Rivian Stock Falls Again as Production and Sales Woes Bite

Rivian Automotive, a manufacturer of electric vehicles, has not had a good month. At first, the firm was forced to back down from its intention to increase prices for customers who pre-ordered SUVs. Stock prices have fallen by more than eight percent in pre-market trading today due to the company’s announcement of financial results for the fourth quarter of 2021.

Bloomberg says that Rivian’s fourth quarter was less successful than projected. The corporation appears to be facing the most difficulty with its supply chain.

As a result of the worldwide parts shortage, Rivian is unable to meet production demands. The company estimates that 25,000 will be produced in 2022, but without the aforementioned problems, that number may be doubled.

Rivian Stock Falls Again as Production and Sales Woes Bite

Rivian Stock Falls Again As Production And Sales Woes Bite

By midday today, Rivian Automotive’s share price (RIVN -4.83%) had dropped 7.5%. Although a major shareholder just announced the sale of a substantial quantity of Rivian shares, the market is clearly growing increasingly apprehensive about what the electric vehicle (EV) manufacturer may have to say when it announces first quarter results later today.

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IPO Lock-Up Period

In other words, when CNBC revealed over the weekend that Ford (F -1.39 percent) planned to sell 8 million shares in the EV shortly after the 180-day Ipo lock-up period, which restricts early investors from selling ownership in a company, the price of Rivian has been plunging drastically this week.

Ford confirmed in a regulatory statement on May 10 that the company had sold 8 million shares of Rivian the day before at a price of $26.80 per. Ford lost a lot of money in the first quarter due to the rapid drop in Rivian’s stock price, and the company was widely expected to sell its shareholding to prevent further losses.

Amazon was an Early Investor in Rivian

Investors are worried that this is just the beginning because Ford still owns 94 million shares of Rivian. The situation is even worse now that Amazon owns over 160 million shares of the EV maker. Like Ford, Amazon was an early investor in Rivian and saw a large loss in the first quarter of this year.

The timing of Ford’s selling was terrible. Due to the volatile stock markets, investors are staying away from growth companies like Rivian, which is scheduled to release its Q1 earnings later today.

Predictability is low. Due to the ongoing conflict between Russia and Ukraine, rising costs have been a problem since the fourth quarter, and Rivian has already cut its output projection for the year from 50,000 vehicles to 25,000 vehicles due to supply constraints.

Because of this, Rivian’s production numbers in the first quarter would not be encouraging, and the company’s losses could grow.

Rivian Stock Turns Higher After Production Issues Led to Earlier Declines

Stocks took an unexpected fall Tuesday morning after the announcement of the news. The corporation did not issue a press release or make a public filing regarding the departure until Tuesday.

Rivian, however, confirmed the resignation with Barron’s adding “Rod began a phased retirement from Rivian some months ago, providing the team consistency as we went into production ramp.

Thanks to him, we were able to get through a difficult period. We have taken on Rod’s responsibilities as a team. Jimmy Knauf and Charly Mwangi are two executives who could be involved in taking on those responsibilities. Knauf is the vice president for facilities at Rivian.

In November of 2021, he began working. Manufacturing engineering is within Mwangi’s purview as vice president. In May of 2020, he started at Rivian.

Stocks appear to have calmed down after the statement. At the midst of the day’s trading, the share price had risen by 4.1%. Gains of roughly 0.3% and 0.1% were seen in the S&P 500 and Dow Jones Industrial Average, respectively. The stock price was also affected Tuesday by concerns about 2021 production.

Production of Rivian’s initial product, the R1T pickup truck, is about to increase at the company’s first factory in Illinois. In 2021, the firm manufactured 1,015 automobiles.

Not quite where the company needs to be. During a company meeting in mid-December, CEO R.J. Scaringe said that production targets for 2021 were set at around 1,200 units.

Production Delays and Challenges

  1. Supply Chain Disruptions: Rivian, like many other automakers, faced supply chain disruptions, exacerbated by the global COVID-19 pandemic. Shortages of critical components, including semiconductor chips, impacted the company’s ability to ramp up production.
  2. Battery Supply: The availability of batteries is a critical factor in electric vehicle manufacturing. Rivian relies on external suppliers for its battery cells, which can lead to production bottlenecks if supply agreements are not met.
  3. Production Capacity: Scaling up production is a formidable challenge for any automotive startup. Rivian initially struggled to meet production targets, delaying deliveries to customers.

Sales and Market Challenges

  1. Competition: The electric vehicle market has become increasingly competitive, with established automakers and new entrants vying for market share. Rivian faces stiff competition from companies like Tesla, Ford, and General Motors.
  2. Pricing: Rivian’s vehicles are positioned in the premium segment, with relatively high price points. This pricing strategy may limit its market reach compared to more affordable EV options.
  3. Consumer Demand: While there is a growing interest in electric vehicles, consumer demand for electric trucks and SUVs may not match that of traditional gasoline-powered vehicles. This can impact Rivian’s sales and market penetration.

Stock Performance and Investor Sentiment

Rivian’s stock (RIVN) experienced a roller-coaster ride since its initial public offering (IPO) in November 2021. The stock initially surged, valuing the company at a market capitalization that exceeded well-established automakers.

However, the stock has since faced substantial declines, reflecting concerns about the company’s production capabilities and market competition.

Investor sentiment regarding Rivian has also been influenced by broader market trends, including fluctuations in the EV sector and concerns about high valuations for tech and EV stocks. These factors have contributed to increased volatility in Rivian’s stock price.

The Impact on the EV Industry

Rivian’s struggles are not unique to the company but are reflective of broader challenges within the electric vehicle industry:

  1. Production Complexities: EV production requires intricate coordination of various components, from batteries to electronics. Companies must overcome production complexities to meet demand and scale effectively.
  2. Supply Chain Vulnerabilities: The global supply chain has proven vulnerable to disruptions, emphasizing the importance of securing critical components and materials for electric vehicle manufacturing.
  3. Market Realities: While there is strong interest in EVs, the market remains sensitive to factors such as pricing, consumer preferences, and competition. Automakers must navigate these dynamics to succeed.
  4. Investor Expectations: The electric vehicle sector has attracted significant investment and speculation. Companies like Rivian face high expectations from investors, making it challenging to meet or exceed those expectations consistently.

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As of March 8th, Rivian revealed that it had received roughly 83,000 preorders for both the R1T pickup truck and the R1S SUV. Not only that, but Amazon has placed an order with Rivian for a hundred thousand of its all-electric delivery vehicles (EDVs).

With this funding round, Rivian has a significant advantage over the vast majority of other EV start-ups. Almost $18.4 billion was in Rivian’s cash reserves at the conclusion of the fourth quarter. Hope now you know about rivian stock falls again as production and sales woes bite. 

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