Rivian Stock Surges on AT&T Deal: Key Takeaways

Rivian stock (NYSE: RIVN) rose almost 14% yesterday and hit multi-month highs after the startup electric vehicle (EV) company announced a vehicle supply agreement with telecom giant AT&T. Here are the key takeaways from the deal.

As part of the deal, AT&T would start adding Rivian’s Commercial Van and R1 vehicles to its fleet early next year. AT&T is also the exclusive provider of connectivity to Rivian vehicles in North America.

Both companies are positive about the partnership and in his prepared remarks Dagan Mishoulam, VP, of Strategy & Fleet at Rivian said, “We couldn’t be happier to collaborate with AT&T as we work together to help cut emissions and protect our environment.”

Rivian and AT&T partner for fleet

He added, “Our category defining vehicles offer some of the most advanced technology in the sector and are continually improved through over-the-air updates. We’re very much looking forward to expanding our relationship with AT&T to help them achieve their climate goals.”

Hardmon Williams, SVP, of AT&T Connected Solutions, said, “We’re excited to purchase Rivian EVs for our fleet. This pilot is another important step in our ongoing efforts toward sustainability, reducing our carbon footprint and embracing a cleaner future for our operations. With advanced connectivity and a vision for a sustainable future, Rivian is setting the standard for the evolving demands of modern transportation.”

Notably, Rivian previously had an exclusive agreement with Amazon for its electric delivery trucks (EDVs). However, during the Q3 2023 earnings call, it ended weeks of rumors and confirmed that it has ended the exclusive agreement with Amazon and would start selling these to other customers as well.

Rivian ended its exclusive agreement with Amazon

During the earnings call, Rivian said, “We’re confident in the value our vans, software and services offerings can provide fleet customers and are in active discussions with a number of large potential fleet customers to launch pilot programs. It’s important to appreciate that the sales cycle for commercial vans typically begins with lower volume pilot programs.”

Rivian has sold over 10,000 EDVs to Amazon – its biggest shareholder – which has an option to purchase up to 100,000 vehicles as the e-commerce giant tries to lower its carbon footprint.

RIVN posted impressive Q3 earnings

Rivian reported revenues of $1.34 billion in Q3 which was slightly higher than the $1.32 billion that analysts expected. Its net loss of $1.37 billion was also narrower than the $1.72 billion that analysts expected.

Rivian also lowered its 2023 EBITDA loss guidance to $4 billion which is narrower than the $4.3 billion loss that it previously forecast. It also raised its 2023 delivery guidance to 54,000 – its second guidance raise of the year.

While the guidance raise is less than 10% of the original guidance it is still noteworthy as multiple other players like Ford, General Motors, Lucid Motors, Fisker, and Polestar have slashed their EV production targets, Ford is also reportedly looking to cut production of F-150 Lightning whose internal combustion version has been America’s best selling pickup for decades.

Competition rises in the electric pickup market

Rivian also sells the R1T pickup truck which has received good reviews from auto analysts. Tesla has also started deliveries of its long-awaited Cybertruck even as mass deliveries are expected only by 2025.

During Tesla’s Q3 2023 earnings call, CEO Elon Musk said, “we dug our own grave with the Cybertruck.” He added, “It’s a great product, but financially, it will take, I don’t know, a year to 18 months before it is a significant positive cash flow contributor.”

Meanwhile, the model – which has estimated reservations of over 2 million – could shake up the electric pickup market which hasn’t seen the kind of price war we’ve seen in sedans and SUVs.

EV price war

There has been a brutal price war in the EV industry and Tesla which started the price war last year yet again lowered car prices in the US in October. After this round of price cuts, Tesla’s website lists the starting price for the Model 3 at $38,990 while the Model Y at $45,990. After these price cuts, Tesla has lowered the prices of the Model 3 standard version by almost 17% in the US since the beginning of the year.

Notably, even Tesla’s operating margins have nosedived amid the price war and came in below 8% in Q3.

Companies are reconsidering their EV investments amid the price war Ford would delay its planned $12 billion investments towards building electric cars and also postpone the construction of the EV battery plant in Kentucky. Rival General Motors has also scaled back its EV plans and has delayed the production of electric trucks at the Orion assembly plant until late 2025.

Rivian’s long-term plans

Rivian currently has one plant in Normal in the US. It is looking to set up a second plant in Georgia which would have an annual capacity of 400,000 cars. Rivian expects to have a total production capacity of 600,000 cars between the two plants by the end of this decade.

It delayed the timeline for the affordable R2 vehicle platform by a year to 2026. The model would help Rivian scale up production.

When Rivian listed in 2021, it became the biggest listing since Facebook’s 2012 listing. Rivian’s IPO sailed through easily and the company priced the shares at $78 each, which was above the already increased price range. The stock had a good listing and went on to hit an all-time high of $179.47, which was over twice the IPO price.

At its peak, Rivian commanded a market cap of over $150 billion. Many saw it as a sign of optimism towards pure-play EV companies. However, there were skeptics, which included Tesla’s CEO Elon Musk, who found the valuation too high

Despite rising over 20% in 2023, Rivian is still way below its all-time highs. The stock is meanwhile higher in the premarket today and looks set to continue its good run of recent days.