Bit.

Not much can spoil a good mood more quickly for a manufacturer such as Rivian (NASDAQ: RIVN) than hearing that more competition is on the way. At a time when the young electric vehicle (EV) maker is focused on building its brand and its scale, and accelerating the production of its recently launched R2, the less competition, the better.

South Korean car manufacturer Kia, on the other hand, has different objectives and plans to enter new electric segments in the U.S., including the lucrative truck market, and to drive its total sales to over 1 million with the help of new EVs. Some Rivian investors might be worried, but here's why they should still be able to sleep at night.

Image source: Rivian.

Kia has acquired its target

Kia hopes to splash into the U.S. pickup market with a midsize electric and range-extender truck by the end of this decade, according to the company's CEO, Ho Sung Song. It's part of Kia's broader plan to boost its annual U.S. sales to over 1 million vehicles and sell 90,000 pickups annually in North America. Kia's electric pickup would likely face off against EV pickups like the Chevrolet Colorado, Ford Ranger, Toyota Tacoma, and Rivian's R1T.

The U.S. truck segment is both lucrative and historically dominated by Detroit automakers, with a smaller niche covered by the Japanese. Kia's first punch into the valuable U.S. truck market won't be easy, but the company's CEO believes that its growing brand reputation and compelling electrified powertrains can rope in new customers. Song may be right, but for Rivian, each passing day makes that notion more irrelevant -- as things stand now. There are a few reasons for that.

Rivian investors should consider this

Some investors might be surprised to find that the truck industry economics get flipped on their head when comparing electric pickups to their gasoline counterparts. On one hand, internal combustion engine (ICE) trucks cost only marginally more to produce than a sedan, carry two to three times the price tag, and generate significantly higher margins. On the other hand, for electric pickups, it means a much larger battery than a sedan's, since trucks need to pull significant weight. That eats right into those juicy margins, as batteries are the biggest cost of these vehicles.

That is primarily why Rivian's rival Lucid (NASDAQ: LCID) never developed a truck and currently has no plans to. Furthermore, by the time Kia's new electric truck hits the streets in America, the R1T will be much more of an afterthought, and the R2T ... well, it doesn't exist. As it stands now, Rivian has no plans to introduce a smaller or more affordable truck model, such as a hypothetical R2T. At one point, Rivian's CEO even commented that there are no plans for a truck version of the R2.

What it all means for Rivian investors

Right now, Rivian is focused on reducing production costs while building scale, and has made incredible progress, including reaching its first full-year gross profit in 2025. Rivian's best pathway to proving it is capable of generating profits for investors is to accelerate production of the R2, a midsize platform that covers the most broadly appealing segment, and the R3, a compact crossover.

Rivian figured out pretty quickly what EV consumers want and pivoted away from offering electric trucks. It's a wise move from the young EV maker for now, enabling more resources to be invested in products that more people want, such as derivatives of its R2 or R3, or developing its software stack and driverless vehicle technology.

Daniel Miller has positions in Ford Motor Company and General Motors. The Motley Fool recommends General Motors. The Motley Fool has a disclosure policy.