Rivian Automotive (RIVN -2.79%) was one of the market's hottest stocks just over four years ago. The electric vehicle (EV) maker went public at $78 per share on Nov. 10, 2021, and its stock more than doubled to a record closing price of $172.01 a week later.

At the time, investors were impressed by Rivian's ambitious production goals and its support from Amazon and Ford Motor Company. But over the subsequent years, it missed its own production targets and racked up steep losses.

Ford also sold most of its shares of Rivian and axed its plans to co-develop an electric pickup, while rising interest rates popped its bubbly valuations. Today, its stock trades at about $12. So should investors buy Rivian's stock as a turnaround play today?

Image source: Rivian.

Why did Rivian struggle to ramp up its production?

Rivian currently sells three types of EVs: the R1T pickup truck, the R1S SUV, and custom delivery vans for Amazon and other companies. Prior to its initial public offering (IPO), Rivian predicted it would produce 50,000 vehicles in 2022. But that year, it only produced 24,337 vehicles and delivered 20,332 vehicles. It blamed that sluggish growth on supply chain constraints, intense competition, and an unfavorable macroeconomic environment.

In 2023, it produced 57,232 vehicles and delivered 50,122 vehicles as it resolved its supply chain issues and ramped up its production of its in-house Enduro drive unit. But in 2024, it only produced 49,476 vehicles and delivered 51,579 vehicles. Its growth stalled out again as it temporarily shut down its main plant in Illinois for some technological upgrades and faced more supply chain challenges. More competitors also carved up the EV market, which cooled down as interest rates stayed high.

For 2025, Rivian only expects to deliver 46,000 to 51,000 vehicles. It attributes that dim outlook to another shutdown of its Illinois plant in the second half of 2025 to gear up for the launch of its R2 SUV in the first half of 2026; the devastating fires in Los Angeles, which was one of its top markets; a "challenging" demand environment; and "potential adjustments" to federal incentives, regulations, and tariffs. It's also been grappling with some component shortages for its own Enduro drive unit.

What's next for Rivian?

During the fourth-quarter conference call, CEO Claire McDonough predicted the R2's launch in 2026 would be "truly transformative for our growth and profitability." But until then, it expects its full-year capital expenditures to rise from $1.14 billion in 2024 to between $1.6 billion and $1.7 billion in 2025 as it expands its Illinois plant, resumes its construction of its new Georgia plant, and opens more service centers, experiential spaces, and charging stations across its Rivian Adventure Network.

But even though Rivian expects its capital expenditures to climb ahead of the R2's launch, it believes its gross profit -- which turned positive in the fourth quarter of 2024 -- will stay positive in 2025 for three reasons:

1. It's improving its material, conversion, and depreciation costs per vehicle.
2. It's selling more of its regulatory credits to other automakers.
3. It's expanding its higher-margin software and services business.

For 2025, analysts expect Rivian's revenue to rise 8% to $5.39 billion as it narrows its net loss from $2.69 billion to $1.86 billion. It still had $9.06 billion in total liquidity (consisting of $7.7 billion in cash, cash equivalents, and short-term investments along with the capacity of its asset-based revolver), so it won't go bankrupt anytime soon.

It might be smart to buy Rivian before the R2 launch

Rivian is still a highly speculative stock. But with an enterprise value of $13.23 billion, it looks cheap at 2.5 times this year's sales. That might be why Amazon still hasn't sold its 15% stake in the automaker even after Ford cut its losses.

Therefore, I think it might be smart to nibble on Rivian's stock at these depressed levels before it launches the R2 in 2026. 2025 will likely be a rough transition year for Rivian, but its low valuation and stabilizing gross margin could limit its downside potential. If it successfully scales up its production of the R2, its stock could surge a lot higher over the next few years.