The electric vehicle (EV) industry has lost much of its luster as government policy and consumer sentiment become less favorable. And with shares down by around 88% from their all-time high of $172 (reached in late 2021), Rivian Automotive(NASDAQ: RIVN) hasn’t escaped the downtrend unscathed. The company is still struggling to scale up its business model and show investors it can create a pathway to sustainable profitability.
That said, despite the challenges, Rivian investors have a lot to look forward to in 2026. The company could see thinning competition in the electric pickup truck market and a pivot to potentially high-margin software and services, which promise to help reignite growth.
On the surface, the U.S. EV industry is in a terrible place. Reuters reports that overall sales dropped 41% in November due to a confluence of factors, including the Trump administration’s decision to end the $7,500 tax credit that previously applied to purchases of new EVs. Investors shouldn’t expect this to be a short-term downtrend because the White House has also rolled back emissions standards on gasoline-powered cars, which will make them more competitive relative to electric rivals.
Ford Motor Company has responded to the new incentives by pivoting away from EVs with a $19.5 asset writedown related to canceled models. The company has also announced plans to replace its fully electric F-150 Lightning pickup truck with a hybrid and scrapped its planned next-generation electric truck (which was code-named the Ford T3).
Ford’s F-150 Lightning competed directly with Rivian’s R1T in the market for large, fully electric pickup trucks. And the larger company’s departure could allow Rivian to rapidly capture market share and brand recognition over the next few years. These factors will help Rivian remain competitive, even if Ford decides to reenter the EV pickup truck market in the future.
Unlike traditional automakers, which tend to be headquartered in 20th-century industrial hubs like Michigan, Rivian decided to base its operations out of California, where it has access to arguably the world’s best technology-related talent. Rivian’s software prowess attracted the attention of Volkswagen. And the two companies have joined forces for a joint venture to focus on developing software and electric architecture.
This deal will unlock economies-of-scale advantages as both companies can share components across their entire model lineups. It is also attracting the attention of other automakers, which are interested in high-performing and cost-efficient electric architectures.
According to Rivian’s chief software officer, Wassym Bensaid, other original equipment manufacturers (OEMs) are “knocking at the door” about potentially incorporating these systems into their cars. Such deals could unlock further revenue opportunities for Rivian while also boosting its economies of scale.
Image source: Getty Images.
Catalysts only matter if they lead to operational improvements. And Rivian’s third-quarter earnings suggest things are moving in the right direction. Revenue jumped 78% year over year to $1.56 billion, helped by a surge in software and services contribution, which jumped 324% to $416 million (27% of the total). If Rivian’s software business continues to grow at such a massive clip, it will soon become the company’s core growth driver while vehicle production and sales take a back seat.
To be fair, Rivian’s situation isn’t all rosy. The company is still dealing with an immense cash burn, with third-quarter operating losses of $983 million. That said, there seems to be light at the end of the tunnel as the company stands to benefit from surging software and services revenue and reduced competition in the EV pickup truck market. While Rivian stock remains risky, now looks like the time to bet on a long-term rebound.
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Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
