From an operational standpoint, each Tesla (TSLA 3.06%) and Rivian (RIVN -1.59%) had uneven years in 2024. Nonetheless, Tesla’s inventory skyrocketed increased, whereas Rivian noticed its shares end the 12 months a lot decrease, down about 43%. A part of Tesla’s inventory success final 12 months may be attributed to its late run following the election win from Donald Trump, as Tesla CEO Elon Musk was an enormous supporter of his and has develop into an advisor.
With the brand new 12 months upon us, nevertheless, let’s take a look at which inventory might be set to outperform in 2025.
Deliveries and extra
Identical to their shares headed in numerous instructions in 2024, so did their automobile deliveries. Rivian delivered 51,579 automobiles in 2024, up from 3% in 2023, whereas Tesla delivered almost 1.79 million automobiles, down from 1.81 million deliveries a 12 months in the past.
Rivian’s supply development got here regardless of a lot of points in the course of the 12 months that constrained manufacturing. Earlier within the 12 months, it shut down its manufacturing plant to implement a retooling improve, whereas late within the 12 months it bumped into part scarcity points. Tesla, in the meantime, noticed its first-ever yearly decline in deliveries as the corporate confronted stiffer competitors and gross sales pressures in China and Europe.
Buyers, nevertheless, disregarded Tesla’s robust 2024 with an eye fixed to the longer term. Many see the corporate’s largest alternative not in promoting electrical automobiles (EVs) however in its autonomous driving robotaxi ambitions. The corporate had an enormous cybercab occasion final 12 months, the place it launched a two-seat automobile with no steering wheel or pedals. It mentioned the automobile would price below $30,000 and that it plans to start out producing the automobiles earlier than 2027. Nonetheless, the corporate has not gone into element on the expertise getting used, driving vary, or security options of the automobiles.
Tesla has not efficiently been capable of develop a completely autonomous driving automotive, and its automobiles utilizing its Supervised Full Self-Driving (FSD) expertise have been the topic of a lot of high-profile accidents and investigations. Nonetheless, Musk has lobbied for the federal government to remove Nationwide Freeway Visitors Security Administration (NHTSA) automotive crash reporting necessities, which the Trump administration seems to assist. Such a transfer might make it simpler to get its absolutely autonomous driving expertise accepted, which might then clean the way in which for its robotaxis.
At present, solely Waymo, owned by Alphabet, gives paid robotaxi rides within the U.S., however its expertise is dearer than Tesla’s as a result of its use of lidar. Nonetheless, Tesla purchased lidar sensors final 12 months, so whether or not or not it incorporates the expertise to enhance efficiency continues to be to be seen. Nonetheless, if the corporate can develop an inexpensive autonomous robotaxi, it could have an enormous alternative in entrance of it.
Rivian’s ambitions are a lot less complicated than Tesla’s. First, the corporate is trying to develop into gross margin-constructive, because it has been promoting its automobiles for lower than the price to make them. The corporate upgraded the tooling in its manufacturing unit to enhance line charges, in addition to lowered the fabric prices going into its automobiles. Its largest achievement was switching to a brand new zonal structure, which considerably reduces the variety of digital management items (ECUs) and wiring in its automobiles and thus lowers prices.
Its zonal structure was additionally an enormous motive behind the large funding and partnership the corporate fashioned with Volkswagen, which is able to get entry to the expertise for its personal EVs. In return, Rivian is getting important money funds, assuming sure milestones are met, which is able to assist it ramp up the manufacturing of its new R2 SUV. Rivian will look towards the cheaper R2, anticipated to price round $45,000, to present it an SUV that can have extra mass enchantment. The brand new SUV is predicted to start out manufacturing within the first half of 2026.
Picture supply: Getty Photographs.
Higher funding in 2025?
Each Tesla and Rivian have potential catalysts in 2025. Any strikes and bulletins towards autonomous driving and robotaxis must be excellent news for Tesla inventory. Whereas its gross sales might proceed to languish abroad, I feel this might be the most important driver of the inventory.
Rivian’s inventory, in the meantime, ought to get a lift if it may get to constructive gross margins and slowly enhance them all year long. Because it cycles by means of its fashions constructed with its older expertise and will increase manufacturing now that its part scarcity has been alleviated, this appears like a sensible purpose.
In selecting an funding between the 2, I would go along with Rivian because the extra speculative play. The inventory was crushed down in 2024, and it ought to be capable to make progress on its gross margin objectives whereas rising deliveries as properly. Tesla’s inventory, in the meantime, already had an enormous run on the finish of 2024, so it could not have as a lot upside on any constructive information.
Suzanne Frey, an govt at Alphabet, is a member of The Motley Idiot’s board of administrators. Geoffrey Seiler has positions in Alphabet. The Motley Idiot has positions in and recommends Alphabet and Tesla. The Motley Idiot recommends Volkswagen Ag. The Motley Idiot has a disclosure coverage.
