Better EV Stock: Rivian or Tesla?​

Rivian (NASDAQ: RIVN) is kind of like Tesla's (NASDAQ: TSLA) runner-up. If you're looking to invest in the electric vehicle (EV) sector, you could buy either one. However, there are some interesting facts you'll want to consider before you make your final choice.

Rivian is on the cusp of a big development

Tesla's first EV was a high-end model. After reaching scale production, it began offering lower-cost EVs for mass-market customers. This is a logical progression, since building a manufacturing business from the ground up is very expensive. There's no way around the fact that early production numbers will be low. Generating the most revenue per vehicle to offset the high start-up costs is probably the best course of action for a business.

Image source: Getty Images.

Rivian did the same thing with its early all-electric truck, the R1, which was targeted at the high end of the market. In 2026, the goal is to introduce the R2, a mass-market vehicle. The R2 could be a make-or-break moment for Rivian's business. If the R2 is well received by consumers, Rivian may have a chance of becoming a sustainably profitable business, like Tesla. If the R2 flops, Rivian's future will be much less certain. Right now, only the most aggressive investors should consider owning Rivian.

Tesla isn't the clear winner

Given that Tesla is profitable, it would seem like the safer bet in the electric vehicle space. While it no longer has the same start-up risk, there are other risks to consider. For example, CEO Elon Musk has a habit of making headlines outside the workplace that often affect the stock price. Tesla has also recently announced plans to cut models that aren't selling well. However, it isn't building different models -- it's working on humanoid robots instead. It isn't clear what, exactly, Tesla is at this point: A car maker, or something else.

Then there's the valuation issue that you can't avoid. Tesla's price-to-earnings ratio is a huge 380x. That's an astronomically high number that's wildly out of line with the other major automakers. Clearly, investors don't view Tesla as a boring auto stock. They see it as something else. Unless you believe Tesla can live up to the massive expectations investors appear to have for the future, you probably won't want to own it.

In the end, neither Tesla nor Rivian may be good options in the EV space right now. That said, you might want to revisit Rivian if the R2 is well-received.

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