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Can cheaper EVs save Rivian (RIVN) stock?

Although it is one of the most exciting new competitors on the EV scene, Rivian Automotive (NASDAQ:SHORE) has suffered significant investment losses since its IPO (Initial Public Offering). Nonetheless, RIVN stock rose heading into the holiday weekend on the back of encouraging production development.

Specifically, Rivian has launched its new Enduro drive unit for retail customers. Previously, it offered the Enduro unit for electric delivery vans (EDVs) that Rivian manufactures for the e-commerce giant Amazon (NASDAQ:AMZN).

With the Enduro’s improved efficiency and lower production cost profile, many investors are hoping this development will move the needle for RIVN stock. While undoubtedly intriguing, potential traders should also consider the larger economic picture.

RIVN Stock gets much-needed price diversity

What began as a viable alternative to You’re here (NASDAQ:TSLA) eventually spirals out of control for Rivian, with MotorTrend reporting last year that the cheapest four-motor R1T Max package (electric pickup truck) was $90,315. However, the latest Enduro will bring the R1T’s starting price down to $73,000.

Such a dramatic cost improvement is primarily possible due to the Enduro’s build profile. Rather than integrating a third-party drive unit (which is the case with Rivian’s four-motor setup), the twin-motor Enduro is built in-house.

Although Rivian has been working on its twin-motor unit for a while, the company has focused on EDVs for Amazon, which are actually configured in a single-motor front-wheel-drive frame. The retail version, with deliveries beginning in June, will feature a twin-motor, all-wheel-drive (AWD) configuration. Understandably, excitement was high for RIVN stock, with Rivian’s Vice President of Manufacturing Operations Tim Fallon saying the following:

“I am incredibly proud of what all of our teams have accomplished. The introduction of our dual engine variants is a major step in ramping up our rig to full capacity, and they have done a great job working on so many features to achieve this.

Even better, drivers shouldn’t see as much performance degradation. According to Rivian’s website, the dual-motor AWD model will accelerate the R1T to 60 miles per hour from a standstill in 4.5 seconds. It’s quite fast. While four-motor all-wheel drive does the same thing in 3 seconds, such performance is really useless for the average commuter.

Efficiency improvements are a welcome change, but challenges persist

With a combination of traditional architectural elements integrated with modern style elements, the Rivian R1T has caught the attention of many consumers. Unfortunately, as Edmunds reported in its real-world EV range tests, the R1T fell short in the efficiency department.

Discussing the mileage, Edmunds said, “…the R1T is by far the least efficient electric vehicle we’ve tested to date.” Notably, he also remarked that “…Rivian’s Edmunds consumption rate of 46.9 kWh/100 miles means it uses almost 23% more energy per 100 miles than the next most guzzling electric vehicle.” in energy that we tested, the Audi e-tron Sportback, which reached 38.2 kWh/100 miles.

Therefore, with the dual engine, drivers should find not only a lower entry point, but also lower “refueling” costs. At the same time, the question should be: are these factors enough to make a substantial difference to RIVN stock?

So far, it’s been a lukewarm “yes.” Although RIVN stock is up about 5% today, it is still down nearly 12% year-to-date and 48% year-over-year. Of course, the problem centers on consumer economics. Even at $73,000, that’s very expensive for most people, especially with the outside pressures of stubborn inflation and massive layoffs. According to the US Census Bureau, the actual median household income in 2021 was $70,784.

As of the date of publication, Josh Enomoto had no position (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto helped negotiate major contracts with Fortune Global 500 companies. Over the past several years, he has provided critical and unique insights to investment markets, as well as various other industries including law, construction management and healthcare.


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