The Contest between Tesla and Rivian: Choosing the Superior Electric Vehicle Investment Option in 2025
In the year 2024, both Tesla and Rivian, two major electric vehicle (EV) companies, experienced turbulent stock markets. Tesla soared higher, while Rivian saw a significant drop of about 43%. The support for Tesla's stock growth can be attributed in part to its CEO Elon Musk's backing of former US President Donald Trump and his subsequent appointment as an advisor.
As we step into 2025, the question on everyone's mind is which company is poised for better performance.
Delivery Powerhouses
The performance of Tesla and Rivian's stocks mirrored their vehicle delivery numbers in 2024. Tesla delivered a staggering 1.79 million vehicles, a slight decline from the previous year's 1.81 million, while Rivian managed to deliver 51,579 vehicles, a 3% increase from 2023.
Rivian's delivery growth was impressive considering the challenges it faced, such as temporarily shutting down its manufacturing plant for an upgrade and dealing with component shortages late in the year. On the other hand, Tesla struggled with stiffer competition, particularly in China and Europe, leading to its first-ever annual decline in deliveries.
Despite these challenges, investors remained optimistic about Tesla's future. The company's biggest opportunity lies in its autonomous driving ambitions, specifically robotaxis. Tesla showcased its vision for a two-seat, self-driving vehicle low in price, under $30,000. However, the company has kept details about the technology, range, and safety features under wraps.
Tesla's push for autonomous driving is not without controversy. The company's vehicles with its Supervised Full Self-Driving (FSD) technology have been involved in several accidents, leading to investigations. Musk has even advocated for the government to remove NHTSA car crash reporting requirements. This could potentially make approvals for autonomous driving technology easier, aiding Tesla's robotaxis.
At the moment, only Waymo, owned by Alphabet, offers paid robotaxis in the US, but its technology comes with a higher price tag due to its use of lidar. Tesla invested in lidar sensors in 2024, raising the question of whether it will utilize this technology to improve its performance or lower costs.
Rivian's ambitions are more focused on financial goals. The company aims to achieve positive gross margins, which it has struggled with due to selling vehicles at a loss. Rivian improved line rates and reduced material costs by upgrading its factory and implementing a zonal architecture, ultimately leading to less expensive, more efficient vehicles.
This architecture also attracted Volkswagen's interest, leading to an investment and partnership. In exchange, Rivian will receive significant funds to produce its R2 SUV, expected to start in the first half of 2026. Priced around $45,000, the R2 aims to be more affordable and attract a larger audience.
Who Will Shine in 2025?
Both Tesla and Rivian have promising catalysts for 2025. Positive developments in autonomous driving and robotaxi technology could be great news for Tesla. Although its overseas sales might continue to face challenges, the potential upside from autonomous driving progress could lead to further stock gains.
Rivian, on the other hand, could see a boost if it successfully achieves positive gross margins and gradually improves them throughout 2025. As it replaces older vehicles with cost-reduced models and overcomes component shortages, this goal seems attainable.
Ultimately, Rivian might be the more speculative play for 2025. Its stock was heavily impacted in 2024, providing a potential entry point for investors. With positive developments on the gross margin front and increased vehicle deliveries, Rivian may offer a lucrative investment opportunity. Tesla's stock, while still promising, might not have the same level of upside due to its already significant gains in 2024.
In light of their financial goals and future prospects, investors might consider diversifying their portfolios by investing in both Tesla and Rivian.
Tesla's focus on autonomous driving could significantly elevate its stock price, especially if it manages to reduce the costs associated with its technology and overcomes regulatory challenges.
On the other hand, Rivian's ambition to achieve positive gross margins and improve vehicle deliveries at lower costs could attract more investors, potentially leading to a rise in its stock price.
