Everyone wants to find the next one Tesla (NASDAQ: TSLA). But investing in the electric vehicle (EV) space can be tricky. Many EV companies have gone bankrupt over the years and it can be difficult to separate the good from the bad.
Fortunately, Tesla has set a clear template for success. And right now, there’s one EV stock that looks extremely attractive. But there is only one investment strategy that has a chance of success.
This is how Tesla became a huge success
In 2006, Tesla CEO Elon Musk revealed “The Secret Tesla Motors Master Plan” to the public. “As you know, Tesla Motors’ original product is a high-performance electric sports car called the Tesla Roadster,” his essay began. “Some readers may not be aware that our long-term plan is to build a wide range of models, including affordably priced family cars.”
Musk summarized the master plan for Tesla:
Today, Tesla is a great symbol of success when it comes to achieving long-term visions. The Tesla Roadster was a success, but given its price of over $100,000, the market was always small.
Tesla had to prove its manufacturing capabilities and show the public that electric cars could be cool and exciting. It used this success to design, build and deliver two new models: the Model S and Model X. These models were still expensive, but introduced Tesla to hundreds of thousands of new owners.
Tesla then used its reputation and access to capital to introduce two new mass market models, the Model 3 and Model Y. These two models, with many affordable prices, helped Tesla increase its sales by more than 1,000% over the past decade could grow. .
Tesla’s master plan did wonders for its valuation. The company is currently worth about $800 billion. Another company, meanwhile, is valued at just $11 billion, yet flawlessly executes Tesla’s proven master plan.
Rivian could be the next big EV stock
When it comes to following Tesla’s template for success, few EV companies look as attractive Rivaans (NASDAQ: RIVN).
In 2018, Rivian announced the debut of its R1T and R1S models. Like Tesla’s previous models, the R1T and R1S were ultra-luxury, high-end, no-compromise vehicles with prices that could easily surpass $100,000 with certain options. Consumer feedback has been fantastic. Consumer Reports found that Rivian has the highest customer satisfaction and loyalty levels of any automaker – electric or otherwise. About 86% of Rivian owners said they would buy another Rivian. No other brand exceeded 80%.
What will Rivian do with its new reputation and sales base? Exactly what Tesla did: build affordable cars. Earlier this year, the company unveiled three new models: the R2, R3 and R3X. All are expected to debut with a starting price under $50,000. Achieving this price level has put Tesla on the map for millions of people. If Rivian can pull it off, it should be very successful.
If Rivian can match Tesla’s success, why is its market cap hovering just above $10 billion? Firstly, the new models are not expected to hit the roads until 2026 at the earliest. Secondly, the required production facilities are not even complete yet. Third, the company is still losing money quickly because car production is capital intensive. However, management expects to achieve positive gross profit by the end of 2024. Finally, Rivian is trying to compete in a market segment – electric vehicles – that has seen many bankruptcies over the years.
Clearly, the market is skeptical of Rivian’s plans, even though the company is operating on a proven growth model and has demonstrated its ability to produce vehicles that customers love. However, the coming years will be crucial. Rivian will become a household name like Tesla if it can deliver, an outcome that will likely see a rapid rise in its valuation.
There is no guarantee that the company will continue to be able to affordably tap the capital markets or get its production capabilities operational quickly. It will have to market its vehicles in a hyper-competitive sector. Yet it’s this uncertainty that offers patient investors a lucrative entry point into Rivian stock right now. If you can remain patient, Rivian’s rise could ultimately mirror Tesla’s.
Should You Invest $1,000 in Rivian Automotive Now?
Consider the following before purchasing shares in Rivian Automotive:
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Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool holds and recommends positions in Tesla. The Motley Fool has a disclosure policy.
The Ultimate Electric Vehicle (EV) Stock You Can Buy Right Now with $1,000 was originally published by The Motley Fool
