The auto industry faces a lot of uncertainty in 2025. High dealership inventories, softening car prices, and Trump’s proposed 25% tariffs on Canadian and Mexican imports, which could raise consumer costs, shrink automaker profits, or both, have all been noted as areas of concern.
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Against this backdrop, RBC analyst Tom Narayan observes that market sentiment toward U.S. automakers “remains cautious.”
“Ford and Stellantis still have elevated dealer inventories and Trump tariff fears, particularly on Mexico, would be a big problem,” Narayan said. “Finally, negativity around EVs is still strong. All that said, December ’24 US dealer inventory data was much healthier than expected. Our channel checks suggest while downshifting sequentially, as typical with seasonality, January US sales are holding up. In its most recent forecast revision, IHSM actually raised ’25 global production numbers for the first time in months.”
As Narayan notes above, sentiment in the EV segment has been particularly negative, with this once high-flying sector impacted by weakening demand amidst what has been a high interest/high inflation environment. Meanwhile, the Trump administration’s wholly unfavorable stance on EVs has done nothing for sentiment either.
But that doesn’t mean there aren’t specific opportunities to take advantage of right now. Narayan has been getting the lowdown on two EV stalwarts – Tesla (NASDAQ:TSLA) and Rivian (NASDAQ:RIVN) – and comes down in favor of one over the other.
So, let’s take a closer look at the pair and with help from the TipRanks database, we can see whether the Street agrees with Narayan’s verdict.
Tesla
Tesla has become synonymous with the EV revolution, a name everyone recognizes. Initially a niche player, under Elon Musk’s leadership, Tesla has become one of the most valuable companies in the world and deserves plenty of credit for bringing EVs into the mainstream.
The debate around Tesla has always been around whether it is actually an auto manufacturer or more of a tech play given how its remit has stretched far beyond being just making cars. Over the years it has ventured into energy storage, solar products, and autonomous driving tech. These days its focus has pivoted to the opportunity in robotaxis, its FSD (full self-driving) software, and humanoid robots.
Still, its main bread-and-butter remains selling cars, and on this front, recent times have been more challenging with the company attempting to counter waning demand and rising competition with a series of price cuts, and that in turn has impacted margins.
Its latest quarterly readout was a mixed affair. In Q3, revenue rose by 7.8% year-over-year to $25.18 billion, although that figure fell short of Street expectations by $490 million. On the other hand, adj. EPS of $0.72 beat the analysts’ forecast by $0.12.
Nevertheless, quarterly results have been taking a back seat to other narratives developing in the Tesla story. Analyst Narayan thinks these will be determining how the stock performs moving forward.
“While we do think the new administration could help with federal deregulation of self-driving vehicles, ultimately, the success of Tesla’s autonomy ambitions, especially as it relates to robotaxis, will come from how well FSD develops. Currently, while we do think the software is an excellent level 2+ product (probably the best in the industry), it is not clear that it will be ready for Level 4 camera-only robotaxi use near term,” Narayan opined.
“That said,” Narayan went on to add, “Waymo’s upcoming deployment of its service in Miami using its own app does suggest it could be possible for Tesla to capture a substantial market, particularly in the US, of a closed loop robotaxi service. Near term catalysts could include FSD adoption increasing (which could translate to higher margins) near term. We think this could be helped with price cuts.”
These comments underpin Narayan’s Outperform (i.e., Buy) rating on TSLA, while his $440 price target reflects a potential one-year gain of ~11%. (To watch Narayan’s track record, click here)
But not everyone is on board. Tesla gets mixed reviews from the rest of the Street, earning a Hold (i.e., Neutral) consensus rating based on 13 Buys, 9 Holds, and 8 Sells. Most analysts believe the stock is somewhat overvalued; at $338.91, the figure indicates shares could decline by ~15% in the coming months. (See Tesla stock forecast)
Rivian
Tesla remains the undisputed EV leader, but several other companies are now eyeing its dominant position, chief among them being Rivian. While the EV boom has led to a market saturated with start-ups likely to fade eventually, Rivian has been identified as a potential challenger to Tesla’s crown.
Founded in 2009 by RJ Scaringe, Rivian’s vehicles have gained plaudits for their innovative design, excellent performance, and impressive features. Rivian also secured significant backing from investors, including Amazon and Ford, and landed a massive contract to produce 100,000 electric delivery vans for Amazon.
However, Rivian’s current situation remains challenging. While ramping up production and deliveries of its vehicles, the company has faced headwinds such as supply chain disruptions, production delays, and high operating costs. Meanwhile, the new Trump administration’s about-face on government support for EVs is set to have negative repercussions for the industry.
On the plus side, Rivian has formed a JV with Volkswagen via which it stands to get a huge $5.8 billion cash injection. Amongst other things, that will go toward helping launch Rivian’s R2 midsize SUV in the first half of next year.
As for financial results, Rivian’s latest quarterly readout, for Q3, was mixed. Revenue fell by 34.8% year-over-year to $874 million, falling shy of analyst expectations by $136 million. Non-GAAP EPS of -$0.99 also missed the Street’s forecast by $0.09. That said, the company reaffirmed its delivery outlook for the year and noted that it remains on course to turn gross profit positive in Q4, signaling potential improvements in operational efficiency despite near-term challenges.
Weighing up all the variables here, RBC’s Narayan takes a cautious stance on Rivian.
“There is some investor debate as to whether the new US administration may try to delay the cash payouts to Rivian but as it stands now, the funding is secured,” Narayan said. “As such, it appears that Rivian could have enough cash to fund operations through the launch of R2. Ultimately, a lot rests on the company’s ability to improve its underlying Gross Profit performance, excluding regulatory credits… The company is still generating losses and could face stiff competition from legacy OEMs. The EV slowdown currently underway also presents a challenge. While the VW deal provides a cash lifeline to Rivian, we await details on the milestones attached to most of the cash coming from VW.”
The verdict from Narayan is a Neutral rating while his $12 price target implies shares will shed 6% of their value in the months ahead.
11 other analysts join Narayan on the sidelines and with an additional 8 Buys and 2 Sells, the stock claims a Moderate Buy consensus rating. Going by the $14.48 average price target, a year from now, investors will be sitting on returns of 14%. (See Rivian stock forecast)
And there you have it – for RBC, Tesla is clearly the better EV stock for investors to buy right now. However, the rest of Wall Street might beg to differ.
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
