Why Rivian Stock Plunged This Week – and Could Fall Further

What happened

Investors who thought Rivian Automotive ( RIVN -2.95% ) the stock had bottomed in March were apparently overly optimistic. Electric vehicle (EV) stock fell another 16.5% this week, according to data provided by S&P Global Market Intelligence.

Interestingly, at least one analyst expects Rivian stock to more than double from its current price, but investors are struggling to maintain confidence in the electric truck startup.

So what

Rivian filed its annual 10-K report with the Securities and Exchange Commission on March 31. While its numbers were nothing out of the ordinary, the filing gave investors a bit more insight into something they hadn’t known before – the impact of the Russia-Ukraine conflict on Rivian’s operations. .

Rivian admitted that the shortage of supply in critical parts such as semiconductors posed a major challenge to it, noting that it had been forced to modify its processes to adapt to these shortages. The changes only increased the company’s vehicle production costs, which were already on the rise due to sharply rising prices for metals such as lithium and nickel, key inputs for electric vehicles. .

Image source: Rivian Automotive.

Rivian also hasn’t ruled out the possibility of a price hike for its vehicles in the near future to offset its rising costs. This may not work in Rivian’s favor, as it is already struggling to ramp up production and fill its order book. For perspective, on April 5, Rivian reiterated its forecast that it would produce 25,000 electric vehicles in 2022. Just a few weeks ago, it said it could have produced 50,000 units this year without the problems of supply and logistics.

Additionally, Rivian said on April 5 that it produced 2,553 vehicles and delivered 1,227 vehicles in the first quarter. While I find this pace of production encouraging given that Rivian had only produced 1,410 vehicles this year through March 8, investors wanted more from the company.

Between, General Engines (GM 1.63% ) and Honda announced plans to co-develop and mass-produce affordable electric vehicles by 2027. Although mainstream automakers are targeting crossovers and SUVs, the possibility of them developing an electric pickup cannot be ruled out . General Motors’ GMC Hummer EV, slated to start production in 2023, is already seen as a rival to Rivian’s R1T pickup.

Meanwhile, You’re here (TSLA -3.00% ) officially opened the Texas gigafactory that will initially produce the Model Y SUV, but will begin manufacturing the delayed Cybertruck next year – another direct competitor to the R1T.

Now what

To be fair, I’m not surprised that Rivian shareholders are feeling nervous. The R1T pickup may have received glorious initial reviews, but it will make little difference to investors until the company can produce trucks on a large scale and deliver them to buyers. Competition in its niche is intensifying and costs are rising, and with declining investor confidence, these headwinds are reflected in Rivian’s share price.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.

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