With prices near record lows, there is finally some positive news for Rivian.

Stocks have been hard to come by for several years. rivian cars (RIVN -2.27%)The price, which exceeded $179 immediately after its launch in November 2021, has now fallen to less than $10.

Rivian’s problems and why EV stock prices are falling

Rivian is making progress in vehicle sales, with production and deliveries more than doubling in 2023. However, electric vehicle (EV) manufacturers are selling vehicles at a loss, as evidenced by last year’s total profit of minus $2 billion.

Rivian’s gross profit is the difference between the price it sells its vehicles for and how much it costs to build them. This excludes marketing, research and development, or corporate expenses and mostly includes the cost of materials and labor needed to build the vehicle. Rivian’s negative gross margins are a sign that it doesn’t currently have the scale and manufacturing efficiency to compete with larger automakers.

Recently, overall EV sales have started to slow. According to Kelley Blue Book, U.S. electric vehicle sales increased only 2.6% in the first quarter. This compares to a 46.4% increase in the first quarter of 2023.

Amazon provides good news for Rivian.

While Rivian is clearly taking care of its issues, there is some good news that has recently come to light for the company. bloomberg According to recent reports: Amazon (AMZN -2.56%) Became the largest private EV charging station operator in the United States.

Why is that good news for Rivian? That’s because the company is Amazon’s electric delivery van (EDV) supplier. Amazon is committed to achieving net-zero emissions by 2040, and Rivian’s EDVs are one of the keys to achieving that goal.

Amazon ordered 100,000 vans from Rivian in 2019 and plans to have them on the road by 2030. However, only about 13,500 units have been delivered so far. One of the biggest reasons for this is that the e-commerce giant did not have a charging infrastructure in place.

However, the company currently has 17,000 chargers in 120 warehouses across the United States. This will pave the way for significantly more EDVs to be shipped to Amazon in the coming years.

Notably, Amazon is also a major shareholder of Rivian, owning approximately 17% of the company. Therefore, we have an interest in ensuring Rivian’s success.

Equally important, Amazon also laid out a roadmap for other companies looking to convert their vehicles to EVs. The Amazon-Rivian EDV deal was initially exclusive, but that exclusivity has ended. AT&T Amazon is the first company to run a test pilot program with Rivian this year, which will add the EV maker’s vans to its fleet.

more good news

While overall EV sales declined sharply in the first quarter, Rivian sales were fairly solid, up about 59%. The company produced 13,980 vehicles and delivered 13,588. That growth far surpassed overall EV growth in the United States.

Meanwhile, the Rivian R1S was the fourth best-selling electric vehicle in the first quarter. tesla model and ford Mustang Mach-E. Rivian launched a more affordable electric EV, the R2, last month. Pricing starts at $45,000, and the company is looking to make this a more mainstream vehicle. The new vehicle received over 68,000 reservations within 24 hours of its launch.

Image source: Getty Images.

turnaround play

With negative gross margins, Rivian has a lot of work to do to prove it’s still a viable business. On that front, the company announced it would close both its consumer and commercial lines for a few weeks to implement cost-saving technologies at the factory, including new design and engineering changes to the R1 platform. Additionally, the line rate will be increased by approximately 30% to increase vehicle production efficiency.

As production increases and the company becomes more efficient, gross margins become positive and profitability increases. It may not be easy, but having support from Amazon helps a lot.

Rivian is undoubtedly speculative, but the stock has potential for investors looking for a high-risk-reward investment, and we’re finally seeing good news about that changing.