TSLA's Legacy or RIVN's Promise: Which EV Story Holds Up Better Now?

Tesla's Q1 deliveries fell 13% YoY, with automotive margins declining to 11.3%, and U.S. EV market share dropping below 50%, though its energy unit remains strong; the company has also pulled back on growth expectations. Rivian's Q1 deliveries also decreased, leading to a trimmed 2025 delivery forecast, but the company is focused on its lower-cost R2 SUV and reported a gross margin of 17% for the quarter, with projected losses expected to shrink, though cash burn remains a concern.

Analysis

Tesla is navigating a challenging period in its core electric vehicle business, marked by a 13% year-over-year decline in Q1 deliveries, a contraction in automotive margins to 11.3% in the last reported quarter from 15.5% in Q1 2024, and a drop in its U.S. EV market share to below 50% from 63% in 2022. Compounding these issues, the company has withdrawn its prior 2025 vehicle delivery growth guidance of 20-30%, citing uncertainties like global tariffs and softness in China. However, Tesla's Energy Generation and Storage division offers a significant counterpoint, having become its most profitable segment with energy storage deployments growing 113% in 2024 and projected to increase by at least 50% in 2025. The upcoming robotaxi event on June 22 is a potential catalyst, though investors are advised to maintain cautious expectations due to historical rollout delays and regulatory complexities. Rivian also faces headwinds, with Q1 2025 deliveries falling to 8,640 vehicles from 13,588 year-over-year, and its 2025 delivery forecast being trimmed to 40,000-46,000 units, below its 2024 actuals. Despite this, Rivian is strategically focused on its lower-cost R2 SUV (priced around $45,000, launching in 2026) to enhance market appeal and production efficiency. Positive developments include achieving a 17% gross margin in the latest quarter—its second time positive—and an anticipated narrowing of its EBITDA loss to $1.7–$1.9 billion in 2025 from $2.7 billion in 2024. A partnership with Volkswagen for next-gen software is also in place. Nevertheless, Rivian's cash burn is a primary concern, with its cash balance at $4.7 billion and planned capital spending up to $1.9 billion in 2025. Both companies operate in an increasingly competitive EV market and face potential policy uncertainties. Reflecting this mixed outlook, both TSLA and RIVN carry a Zacks Rank #3 (Hold), with the article suggesting Rivian presents a higher-risk, higher-reward speculative opportunity contingent on the R2's success, especially as Tesla's shares have underperformed Rivian's over the past six months.

Key Decisions for Investors

• Investors should critically assess Tesla's ability to arrest the decline in its core EV sales and stabilize automotive margins amidst heightened competition and uncertain growth outlook, while closely monitoring the continued strong performance and profitability contribution from its Energy division.
• For Rivian, the investment thesis hinges on its successful execution of the R2 model launch, diligent management of its significant cash burn during this high-investment phase, and its ability to scale production to achieve profitability, representing a speculative bet with considerable upside potential.
• Considering the Zacks Rank #3 (Hold) for both companies and the broader EV sector challenges, including increased competition and potential policy shifts, a cautious and patient investment approach is advisable, carefully weighing the distinct risk-reward profiles before allocating capital.