Rivian Shares Tumble As Production Ramp Stalls

Investing in publicly traded companies is not for the faint of heart, particularly when it comes to EV manufacturers. Rivian debuted on the stock market last year and promptly soared, as people looking to find the next Tesla plowed money into the company. As of the end of trading on March 11, those investors had lost a total of $124.5 billion, as the price of the company’s shares has fallen by 77% since its IPO. OUCH!

Rivian has suffered the same growing pains as Tesla did a decade ago. Don’t forget there was a time when Elon Musk was frantically trying to get Apple CEO Tim Cook on the line to save his company from financial ruin. Cook refused to take his calls and the rest, as they say, is history.

According to Autoblog, Rivian this week said its production numbers in 2022 would be about half of expectations as supply chain issues continue to hamper the company. Here again, Tesla proponents can relate.

When you are the new kid on the block, suppliers who have solid orders from companies they have done business with for years are not overly anxious to forsake their regular customers for some startup that may or may not be able to pay its bills. Tesla often found itself being put off by suppliers. It’s one of the reasons why Tesla has elected to manufacture many of the parts it needs to build its cars in-house.

Rivian says as of March 8, it has built 1,410 vehicles so far this year. It had expected to build 50,000 trucks this year, but now advises it is shooting for 25,000 as it expects supply chain issues to continue for the rest of this year and on into 2023. Shares of Rivian dropped by 12% after the announcement.

“As we continue to ramp up our manufacturing facility, manage supply chain challenges, face continued inflationary pressures and minimize price increases to customers in the near term, we expect to recognize negative gross margins throughout 2022,” the company said this week in a letter to shareholders. Rivian reported a fourth quarter net loss of $2.46 billion, or $4.83 per share, compared with a year-ago loss of $353 million, or $3.50 per share. It posted revenue of $54 million, well below investors’ expectations of $60 million.

Garrett Nelson, an auto industry analyst at CFRA Research, tells Autoblog“The 2022 production guidance was disappointing and well short of what they said in their road show, and the fourth-quarter loss was wider than expected.”

CEO RJ Scaringe tried to put a brave face on things during a conference call with analysts on Thursday, saying Rivian expects a “significant” ramp up in production of the EDV-700 electric delivery van it is building for Amazon in the second quarter of this year.

Rivian says it is “exploring ways to further expand” its commercial relationship with Amazon, which owns a 20% stake in the compayny and has ordered 100,000 vans. It will also begin producing a smaller van for Amazon called the EDV-500 later this year. The company claims to have 83,000 pre-orders for its R1T pickup and R1S sport utility vehicle as of March 8 — up from 71,0003 months ago.

The company got significant blowback from those reservation holders after it tried to jack up the prices of its vehicles by up to $12,000 a few weeks ago. It later said the price increases would not affect most reservation holders, but it was a bumbling, ham-fisted move by the company that rattled many of its investors.

Don’t Listen To Me!

If you are a day trader or otherwise involved in the stock market, do not base any investment decisions on what I say. Having lost money big time by investing in EV startups, I chose not to follow the herd when Rivian went public and I’m glad I didn’t. I consider myself to be the worst person in the world to offer financial advice. Please ignore anything I say.

The question now is whether Rivian will survive. The few people who own a Rivian R1T pickup truck rave about them, but there are lots of companies with good products who never make it. We hope Rivian succeeds as something more than an adjunct of Amazon but the outlook for the company is fraught with danger. Will Rivian find a way to thrive? “We’ll see,” said the Zen master.


 

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