Once the darling of the EV world, electric truck maker Rivian is on the ropes

Rivian Automotive Inc. emerged as an investor darling – a brand with the promise of bringing the ‘cool’ factor to the once red-hot electric vehicle market.

But the Irvine-based company pumped the brakes on Wednesday, announcing a 10% workforce reduction and lower production expectations. The news caused the stock to plummet. The 25% share price drop it recorded on Thursday was the worst day in its history.

It’s all part of a larger reckoning for EV companies, which now face declining demand amid a shrinking pool of wealthy buyers who don’t yet own an EV and continued questions from the broader consumer market about whether EVs really fit into their lives and budget. .

“We’ve been living in a wave of ‘Oh, electric cars are great, they’re going to continue the accelerated growth and just get better,’ and now it looks like they’re reaching this point of reality,” said Jessica Caldwell, head of insights at Edmunds. “Mass market buyers have less income and many more questions.”

Rivian’s trucks and SUVs certainly turn heads; its sleek design and outdoor features have investors, analysts and the public excited about its potential. The company, which counts Amazon as an investor, blew the roof off in its 2021 initial public offering of shares, ending its first day of trading at a valuation of nearly $88 billion.

But the average car buyer likely can’t afford the price of Rivian’s current lineup of vehicles: the company’s R1T electric pickup starts at nearly $70,000, while the R1S SUV starts at nearly $75,000. The company, which is not yet profitable, reported a net loss of $1.52 billion for the three-month period ended December 31, compared with $1.72 billion during the same period a year earlier. Much depends on the company’s plan to produce the cheaper R2, which will debut in March but won’t begin mass production until 2026.

Despite years of EV sales growth, mass market customers remain wary of EV battery life, range and the availability of reliable charging stations. That’s why hybrid vehicle sales have grown alongside electric vehicles, Caldwell said.

“It’s not always easy to install a charger where you live,” she says. “For electric vehicles to take off and become a mass market, major infrastructure growth is ultimately needed.”

That hesitation is reflected in Rivian’s production and delivery expectations for 2024. The company says the order backlog has shrunk, partly due to fulfillment, but also due to cancellations and fewer new orders.

The company said it expects to produce 57,000 vehicles this year, which it said was in line with 2023 figures, although it disappointed Wall Street analysts who expected that number to be higher. Last year the company produced 57,232 vehicles and delivered 50,122 cars, more than double the 2022 figures.

This year’s projections “cast a dark cloud around the story,” said Dan Ives, managing director and senior equity analyst at Wedbush Securities.

“Reducing costs and workforce due to a milder climate and production issues,” he wrote in an email. “Rivian went from a Cinderella story to a horror show.”

Deutsche Bank analyst Emmanuel Rosner said in a note to clients that he now expects 2024 deliveries to be “flat” at 50,000 vehicles, versus his previous expectation of 65,000 vehicles.

“Rivian’s rather gloomy 2024 guidance, including no volume growth and continued steep losses, in our view shows the significant challenges ahead for the company,” Rosner wrote.

The company attributed the lower expectations for 2024 to “economic and geopolitical uncertainties” and highlighted the effect of higher interest rates on new auto loans. Rivian said it would continue its “company-wide cost transformation program,” which it said helped lower the price for the company’s electric pickup truck, SUV and van.

“We firmly believe in the full electrification of the automotive industry, but recognize challenging macroeconomic conditions in the near term,” CEO RJ Scaringe said in the company’s statement.

Rivian isn’t the only EV maker faltering: shares of electric carmaker Lucid Group Inc. fell nearly 17% on Thursday after a disappointing earnings report. Although shares of Tesla Inc. rose slightly on Thursday, the Elon Musk-led automaker warned last month of possibly lower growth in 2024, but the company reported a small increase in sales for the fourth quarter.

For Rivian, the details surrounding the R2 debut will be especially important to consumers and analysts alike.

“Rivian is very exciting, their products are very exciting, they’re definitely cool, but there are questions about how much market and how much runway they have, especially as they wait for R2,” Edmunds’ Caldwell says. “If they can get a cheaper vehicle, that will obviously have a bigger market.”

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