The embattled EV maker Rivian Automotive (NASDAQ:RIVN) recently got some much-needed good news. Shares rose nearly 8% on Mar. 27 after President Trump announced big-time tariffs on foreign cars and components. This announcement came a week after a large downgrade by analysts at Piper Sandler, which caused shares to fall by 4%. The company also released two other pieces of significant news on Mar. 26.
Below are the specifics surrounding these important pieces of news. First, I’ll discuss the news that came from Rivian itself, then go into detail on this new round of tariffs. I’ll add perspective along the way on whether these are positive or negative developments for Rivian shares.
Micromobility Spin-Out Increases Focus on Core Operations
Rivian’s Mar. 26 press release contained two key announcements. The main headline was that the firm is spinning out its micromobility business. This previously internal part of the business is being sold as a new firm called Also. Rivian will retain a substantial minority stake in the business. Many believe Also will make products like electric scooters, e-bikes, and other small electric vehicles. But, the details are still unclear.
It makes sense for Rivian to be active in developing products adjacent to electric cars. InsideEVs points out that the micromobility market grew at a brisk pace from 2018 to 2023. Compared to 2023 levels, McKinsey and Company expects the number of micromobility trips to increase by 95% to 306% by 2035. This could represent a substantial secondary revenue stream for Rivian. However, Rivian isn’t in a position to spend significant time on non-core business activities.
In Q4, the company posted a positive gross margin for the first time ever. Even producing vehicles profitably has taken the firm around three years. It still has a long way to go to achieve consistently positive free cash flow or net income, which is vital to Rivian’s survival. It is plausible that the micromobility business was a distraction from this goal.
Thus, no longer operating this business is a good move that intensifies Rivian’s focus on its most important objectives. Additionally, Rivian can still participate in micromobility upside through its investment in Also.
R2 Update Keeps Production Worries at Bay
A sidebar in this press release, but arguably more important overall, was an update on Rivian’s core business. The company said it continues to progress on launching its next vehicle, the R2. The company still expects that R2 deliveries will begin in the second half of 2026. This is another welcome update, as Rivian has faced significant production delays in the past. The R2 is extremely important in Rivian’s path to profitability.
The company expects material costs for the R2 to be around half that of the second-generation R1. Additionally, it expects a more than 50% reduction in non-material costs of goods sold. This likely includes labor and overhead costs needed for actual vehicle production. If these cost reduction forecasts come to fruition, the company’s gross margin and overall profitability could improve greatly.
They could also significantly benefit revenue growth. The R2 will start at a price of $45,000, well below the over $90,000 average selling price of Rivian’s current vehicles. This should help open up the firm to a market of less affluent consumers. However, the firm will need to strike the right balance between price and quantity to drive higher revenue growth.
Tariffs Can Make Rivian Vehicles More Competitive in the Fierce Auto Market
The tariff news was the biggest reason for the strong recent move in Rivian’s stock price. All foreign autos and foreign auto components will be subject to a 25% tariff. Rivian makes all of its vehicles at its plant in Illinois, meaning the firm’s vehicles will not directly be subject to the tariffs. However, the tariffs will still negatively impact Rivian, as it sources some of its components internationally.
Higher component costs create a bit of a quandary for a firm already struggling with profitability issues. Still, this news is likely a net win for Rivian and Tesla (NASDAQ:TSLA) as it increases their price competitiveness versus many other automakers.
Overall, these news items are positive developments for Rivian. However, the firm’s success still hinges greatly on the successful rollout of the R2, which is still around a year away. This stock remains one to watch. Investors should maintain a keen focus on management commentary surrounding the R2 rollout and tariff implications.