Rivian Automotive (RIVN)
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On July 14, 2025, Guggenheim Securities analyst Ronald Jewsikow downgraded Rivian Automotive from a “Buy” to “Neutral” rating, citing a series of concerns, including weaker long-term sales projections for its upcoming R2 and R3 models, as well as anticipated policy changes that will affect both the company’s ability to sell vehicles at attractive prices and its overall demand moving forward.
Weakening Sales Projections for the R2 and R3 Models
RIVIAN’S R2 AND R3 MODELS:
Upcoming Models: Rivian’s R2 and R3 models are seen as key to the company’s growth strategy, particularly as it attempts to diversify its product portfolio and address the mass-market segment of electric vehicles (EVs). The R2 is expected to be more affordable and aimed at a broader consumer base, while the R3 is expected to be a larger, more luxury-oriented EV.
Weaker Long-Term Sales Projections: Jewsikow noted that Guggenheim’s revised projections for these upcoming models have been downgraded due to weaker-than-expected demand for Rivian’s current R1 series and growing concerns around government tax credit policy changes. Specifically, while Rivian initially anticipated strong demand for these future models, concerns over the slower adoption of the R1, along with shifts in U.S. EV tax credit policy, have led to a less optimistic forecast for the long-term sales trajectory of the R2 and R3.
Softness in Current R1 Model Revenues
CHALLENGES WITH THE R1 MODEL LINEUP:
Rivian’s current flagship vehicles, the R1T (pickup truck) and R1S (SUV), have been well-received in certain consumer segments, particularly among early adopters and enthusiasts of off-road EVs. However, despite positive reviews, Jewsikow highlighted that the sales momentum for the R1 models has not been as strong as initially expected, with weaker demand growth and limited market penetration.
This sales softness is concerning, as Rivian was counting on the R1 models to generate a steady revenue stream that would fund the development of future models like the R2 and R3. As the company struggles with scaling production and meeting demand, the R1’s sales underperformance puts additional pressure on Rivian’s financials and its ability to hit aggressive volume targets.
3. Changes in U.S. EV Tax Credit Policy
TAX INCENTIVE REDUCTIONS:
One of the critical concerns raised by Guggenheim involves the U.S. government’s changing tax credit policy for electric vehicles, which is set to phase out federal EV tax incentives over the coming years. Rivian, along with many EV manufacturers, has relied on these incentives to make their vehicles more affordable to consumers, thereby stimulating demand.
President Donald Trump’s recently passed spending bill is expected to significantly alter the tax credit structure for electric vehicles, phasing out some incentives that were previously available to consumers buying EVs. This policy shift could have a substantial negative impact on Rivian’s vehicles, particularly for the R2 and R3 models, which are expected to be price-sensitive in nature.
IMPACT ON R2 AND R3 MODELS:
The R2 and R3 are expected to be priced in a more competitive range, targeting middle-income buyers who are more likely to be swayed by available tax incentives when making purchasing decisions. Without the federal EV tax credit, the effective cost of these vehicles will rise, potentially dampening demand, especially for price-sensitive buyers.
Jewsikow noted that the loss of these incentives will likely lead to weaker demand for both the R2 and R3, although the full impact of this change won’t be felt immediately. The analyst expects this impact to materialize more fully by 2027, when Rivian plans to scale production of these models significantly.
4. Short-Term Demand Pull Forward
PREORDER BACKLOG:
Despite these longer-term concerns, Jewsikow acknowledged that in the short-term, Rivian may still experience a demand surge due to consumer rushes to purchase vehicles before the loss of the EV tax incentives. Rivian has a robust preorder backlog for its vehicles, especially the R1T and R1S, driven in part by consumers wanting to lock in tax credits before they are phased out.
In the short run, buyers who are incentive-sensitive may push forward their purchase plans, which could result in temporary demand acceleration. However, this rush to buy may be unsustainable in the long term, as it pulls forward demand from future periods, potentially leading to a slower growth trajectory once the incentives are no longer available.
5. Impact on Rivian’s Ability to Achieve ASPs and Volume Targets
REQUIRED AVERAGE SELLING PRICES (ASPS):
Jewsikow raised a critical point regarding Rivian’s average selling prices (ASPs). For Rivian to meet its financial and valuation targets, it needs to sell its vehicles at a certain price point that supports its production costs while also delivering a healthy margin. However, without the EV tax credits, the effective price for consumers will rise, making it more difficult to achieve the required ASPs to maintain its projected growth path.
Rivian’s ability to meet its volume targets—especially for its future models, R2 and R3—is now in question. With lower-than-expected sales of the R1, increasing production costs, and the loss of incentives, achieving the necessary sales volumes and pricing structure to support the business model is becoming more challenging. Guggenheim believes that these headwinds will make it harder for Rivian to hit the sales targets that would justify its current valuation.
Outlook:
Guggenheim’s downgrade reflects growing skepticism about Rivian’s ability to meet its long-term growth and profitability targets, especially in the face of supply chain challenges, slower demand for the R1, and the loss of EV tax incentives. While Rivian’s cost-reduction efforts for the R2 are viewed as credible, the analyst is concerned that declining demand for the R1, combined with the policy shift regarding EV incentives, will severely hinder the company’s ability to achieve the necessary sales volumes and average selling prices (ASPs) to justify its previous valuation.
The downgrade from a “Buy” to a “Neutral” rating highlights the increased uncertainty surrounding Rivian’s ability to execute on its growth strategy, particularly in the face of evolving market dynamics and regulatory changes.
David is veteran trader, and a former investment analyst at private equity firm, and is currently a STA Research analyst.
The downgrade makes sense given the uncertainty around the R2 and R3 models, especially with broader EV demand cooling. It’ll be interesting to see how Rivian adjusts its strategy in response to evolving consumer preferences and potential policy shifts.