The Rivian (NASDAQ: RIVN) share price is the latest electric vehicle (EV) stock to hit the market. After the company’s IPO earlier this week, the stock jumped as investors rushed to buy into the growth story.
Rivian share price IPO
Like many of its peers, Rivian is trying to capitalise on the booming demand for EVs. As part of the green energy transition, governments and corporations worldwide are encouraging individuals to buy electric.
As well as the legacy manufacturers, such as Ford and Volkswagen, a range of newer startups have emerged. All of these appear to offer something different.
Among the EV landscape, the Tesla (NASDAQ: TSLA) share price stands out. The company is the market leader in the sector, and I do not think it is unreasonable to say that this enterprise has single-handedly changed opinions about EVs worldwide.
But if I had to choose between the Rivian share price and Tesla share price, there is one that I believe has far more potential than the other.
First-mover advantage
Rivian has some big growth plans, but today, the company is still in its early stages of development. Vehicle production is minimal and, during the past two years, it has lost a cumulative $1.4bn with zero revenues. In its IPO prospectus, the firm also revealed it had borrowings of $2.5bn and minimal assets.
Still, it is targeting the production of 350,000 vehicles annually by 2025. That could generate revenues of as much as $25bn a year. Amazon has committed to buying 100,000 of these vehicles for its delivery fleet, and the e-commerce company is also one of Rivian’s major backers.
However, Tesla is already producing nearly 250,000 vehicles a quarter. Management is targeting the production of 20m vehicles a year by 2030.
Further, Tesla is also solidly profitable and has diversification outside the automotive sector. For instance, it is one of the world’s largest suppliers of battery energy storage systems.
The better buy
While Tesla’s current market capitalisation might look a bit on the rich side, considering its current income position, it generates revenues and profits, unlike Rivian.
Moreover, EVs are still a relatively new market. There are lots of different players fighting for market share. Although Tesla is the biggest player by far, even its success is not a given. It could lose market share to the likes of Ford or Volkswagen, both of which are investing substantial sums in their EV offerings.
Considering these risks, I think the Rivian share price has more risk attached to it than Tesla’s share price. And with that being the case, I would avoid the stock.
However, I also think Tesla has tremendous potential, and I would buy this company as a speculative investment for my portfolio.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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