Rivian Automotive stock was surging after the company introduced its new vehicle platform on Thursday.
3 min
Rivian Automotive stock was surging after the company introduced its new vehicle platform on Thursday.
Investors knew the car was coming, but the electric vehicle start-up sprinkled a couple of extra surprises in its presentation to the delight of its shareholders.
As its name suggests, R2—unveiled Thursday afternoon—is Rivian’s second vehicle platform. It’s a lower-cost product that should enable the company to widen its addressable market with a cheaper price tag. The R2 will start at around $45,000, and is slated to hit the streets in 2026.
The timing was the first surprise. CEO R.J. Scaringe said the car will ship in the first half of 2026. That brings some certainty for investors and, of course, the sooner the better.
“I’m so excited about this vehicle,” said Scaringe. “I’m so excited about what it represents for us as a company in terms of achieving scale.”
Rivian’s first platform, R1, is the base for the R1T pickup truck and R1S SUV. Those two vehicles start at around $75,000.
The R2 SUV shown at the event has Rivian’s trademark look. The vehicle—which could be called the R2S if Rivian sticks with its first platform’s naming conventions—is a smaller version of the R1S. The wheelbase is a little shorter than that of the R1S.
The R2’s per-charge range will exceed 300 miles and there will be a tri-motor version that goes from zero to 60 miles an hour in about three seconds.
The second surprise was another vehicle—the R3 and sportier trim called the R3X. It’s another vehicle that will be built on the platform. Pricing and timing for the R3 weren’t part of Scaringe’s prepared remarks. Rivian didn’t immediately respond to a request for comment.
Rivian shares were up 13.8% in late trading at $12.55, while the S&P 500 and Nasdaq Composite were up about 0.9% and 1.4%, respectively.
The stock had gotten a lift even before the R2 launch event, which started around 1 p.m. ET Thursday, thanks to a new call to buy the shares on Wall Street.
Earlier Thursday, Jefferies analyst Philippe Houchois launched coverage of Rivian with a Buy rating and a $16 price target.
“Rivian has looked closest to Tesla in spirit, with its own software stack, strong brand identity, global potential, and similar growth pain,” wrote the analyst.
(Product launch events weren’t what Houchois was referring to, looked a little like a Tesla product launch event run by Elon Musk.)
The cost of the new platform will be key, the analyst said.
Rivian “is facing two critical if not existential tests this year: (1) deliver a $35,000-to-$40,000 reduction in unit production costs from redesign, purchasing, and manufacturing efficiency; and (2) demonstrate the R2 model can be developed at a significantly lower cost than R1,” wrote Houchois in his coverage launch report.
The new vehicle and Buy rating should come as a relief for investors. Coming into Thursday trading, Rivian stock was down about 53% so far in 2023. Slowing demand growth for EVs, along with disappointing production guidance from Rivian, has pushed down shares.
Rivian expects to produce about 57,000 units in 2024, roughly the same amount produced in 2023. But Houchois sees a silver lining there.
“Slower EV demand and planned second-quarter [plant] shutdowns will constrain growth this year but could also help deliver the sharp $20,000 reduction in unit costs to achieve positive gross margin exiting 2024,” wrote Houchois.
Rivian hasn’t achieved the scale required yet to generate positive profits and cash flow. It delivered about 50,000 unit to customers in 2023. Tesla wasn’t producing consistent profits until it was delivering roughly four times that amount.
Wall Street expects Rivian to use about $4.3 billion in cash in 2024. It ended 2023 with about $9.4 billion in cash, and $10.5 billion in total liquidity.
Overall, 55% of analysts covering Rivian stock have Buy ratings, according to FactSet. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target for Rivian stock is about $17.
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What a quarter-million dollars gets you in the western capital.
Alexandre de Betak and his wife are focusing on their most personal project yet.
Multinationals like Starbucks and Marriott are taking a hard look at their Chinese operations—and tempering their outlooks.
4 min
For years, global companies showcased their Chinese operations as a source of robust growth. A burgeoning middle class, a stream of people moving to cities, and the creation of new services to cater to them—along with the promise of the further opening of the world’s second-largest economy—drew companies eager to tap into the action.
Then Covid hit, isolating China from much of the world. Chinese leader Xi Jinping tightened control of the economy, and U.S.-China relations hit a nadir. After decades of rapid growth, China’s economy is stuck in a rut, with increasing concerns about what will drive the next phase of its growth.
Though Chinese officials have acknowledged the sputtering economy, they have been reluctant to take more than incremental steps to reverse the trend. Making matters worse, government crackdowns on internet companies and measures to burst the country’s property bubble left households and businesses scarred.
