It’s perfectly fine to have a strong conviction in new-energy vehicles. However, this doesn’t mean you should invest in electric vehicle (EV) manufacturer Rivian Automotive (NASDAQ:RIVN). Sure, RIVN stock popped in January, but the likelihood of a long-term rally is low because Rivian will have difficulty gaining market share against its most powerful competitors.
It’s not hard to find red flags for Rivian if you know where to look for them. For example, Rivian Automotive eliminated 351 jobs in California about six months ago and is now letting go of approximately 840 additional staff members.
That’s not a good sign, and it’s only the beginning of a much broader bearish argument against Rivian. So, let’s uncover several more reasons to avoid RIVN stock altogether.
Intense Competition Is Bad for RIVN Stock
Rivian may be a bold company, but audacity doesn’t always yield results. Frankly, Rivian is a small fish in an EV market that’s a huge pond full of sharks. Thus, Rivian will have to compete against the likes of Tesla (NASDAQ:TSLA), which has deeper capital resources and substantially more brand-name recognition than Rivian.
Yet, Tesla isn’t the only 800-pound EV industry gorilla that Rivian will have to contend with. There’s also Ford (NYSE:F), which once was a confident Rivian shareholder.
Recently, Ford reduced its stake in Rivian to just 1.15%. And, as Thomas Niel pointed out (and I agree 100% with this), Ford “may pose a serious competitive threat” to Rivian, “with its best-selling F-150 Lightning truck.”
Rivian’s E-Bike Foray Seems Poorly Timed
The same Reuters report that discussed Rivian’s reduction of 840 staff members also observes that Rivian has “been losing money on every vehicle it builds.” It also noted that Rivian’s balance of cash and cash equivalents dwindled to $13.27 billion as of Sept. 30, 2022, from over $18 billion a year earlier.
Therefore, it’s not an ideal time for Rivian to venture into new, risk-prone and potentially capital-intensive areas. Yet, per Bloomberg, Rivian Automotive is hastily moving forward with an electric bike or e-bike business.
Think about it: As we just stated, Rivian is cutting hundreds of jobs. Yet, won’t the company have to hire people as it attempts to expand into the e-bike business? All in all, this doesn’t seem like a good time for Rivian to venture into e-bikes.
Rivian Hasn’t Sold Many EVs
Now, prospective investors should ask themselves a crucial question: Should Rivian venture into the e-bike business if the company’s not doing particularly well at producing and selling electric cars and trucks?
That’s Rivian’s core business, after all. Even after setting a low bar, though, Rivian couldn’t clear it. Specifically, Rivian Automotive had an objective of producing 25,000 vehicles last year but fell short when it actually produced 24,337 vehicles. Moreover, during the fourth quarter of 2022, Rivian only produced 10,020 vehicles and delivered 8,054 vehicles.
All told, Rivian Automotive delivered 20,332 vehicles during the full year of 2022 — nothing to write home about, in my opinion. Again, this is a comparatively tiny company trying to compete with automotive giants. America’s roadways, highways and driveways aren’t filled with Rivian’s EVs. So, investors should seriously consider a different clean-energy investment than RIVN stock.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.