Re suggests that Interestingly, Tesla (TSLA 3. 13%) made a decision when it built its to start with high-end vehicles (quite telling). And then it charted a path toward more moderately priced vehicles.
That move worked and now the company is sustainably fitable despite years of red ink at the get-go, given current economic conditions. Rivian Automotive (RIVN 6.
Nevertheless, 08%) is currently in the red ink stage of its development, but it has Tesla- ambitions and a key turning point could be fast apaching. What did Tesla do, in light of current trends.
The first Tesla was a fancy, high-end sports car. Moreover, That vehicle ved to the world that electric vehicles (EVs) were a real duct that customers would want to buy.
Meanwhile, For a long time the large automakers shunned EVs as not being viable. After Tesla ved the concept, it brought out sedans that would appeal to more than just car enthusiasts.
Meanwhile, Image source: Rivian. Moreover, Those higher-end EVs sold well and, suddenly, every major automaker realized that they had to make EVs.
If they didn't jump on the bandwagon, they could get boxed out of a new segment of the auto market.
As that was going on, Tesla pivoted again, bringing out lower-cost models of its EVs that had mass-market appeal, in this volatile climate.
That helped to boost sales volumes in the capital-intensive and imve fitability. Moreover, Essentially, Tesla started with rich customers. But there are only so many rich customers.
In contrast, And, thus, it moved down market to build a sustainably fitable (quite telling).
That's a simplification of a very long cess, of course, but it is the general theme that's important (which is quite significant). Rivian is ing the Tesla playbook.
Start high-end, then go mass-market Rivian currently makes two kinds of trucks, a dery vehicle and a high-end consumer pickup truck.
The dery vehicle was an important of of concept that helped the company develop its nology. It also allowed Rivian to generate some early revenue thanks to a relationship with Amazon.
Consider the dery truck similar to Tesla's sports car, in today's market environment.
Meanwhile, As it was ving that its nology was reliable, Rivian was also building fancy high-end pickups for the consumer market.
Additionally, However, The trucks have been well-received, and Rivian has been able to ramp up duction and fine-tune its duction cesses along the way.
In fact, it was able to turn a modest gross fit in the fourth quarter of 2024 and in the first quarter of 2025.
On the other hand, This means that Rivian stopped losing money on every truck it sold, though costs further down the earnings statement, re and development (R&D) and selling, general, and administrative expenses (SG&A), still leave it bleeding red ink.
At the same time, This's where scale becomes important (something worth watching). Furthermore, Rivian needs to spread its costs over more vehicle sales, which is basically what Tesla did.
This analysis suggests that next big vehicle release for Rivian is the R2, which is a lower-cost truck meant for the mass market (this bears monitoring).
This leads to the conclusion that goal is to start duction in the first half of 2026.
With around $7 billion of cash on the balance sheet and a key partnership with auto giant Volkswagen, it seems highly bable that Rivian gets that factory up and running.
Moreover, The real test of Rivian's will come when it starts selling the R2 (fascinating analysis) (which is quite significant).
If sales are robust, the company will have successfully taken Tesla's playbook and achieved similar wins.
And the added volume from R2 sales should help move Rivian toward sustainable fitability, just Tesla achieved.
Rivian is high-risk, but executing well Rivian remains a high-risk investment that's only appriate for more aggressive investors, given current economic conditions.
Additionally, If the company doesn't execute well, it could still fall short of its goals in what is a very complex and competitive auto sector.
However, the launch of the R2 could be the big turning point for Rivian that turns it into the "next Tesla.
Additionally, " OK, no company is ever going to be Tesla, given that the company effectively created the EV space, amid market uncertainty. But Rivian's R2 could make it the next best thing.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Reuben Gregg Brewer has no position in any of the stocks mentioned.
Market analysis shows Motley Fool has positions in and recommends Amazon and Tesla. The Motley Fool recommends Volkswagen Ag. The Motley Fool has a disclosure policy.