The Electric Vehicle (EV) market is heating up, with Tesla and Rivian as the key players. While Tesla has been the top EV maker globally, the competition is fierce, and Rivian is quickly rising as a strong contender. In 2025, both stocks had their fair share of ups and downs, but Rivian's stock price has been on an upward trajectory, outperforming Tesla's by a significant margin. But what does the future hold for these EV giants? Let's dive into the details and explore which stock might outperform in 2026.
The Tesla Case
Tesla's 2025 was a challenging year, with revenue and automotive deliveries dropping in the first two quarters. However, the company saw a significant rebound in the third quarter, just before the federal tax credit for EVs expired. Despite this, Tesla's adjusted earnings per share (EPS) took a hit, plunging by 31%, and the company faced gross margin pressure due to the drying up of 100% margin regulatory credits.
The key to Tesla's performance in 2026 lies in its robotaxi business. Tesla is currently testing its cybercab in Austin, Texas, with a geofenced area and a safety driver. CEO Elon Musk has ambitious plans, aiming for fully autonomous robotaxis in Austin by the end of the year. However, the company's ability to deliver on these promises is questionable, given its history of overpromising and underdelivering. The success of its robotaxi venture will be crucial in determining Tesla's stock performance in the coming year.
The Rivian Case
Rivian made significant strides in 2025, turning in two consecutive quarters of positive gross margins. This achievement unlocked a substantial $1 billion equity investment from Volkswagen. Despite facing tariff and supply chain pressures, Rivian managed to turn a gross profit in the third quarter, showcasing its resilience and ability to navigate challenges.
The company's success can be attributed to its focus on cost reduction. By revamping the internal design of its SUVs and improving manufacturing processes, Rivian significantly lowered production costs. The switch to a zonal architecture system played a pivotal role in reducing the number of electronic control units and wiring, making its vehicles more efficient and cost-effective. This technology also attracted investment and fostered a joint venture with Volkswagen.
In 2026, Rivian's key focus will be on the launch of its new, smaller R2 SUV. This vehicle will be priced lower than its R1 SUV, expanding its customer base. With higher gross margins and locked-in input costs with suppliers, the R2 is poised to be a profitable venture. The production of the R2 at higher volumes will further enhance profitability by spreading fixed costs across a larger unit base.
The Verdict
While Tesla has a history of overpromising and underdelivering, making it a risky bet for 2026, Rivian presents a more promising outlook. With a clearer roadmap and the potential for strong sales and gross profits, Rivian is a speculative stock but appears well-positioned for success in the coming year. As such, it is likely to outperform Tesla once again in 2026, despite the challenges faced by the EV market.
