George Soros Trims Rivian Stake & Exits Tesla Amid Slump in EV Stocks

Once a hot investment theme, EV (electric vehicle) stocks have fallen out of favor with investors and several fund managers have shunned the sector. Recent 13F filings show that billionaire investor George Soros has exited Tesla while trimming the stake in Rivian.

Money managers with over $100 million in assets have to file their 13F within 45 days of every quarter end. The filings show their holdings at the end of the quarter.

Soros Fund Management sold Rivian shares in the fourth quarter of 2022 as well and its stake in the company is now down to just about $55 million after it sold another 10.8 million shares in the first quarter.

Notably, in Q4 2022 David Einhorn of Greenlight Capital also exited Rivian. Ford, which was the second largest Rivian stockholder also sold most of the shares in the quarter. However, Amazon – the largest Rivian stockholder – continues to back the company.

The e-commerce giant has also placed an order for upto 100,000 electric delivery trucks from Rivian.

Soros trims stake in Rivian and exits Tesla

As for Soros, along with trimming the stake in Rivian, the billionaire also exited Tesla. EV stocks have slumped over the last year amid slowing growth and a brutal price war.

To be sure, Rivian hasn’t yet gotten into the price war initiated by Tesla. The company only sells only SUVs and pickup trucks – where the pricing is still strong.

Meanwhile, after multiple rounds of price cuts, Tesla has raised car prices twice in the US on the models barring the Model 3 sedan. The Model 3 now starts at just under $40,000 in the US which is the lowest ever since the model was launched.

Rivian reported better-than-expected earnings for Q1 2023

Rivian reported better-than-expected earnings for the first quarter of 2023. Not only were its revenues higher than what the market was expecting but its losses were also narrower than what analysts predicted.

It also maintained its 2023 delivery guidance of 50,000 cars. The company’s CEO RJ Scaringe said “The team remains focused on ramping production, driving cost reductions, developing the (upcoming) R2 platform and future technologies and delivering an outstanding end-to-end customer experience.”

Rivian is building a new plant

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. The company expects to roll out vehicles from the plant, which would be built at a cost of $5 billion, in 2024. Rivian expects to have a total production capacity of 600,000 cars between the two plants.

It delayed the timeline for the affordable R2 vehicle platform by a year to 2026. The model would help Rivian scale up production. Notably, Tesla also achieved scale with its lower-priced Model 3 and Model Y, and together both these models account for almost 98% of its total sales now.

How Wall Street reacted to RIVN’s Q1 2023 earnings?

After Rivian’s Q1 2023 earnings release, Canaccord Genuity’s George Gianarikas maintained his $40 target price on the company.

He said, “We believe Rivian is on its way to capturing its fair share of the EV market via a thoughtful vertically integrated strategy. We see the R1S as the family (electric) SUV of choice and likely to see accelerating growth as more vehicles hit the streets.”

Notably, during Rivian’s Q1 2023 earnings call, Scaringe said, “the engagement we have with customers and the level of satisfaction that our early customers the first 35,000-or-so customers are having really creates a powerful flywheel where our biggest, and I would say, most important advocates are the buyers of our vehicles.”

He also said that the company’s order backlog runs “well into 2024” even as the company stopped providing the reservation numbers.

Is Rivian the next Tesla?

Wall Street has always been obsessed with the “next Tesla” and “Tesla killers.” However, the slump in many startup EV companies has shown that it is not easy to compete in the EV industry which is getting more competitive with each passing day.

In February, Barclays analyst Dan Levi said, “We are hard pressed to see any company in the auto landscape as the ‘next Tesla,’ as Tesla has been quite unique in its accomplishments.”

He however added, “that said, if we were to identify any of the start-up EV automakers as the closest to Tesla (vis-à-vis defining characteristics), we believe it would be Rivian. Rivian thus far has established key moats in product and technology.”

After Rivian’s Q1 2023 earnings call, Levi said that the worst seems over the company even as he admitted that its “not out of the woods yet.”

Cathie Wood on Tesla stock

Meanwhile, while Soros has exited Tesla, Cathie Wood of ARK Invest has increased the stake and also raised her target price to $2,000 and expects the stock to hit the level by 2026.

Tesla has set a 2023 production guidance of 1.8 million which Musk said can rise to 2 million in the best case. He has tried to downplay the demand concerns and blamed slowing car sales on Fed’s rate hikes and macroeconomic turmoil.

Tesla has set itself a target of producing 20 million cars annually by 2030. To put that in perspective, Toyota, the world’s largest automaker, sold just over 10 million cars in 2022.

Even Rivian is targeting a 10% EV market share by 2030. However, the company has a long road ahead before it reaches anywhere near that number.