Rivian Automotive Inc (RIVN.O) surged 7% on Wednesday as its good profits stood out in a terrible quarter for electric-vehicle startups, but analysts cautioned that tough competition might hinder its profitability.
After reiterating its yearly production projection and beating quarterly sales forecasts, the company’s premarket shares prices rose roughly $800 million.
Rivian’s decision to hike pricing last year has helped the E.V. producer reduce cash burn at a time when Lucid Group Inc (LCID.O) and Nikola Corp (NKLA.O) are battling with rising losses.
“We do see the average selling price continuing to expand and grow,” CEO RJ Scaringe said, adding that Rivian’s expanded products, including the “Max Pack” battery, will boost demand.
Still, several analysts were cautious about a firm stuck in a pricing war initiated by market leader Tesla Inc (TSLA.O) and facing increased competition from well-heeled legacy competitors like Ford Motor Co (F.N.).
“We continue to like the truck, but not necessarily the stock and the headlines that may be ahead,” said Michael Shlisky of D.A. Davidson, one of 10 analysts who dropped their price target on a company that has fallen 25% this year.
Shlisky said Rivian had reduced costs by moving to self-made Enduro motors and cheaper lithium iron phosphate batteries. Still, its efforts to renegotiate with suppliers may fail due to limited manufacturing volume.
Between January and March, the Amazon-backed startup created 9,395 automobiles, 2% of Tesla’s 440,808 productions.
However, lower commodity costs and supply chain difficulties could help the corporation.
“As sagging E.V. commodity prices, technology improvements, and supply chain loosening positively impact operations, we see a logical path to positive gross margins next year,” Canaccord Genuity analysts said.
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