Volkswagen Just Validated Rivian's Tech... and the Long-term Growth Thesis

Rivian Automotive’s (NASDAQ:RIVN) long-term outlook appears to be very bright as Volkswagen’s (OTCMKTS:VWAGY) recent decision to expand its blockbuster deal with the upstart electric-vehicle maker further validates the potency of its technology. What’s more, data strongly indicates that U.S. consumers are very pleased with Rivian’s EVs, while Rivian should benefit over the longer term from Tesla (NASDAQ:TSLA) CEO Elon Musk’s distracting forays into politics. Also importantly, Rivian’s balance sheet appears to be quite strong at this point, and it should benefit from increasing demand for its commercial vehicles down the road. 

On Nov. 12, Volkswagen and Rivian announced that the veteran German automaker had agreed to increase its investment in RIVN to as much as $5.8 billion from the previous level of up to $5 billion. Moreover, Volkswagen appears set to integrate Rivian’s technology in many of its vehicles, as the German automaker intends to utilize the systems “across a wide range of price points, international markets and brands,” CNBC noted. 

Indeed, Volkswagen expects to utilize Rivian’s technology in its Volkswagen and Audi brands, along with its forthcoming Scout offering. Even Volkswagen’s sports car brands could integrate Rivian’s technology.

In a note to investors reacting to the news, well-respected Morgan Stanley analyst Adam Jonas wrote that the update shows that Volkswagen is committed to the deal. Of course that makes sense.

But perhaps more importantly, the development shows that the auto giant, which has been working closely with Rivian for many months since the firms’ alliance was first disclosed in June, has been impressed by the U.S. company’s technology, And in my view, the latter point bodes very well for Rivian’s future, since technology is such an important part of automobiles in the modern era.

In light of these points, I recommend that growth investors buy the shares. 

High Satisfaction Ratings and Musk’s Continued Political Adventures

Earlier this year, Consumer Reports noted that the owners of Rivian's vehicles are more satisfied with their purchases than the buyers of any other vehicles. The conclusion was based on a survey of the publication's readers. Given the tremendous power of the word-of-mouth phenomenon, I believe that these very high satisfaction rates will result in many more consumers buying the company's EVs. 

Put another way, over the longer term, Rivian's sales are likely to surge as more Americans decide to buy its EVs because they've heard very positive feedback about the vehicles from their friends, relatives, and colleagues. This trend will probably become especially pronounced after Rivian begins selling much less expensive EVs starting in 2026. 

In August. The Washington Post reported that a number of consumers who previously bought Tesla's EVs are abandoning the brand due to Tesla CEO Musk's controversial political positions and his support of former President Donald Trump in the 2024 presidential election. According to the newspaper, the phenomenon is a "growing… movement."

Now that Musk is reportedly attached at the hip to Trump, those sentiments could spread.

Given the high level of political polarization in the U.S. and the fact that EVs tend to appeal more to Democrats than Republicans, it does seem logical that many of Tesla's customers would abandon the company because of Musk's pro-Trump, anti-Democratic positions. 

As an "up-and-coming" EV maker that has not dabbled in politics, Rivian is well-positioned to benefit from the Tesla backlash. Providing evidence to support this theory, the number of Tesla EVs sold in California sank 24% in Q2 versus the same period a year earlier to 52,211, while Rivian's registrations in the state soared 69% year-over-year to 3,472.

Strong Balance Sheet and Commercial Business That’s Poised to Expand

As of the end of last quarter. Rivian had $6.74 billion of cash and short-term investments on its balance sheet. What’s more, CEO R.J. Scaringe reported on the company’s Q3 earnings call earlier this month that Volkswagen’s investments would fund the launch of the company’s relatively inexpensive R2 EVs, expected to debut in 2026, and the construction of its new plant in Georgia. Consequently, I think it’s reasonable to assume that Rivian will not need to raise additional funds for at least a few years from now. 

Also noteworthy is that Scaringe reported on the call that the automaker was “starting” to gain traction with new potential customers in the commercial market, while he expects to begin “to see more of that in 2025.” 

Consequently, I expect the firm to unveil significant new deals on the commercial front by the middle of next year. 

Disclaimer: The author did not hold a position in any of the securities mentioned above. The information provided in this article is for educational and informational purposes only and should not be construed as investment advice. Always conduct your own research or consult with a licensed financial professional before making any investment decisions. Past performance is not indicative of future results.