From an operational perspective, both Tesla (NASDAQ: TSLA) and Rivian (NASDAQ: RIVN) 2024 has been a rough year. However, Tesla’s stock price has been soaring, and Rivian Its stock price fell sharply at the end of the year, down about 43%. Part of Tesla's stock success last year was due to its late performance after Donald Trump won the election, as Tesla CEO Elon Musk is a big supporter of Trump and has become an adviser to him.
However, with the new year upon us, let's take a look at which stocks will outperform in 2025.
Just like their inventory is going differently in 2024, so are their vehicle deliveries. Rivian delivered 51,579 vehicles in 2024, up 3% from 2023, while Tesla delivered nearly 1.79 million vehicles, down from 1.81 million a year ago.
Despite some production-limiting issues during the year, Rivian's deliveries grew. Earlier this year, it closed manufacturing plants to implement restructuring upgrades, and late in the year it encountered parts shortages. Meanwhile, Tesla's deliveries posted its first annual decline as the company faces tougher competition and sales pressure in China and Europe.
However, investors are turning a blind eye to Tesla's difficult 2024 and focusing on the future. Many believe the company's biggest opportunity lies not in selling electric vehicles (EVs) but in its self-driving robotaxi ambitions. The company held a major online taxi event last year, unveiling a two-seat vehicle without a steering wheel or pedals. The company says the vehicles will cost less than $30,000 and plans to start producing the vehicles by 2027. However, the company has yet to detail the technology, driving range or safety features used in the vehicle.
Tesla has yet to successfully develop a fully self-driving car, and its vehicles using Fully Supervised Driving (FSD) technology have been the subject of a number of high-profile accidents and investigations. However, Musk has lobbied the government to eliminate National Highway Traffic Safety Administration (NHTSA) crash reporting requirements, a move the Trump administration appears to support. The move could pave the way for its robotic axes by making it easier to get approval for its fully autonomous driving technology.
Currently, only Waymo has letteroffers a paid robotaxi service in the United States, but its technology is more expensive than Tesla's because it uses lidar. Tesla purchased lidar sensors last year, though, so it remains to be seen whether it will adopt the technology to improve performance. However, if the company can develop cheap self-driving taxis, it will have a huge opportunity.
Rivian's ambitions are much simpler than Tesla's. First, the company wants to achieve positive gross margins because it consistently sells its vehicles below their manufacturing costs. The company upgraded tooling at its factories to improve production line efficiency and reduce vehicle material costs. Its biggest achievement is the move to a new zone architecture, which significantly reduces the number of electronic control units (ECUs) and wiring in the vehicle, thereby lowering costs.
Its regional structure is also a big reason why the company has made significant investments and partnerships Volkswagenwhich will acquire the technology for its own electric vehicles. In return, Rivian will receive a substantial cash payment if certain milestones are met, which will help it ramp up production of the new R2 SUV. Rivian is setting its sights on a less expensive R2, expected to cost around $45,000, making it an SUV with more mass appeal. Production of the new SUV is expected to begin in the first half of 2026.
Both Tesla and Rivian have potential catalysts in 2025. Any initiatives and announcements targeting self-driving and robotaxis should be good news for Tesla stock. While its overseas sales may continue to be sluggish, I think that could be the biggest driver for the stock.
Meanwhile, if Rivian can achieve positive gross margins and slowly improve them throughout the year, the company's stock price should get a boost. That looks like a realistic goal as it recycles models built with older technology and ramps up production once parts shortages ease.
When choosing an investment between the two, I would choose Rivian because it is more speculative. The stock has taken a beating in 2024, but it should be able to make progress on gross margin targets while increasing deliveries. Meanwhile, Tesla's stock price is already up significantly at the end of 2024, so any positive news may not bring much upside.
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Suzanne Frey is an Alphabet executive and a board member of The Motley Fool. Geoffrey Seiler works at Alphabet. The Motley Fool owns and recommends Alphabet and Tesla. The Motley Fool recommends Volkswagen. The Motley Fool has a disclosure policy.
Tesla vs Rivian: Which electric car stock is better to own in 2025? Originally posted by The Motley Fool