An Income Statement And Balance Sheet Showdown

When it comes to electric vehicles, Tesla is head of the class. Over the years, other automakers have entered the EV space hoping to profit from this industry, and many have. With this influx of competition, analysts have been predicting the demise of Tesla’s grip on the EV market. However, these predictions have yet to come true.

The biggest competitor to Tesla making waves right now is Rivian. Investors love the stock, but it’s still working on increasing production capacity and hasn’t yet turned a profit as a smaller business. But does this mean you should avoid Rivian stock?

Here is a head-to-head comparison of these two companies to help better understand where to invest your money.

Rivian’s Recent Earnings Report

Rivian (RIVN), an electric pickup truck manufacturer, recently revealed its eagerly awaited Q2 results.

The net R1 model reservation backlog was about 98,000 vehicles from customers across the United States and Canada as of June 30, 2022. The average daily reorder rate in the second quarter of 2022 increased compared to the first.

Amazon’s first electric drive vehicle (EDV) order from Rivian was for 100,000 vehicles. Amazon announced the expansion of its bespoke EDVs to cities throughout the country in July 2022. Rivian’s collaboration is crucial to Amazon’s aim to achieve net-zero carbon emissions by 2040.

Moreover, Rivian was able to perfect the EDV characteristics and layout thanks to tight development cooperation involving Amazon and its delivery drivers. Rivian perfected these features during an extensive series of test deployments beginning in early 2021.

The total number of vehicles Rivian manufactured in 2022 is around 8,000 as of the end of the second quarter. Furthermore, Rivian has reiterated the company is on track to meet its 2022 production projection of 25,000 net units manufactured.

Sales in the second quarter were $364 million. However, Rivian was not projected to be profitable in the second quarter of 2022 and disclosed an adjusted deficit of $1.62 per share. Rivian ended the second quarter of 2022 with over $15.4 billion in cash, cash equivalents, and restricted cash.

Tesla Powerhouse EV Dominance

With an emphasis on sustainable energy solutions, Tesla is the world’s largest EV firm. Elon Musk is the founder of Tesla, establishing the company in 2003. Every manufacturer is aiming for Tesla in the automobile industry, which is hardly surprising given how quickly Tesla had grown into the poster child for electrification.

Analysts have previously argued that incumbent carmakers would soon capture Tesla’s EV market share and reduce its worldwide supremacy. For many years, Tesla has dominated the electric vehicle industry in the United States. Yet, analysts project that Tesla’s market dominance will decrease as new EV competitors enter the U.S. market.

For the time being, the U.S. EV market is still heavily reliant on Tesla. The carmaker’s order rate has increased significantly in several regions of the United States because of the recent spike in gas prices. As a result, Tesla is boosting output at its Fremont plant and launching operations at its Gigafactory in Texas. While part of the extra manufacturing is for export, Tesla still expects an expansion in the United States.

New registration figures further reveal that Tesla continues to dominate the U.S. electric car market by a wide margin. In the first quarter of 2022, Tesla sold approximately 564,000 cars, while in the second quarter, it sold around 254,695, vastly outproducing competitors like Rivian.

Tesla vs. Rivian: Sales and Revenue Trends

Rivian

Rivian built 4,401 automobiles and delivered 4,467 during the second quarter of 2022, earning $364 million in sales. In Q2, Rivian also produced a negative gross profit of $704 million due to high labor and overhead costs. These costs arise because Rivian makes vehicles at low levels on manufacturing lines meant for more significant volumes.

This dynamic will persist in the short term. Still, as we have previously seen, the company anticipates strengthening as production levels rise faster than future labor and overhead price hikes.

A rise in overhead and labor expenditures reduced gross profit by $301 million in the second quarter of 2022. Rivian expects these elements to continue negatively impacting operational performance.

Throughout the quarter, inflationary pressures influenced the business’s cost of materials, which the company believes will continue to have an impact. Total operational expenditures in the second half of 2022 increased to over $1 billion, up from $580 million in the same period the previous year.

Also in Q2 of 2022, Rivian recorded a non-cash stock-based compensation charge of $229 million and depreciation and amortization costs of $34 million in operational expenses.

Overall, the investments in people, equipment, and vehicle initiatives accounted for most of Rivian’s year-over-year rise in operating expenditures in the second quarter of 2022. The cost of research and development in the second quarter of 2022 totaled $543 million, up from $394 million during the same period last year.

As a result of these higher operating costs, Rivians’ total loss for Q2 was over $1.7 billion, up from $580 million in the same period last year.

Tesla

In the second quarter of 2022, Tesla earned $2.3 billion in GAAP net income and $2.6 billion in non-GAAP net income. The company has also seen exciting achievements at some of its newer plants.

Gigafactory Berlin-Brandenburg attained a significant milestone by producing over 1,000 automobiles in a single week while maintaining a positive gross profit during the quarter. Tesla delivered the first vehicles equipped with 4680 cells and structural rechargeable batteries to clients in the United States from its Austin facility.

To maximize output, Tesla continues to invest in factory capacity growth. The energy sector of the company also made significant progress in Q2, with increased volumes and superior unit economics leading to an all-time high gross profit. Moreover, consumer demand for Tesla’s storage items continues to outperform the manufacturing rate.

In the second quarter, total sales for the company increased 42% year on year to $16.9 billion. Tesla’s operating income increased yearly to nearly $2.5 billion in Q2, leading to a 14.6% operating margin.

Rivian and Tesla Balance Sheet Comparison

Rivian’s entire current assets were valued at around $15.7 billion in the second quarter of 2022, while its total non-current assets were $4.4 billion. In Q2, Rivian’s total current liabilities were $1.7 billion, while its total non-current liabilities were $1.4 billion. The entire equity of the investors is $1.6 billion.

On the other hand, Tesla’s quarter-end cash, cash equivalents, and relatively short marketable securities grew by $902 million sequentially to $18.9 billion in Q2. The increase was driven primarily by the free cash flow of $621 million, slightly offset by loan repayments of $402 million.

As of Q2, Tesla had converted around 75% of its Bitcoin transactions into fiat cash. Conversions added $936 million to the balance sheet in the second quarter.

Analyst Forecasts

Rivian Automotive Inc. has a consensus price objective of $50, with a high estimate of $83 and a low estimate of $27, according to the 15 analysts who provide 12-month price estimates. The median estimate is up +53.61% from the previous price of $32.55.

The 36 analysts that provide 12-month price projections for Tesla have a consensus target of $1,000, with a high figure of $1,580 and a low estimate of $250. The consensus estimate reflects a +12.36% increase over the previous price of $890.

Bottom Line on Rivian and Tesla

The prevailing opinion among 42 financial analysts polled is to purchase Tesla shares. The company had maintained a stable buy rating due to Tesla’s outstanding performance in the first half of 2022, when it achieved higher sales and net profit.

Rivian, on the other hand, reported a net loss of $1.7 billion in the second quarter of 2022, up from a loss of $580 million the previous year. These significant losses in Q2 were primarily due to higher operational costs.

To summarize, Rivian is where Tesla was five to ten years ago. But only time will tell whether Rivian’s future profitability and share price will have similar performance to Tesla.

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