RJ Scaringe can remember getting some pretty strange looks back in the day.
The founder and CEO of electric truck maker Rivian Automotive (RIVN) recalled in a recent interview the challenges he faced when bringing up the topic of a vehicle that could be powered by electricity.
Related: Analysts overhaul Rivian stock outlook after Volkswagen deal
"In the early, early days of Rivian, I'd go to meet with suppliers, I'd meet with investors and talk about this idea of an electric SUV or an electric truck, and people would look at me as if I had three heads," Scaringe said during the Aug. 1 edition of MotorTrend’s InEVitable podcast. "It was such a crazy idea."
There was really a deep disbelief around the potential for EVs to be effective "outside of very, very small cars," he said.
Scaringe added that the scene shifted dramatically when people realized that EV architecture works across various vehicle sizes.
"I'd say across the board, people are recognizing that this is the future state, and, in most cases, customers recognize that they may not be buying an EV today, but their next, or their next next purchase will likely be an EV."
Rivian CEO: 'extreme lack of choice' in EV sector
There has been much discussion on a slowdown in electric vehicle sales.
However, electric vehicle sales in the U.S. actually grew by 11.3% year over year in the second quarter, reaching a record-high volume of 330,4631 units, Kelley Blue Book said last month. This was driven partly by improved availability, higher discounts, and elevated leasing levels.
Related: Top analyst defends Tesla stock price target despite earnings slump
"I think when we talk about like the slowdown, Scaringe said, "we have to recognize it's still growing. It's a slowdown in growth rate."
He noted that there's "a pretty extreme lack of choice" in the electric vehicle sector, adding that consumers looking for a mid-sized SUV have "two or three good choices at most," he said.
"I think it's relatively convenient for a lot of existing manufacturers to say there's no demand for it, and that takes the pressure off the need to electrify," Scaringe said.
Rivian got some news recently when German authorities approved the company's joint venture with Volkswagen, saying there were "no serious competition problems to be feared," Reuters reported on July 29.
Rivian announced the joint venture and investment agreement with VW in June. The German automaker will invest an initial $1 billion in Rivian, with up to $4 billion in planned additional investment.
The new joint venture will see Rivian license its software technology to Volkswagen, and Scaringe said the deal "does open up lots of opportunities."
Rivian plans to launch two lower-priced electric trucks over the next two years as part of a major challenge to Tesla (TSLA) in the domestic EV market.
Scaringe said the upcoming R2 will be “worlds different” than the Tesla Model Y. As far as the R3, he said it "was so much fun because we're able to take the essence of Rivian and what we represent as a company and say 'how would we put that into a really small package?'"
Rivian is scheduled to report second-quarter results on Aug. 6.
Analyst notes importance of joint venture
In May, Rivian posted a loss of $1.24 per share in the first quarter, down from a $1.25 loss a year ago, while revenue increased more than 80% to $1.204 billion. Analysts had forecast a loss of $1.15 per share with sales totaling $1.17 billion.
Shares of Rivian are down 38% since the start of the year and nearly 47% from a year ago.
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In March, Rivian said it was pausing construction of its $5 billion manufacturing plant in Georgia to speed production and save money.
Meanwhile, Truist analyst Jordan Levy raised the firm's price target on Rivian Automotive on Aug. 6 to $16 from $13 and kept a hold rating on the shares.
The company has done a commendable job adjusting to current market dynamics, revising its growth plans to favor capital preservation and announcing a major JV that, once finalized, would eliminate questions of financing for its next development phase, Levy said.
He noted that the focus will now shift to execution on R1 gross margin breakeven by the end of FY24.
“In the upcoming print, we’re focused on concrete cost-down progress on R1, customer response to the updated R1 series, and any updates to VW talks,” he said.
Earlier this month, Morgan Stanley analyst Adam Jonas raised the firm's price target on Rivian Automotive to $17 from $13 and kept an overweight rating on the shares.
Cash from the Volkswagen deal should reduce near-term volatility in the stock. Still, it doesn't change the firm's view that Rivian may have a better future as a Tier 1 supplier "tech partner" than as a stand-alone maker of electric vehicles, Jonas said.
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