Rivian Automotive (NASDAQ: RIVN) has lost almost all its value in a short period, with shares down by an eye-watering 92% since hitting public markets in late 2021. However, the company still promises patient investors the opportunity to get in on the ground floor of the long-term electric vehicle (EV) opportunity. Let's weigh Rivian's pros and cons to decide if this struggling automaker still has millionaire-maker potential.

What happened to Rivian's buy thesis?

Today, the EV industry is radically different from when Rivian hit the scene three years ago. At the time, the market was soaring -- led by the industry leader Tesla, which had essentially proven that pure-play EV manufacturers could operate profitably at scale. Traditional automakers like Ford, General Motors, and Stellantis seemed relatively late to the party, giving Rivian an opportunity to possibly exploit the gap in Tesla's model lineup through its focus on pickup trucks and large SUVs.

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Today, the thesis that may have justified Rivian's peak valuation of over $153 billion (the company is worth just over $10 billion today) has largely evaporated. Growth for the pure-play EV companies has stalled, and the traditional automakers are flooding the market with many different options -- particularly in Rivian's core SUV and truck segment.

Most alarmingly, the growth story seems to have shifted in favor of legacy automakers, possibly because they can leverage their more established brands and dealership networks to reach more customers.

The dynamic has become quite striking. For example, in the third quarter, Ford's electric F-150 pickup truck saw sales double year over year to 7,162 units. GM is also seeing massive success with many of its products, including the Cadillac Lyriq, a luxury SUV that saw sales soar 139% to over 7,000 units. Both offerings compete with Rivian's lineup of high-end trucks and SUVs.

What is Rivian's path forward?

Rivian's second-quarter earnings highlight the severity of its challenges. Sales grew by a measly 3% year over year to $1.12 billion, while operating losses expanded 7% to $1.38 billion. The company's Q3 earnings (expected on Nov. 7) probably won't be much better. Vehicle deliveries are known to have declined 36% year over year to just 10,018 vehicles (compared to analyst expectations of 13,000).

That said, Rivian doesn't plan to take these challenges lying down. CEO R.J. Scaringe believes he can lead his company to a modest gross profit by the fourth quarter of 2024 by reducing materials costs and improving factory efficiency. If successful, this move could open the door for the company to scale into operating profitability over the long term.

Rivian also has plans to jump-start growth with a new SUV called the R2, which will use its new mid-sized vehicle platform. With a starting price of $45,000, it will be substantially more affordable than Rivian's current flagship SUV, the R1S, which starts at $77,000. Granted, while cheaper vehicles might not help Rivian's margins much, they could help the company gradually shift toward a more volume-based business model.

Is Rivian a millionaire-maker stock?

Unfortunately for investors, Rivian is in survival mode. For the next few years, management's biggest priority will probably be keeping the lights on -- not returning boatloads of cash to shareholders.

With $7.87 billion in cash and short-term investments on its balance sheet, the company can maintain its current cash burn for a few more quarters. But eventually, it may need to pivot to outside sources of capital like equity dilution, which can reduce current investors' claims on future earnings. Investors should probably hold off on buying Rivian stock until the company demonstrates a convincing path to profitability.

Should you invest $1,000 in Rivian Automotive right now?

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Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool recommends General Motors and recommends the following options: long January 2025 $25 calls on General Motors. The Motley Fool has a disclosure policy.

Is Rivian a Millionaire-Maker Stock? was originally published by The Motley Fool