Now, multinational companies are taking a hard look at their Chinese operations and tempering their outlooks. Marriott International narrowed its global revenue per available room growth rate to 3% to 4%, citing continued weakness in China and expectations that demand could weaken further in the third quarter. Paris-based Kering , home to brands Gucci and Saint Laurent, posted a 22% decline in sales in the Asia-Pacific region, excluding Japan, in the first half amid weaker demand in Greater China, which includes Hong Kong and Macau.
Pricing pressure and deflation were common themes in quarterly results. Starbucks , which helped build a coffee culture in China over the past 25 years, described it as one of its most notable international challenges as it posted a 14% decline in sales from that business. As Chinese consumers reconsidered whether to spend money on Starbucks lattes, competitors such as Luckin Coffee increased pressure on the Seattle company. Starbucks executives said in their quarterly earnings call that “unprecedented store expansion” by rivals and a price war hurt profits and caused “significant disruptions” to the operating environment.
Executive anxiety extends beyond consumer companies. Elevator maker Otis Worldwide saw new-equipment orders in China fall by double digits in the second quarter, forcing it to cut its outlook for growth out of Asia. CEO Judy Marks told analysts on a quarterly earnings call that prices in China were down roughly 10% year over year, and she doesn’t see the pricing pressure abating. The company is turning to productivity improvements and cost cutting to blunt the hit.
Add in the uncertainty created by deteriorating U.S.-China relations, and many investors are steering clear. The iShares MSCI China exchange-traded fund has lost half its value since March 2021. Recovery attempts have been short-lived. undefined undefined And now some of those concerns are creeping into the U.S. market. “A decade ago China exposure [for a global company] was a way to add revenue growth to our portfolio,” says Margaret Vitrano, co-manager of large-cap growth strategies at ClearBridge Investments in New York. Today, she notes, “we now want to manage the risk of the China exposure.”
Vitrano expects improvement in 2025, but cautions it will be slow. Uncertainty over who will win the U.S. presidential election and the prospect of higher tariffs pose additional risks for global companies.
For now, China is inching along at roughly 5% economic growth—down from a peak of 14% in 2007 and an average of about 8% in the 10 years before the pandemic. Chinese consumers hit by job losses and continued declines in property values are rethinking spending habits. Businesses worried about policy uncertainty are reluctant to invest and hire.
The trouble goes beyond frugal consumers. Xi is changing the economy’s growth model, relying less on the infrastructure and real estate market that fueled earlier growth. That means investing aggressively in manufacturing and exports as China looks to become more self-reliant and guard against geopolitical tensions.
The shift is hurting western multinationals, with deflationary forces amid burgeoning production capacity. “We have seen the investment community mark down expectations for these companies because they will have to change tack with lower-cost products and services,” says Joseph Quinlan, head of market strategy for the chief investment office at Merrill and Bank of America Private Bank.
Another challenge for multinationals outside of China is stiffened competition as Chinese companies innovate and expand—often with the backing of the government. Local rivals are upping the ante across sectors by building on their knowledge of local consumer preferences and the ability to produce higher-quality products.
Some global multinationals are having a hard time keeping up with homegrown innovation. Auto makers including General Motors have seen sales tumble and struggled to turn profitable as Chinese car shoppers increasingly opt for electric vehicles from BYD or NIO that are similar in price to internal-combustion-engine cars from foreign auto makers.
“China’s electric-vehicle makers have by leaps and bounds surpassed the capabilities of foreign brands who have a tie to the profit pool of internal combustible engines that they don’t want to disrupt,” says Christine Phillpotts, a fund manager for Ariel Investments’ emerging markets strategies.
Chinese companies are often faster than global rivals to market with new products or tweaks. “The cycle can be half of what it is for a global multinational with subsidiaries that need to check with headquarters, do an analysis, and then refresh,” Phillpotts says.
For many companies and investors, next year remains a question mark. Ashland CEO Guillermo Novo said in an August call with analysts that the chemical company was seeing a “big change” in China, with activity slowing and competition on pricing becoming more aggressive. The company, he said, was still trying to grasp the repercussions as it has created uncertainty in its 2025 outlook.
Few companies are giving up. Executives at big global consumer and retail companies show no signs of reducing investment, with most still describing China as a long-term growth market, says Dana Telsey, CEO of Telsey Advisory Group.
Starbucks executives described the long-term opportunity as “significant,” with higher growth and margin opportunities in the future as China’s population continues to move from rural to suburban areas. But they also noted that their approach is evolving and they are in the early stages of exploring strategic partnerships.
Walmart sold its stake in August in Chinese e-commerce giant JD.com for $3.6 billion after an eight-year noncompete agreement expired. Analysts expect it to pump the money into its own Sam’s Club and Walmart China operation, which have benefited from the trend toward trading down in China.
“The story isn’t over for the global companies,” Phillpotts says. “It just means the effort and investment will be greater to compete.”
Corrections & Amplifications
Joseph Quinlan is head of market strategy for the chief investment office at Merrill and Bank of America Private Bank. An earlier version of this article incorrectly used his old title.
