Morgan Stanley Downgrades Rivian to Equalweight, Keeps PT

Morgan Stanley analyst Andrew Percoco downgraded Rivian from Equalweight to Underweight with a price target of $12.00.

“Rivian faces outsized risk heading into 2026 as it launches its lower-priced R2 into a challenging EV market, where slowing adoption, loss of the $7,500 tax credit, and persistent consumer concerns (range anxiety, charging infrastructure, residual values, battery tech, affordability) create headwinds that a mass-market vehicle may struggle to overcome in the near-term.

While the R2 expands Rivian’s addressable market, we believe the company will also face residual-value pressure from R1 lease returns and potential demand cannibalization.

Rivian’s strong design and performance help, but Tesla’s rapidly advancing FSD will require greater conviction in Rivian’s AV capabilities – expect more details at Rivian’s upcoming AI day on December 11th.

In 2026 we forecast auto gross margins ex-credits to remain relatively stable as R2 scaling reduces BoM costs, with software and services contributing incremental high-margin revenue, yielding a $2.9bn adj. EBIT loss.

After ~$300mn of working capital needs and $1.6bn of capex we expect RIVN to burn $4.2bn of FCF, though we expect its next tranche of capital from VW upon completion of winter testing in 1Q26.”

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