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Investing.com - Electric-vehicle maker Rivian (NASDAQ:RIVN) faces slower market growth, intensifying competition and limits to the reach of its brand, according to analysts at Bernstein.
In a note to clients initiating their coverage of the stock with an "underperform" rating, the analysts led by Daniel Roeska argued that U.S. government policy should put a crimp on the expansion of the market for battery-electric vehicles and place "additional pressure on the segment".
EV manufacturers like Rivian have also been grappling with weak demand as elevated interest rates are pushing customers into cheaper hybrid options.
Meanwhile, traditional carmakers are tipped to increase their construction of EV cars, likely making the market for these vehicles as competitive as the one for combustion engines by the end of the decade, the analysts said.
The analysts also flagged that Rivian’s drive to advertise itself as an "adventure" brand condenses its customer base. They estimated that, out of a total anticipated U.S. battery-electric vehicle market of 4 million in units in 2030, the company will be able to address 36% of it.
"Headwinds" could hit Rivian’s plan to ramp up production of its less-expensive R2 SUV as well, the analysts predicted, adding that they expect 2026 core earnings will miss estimates by 50%.
"Without significant volume expansion, Rivian will remain sub-scale and achieve mid-teens gross margins at best - a prospect that makes it challenging to deliver meaningful value to shareholders," the analysts wrote.
Earlier this month, California-based Rivian posted fourth-quarter deliveries that surpassed expectations and said production was no longer being constrained by the shortage of a part, boosting hopes that the business will eventually turn its first profit.
Output in 2024 stood at 49,476 vehicles, down by around 13% from the prior year but still above Rivian’s previously-lowered guidance of 47,000 to 49,000 units.