Rivian Automotive Inc. emerged as investors' favorite: a brand that promised to bring the “cool” factor to the once-hot electric vehicle market.
But the Irvine-based company hit the brakes on Wednesday, announcing a 10% cut to its workforce and lower production expectations. The news sent its shares plummeting. The 25% drop in share price on Thursday was the worst day in its history.
It's all part of a broader reckoning for EV companies, which now face slumping demand amid a shrinking pool of wealthy buyers who don't yet own an EV and lingering questions from the consumer market. in general about whether electric vehicles can really fit into their lives and budgets. .
“We've been living on this wave of 'Oh, electric vehicles are great, they're going to continue the growth spurt and they're only going to get better,' and now it seems like they're coming to this point of reality,” Jessica said. Caldwell, chief knowledge officer at Edmunds. “Mass-market buyers have less income and a lot more questions.”
Rivian's trucks and sport utility vehicles certainly turn heads: The sleek design and outdoor features excited investors, analysts, and the public about their potential. The company, which counts Amazon as an investor, blew up during its initial public stock offering in 2021, ending its first day of trading valued at nearly $88 billion.
But the average car buyer probably can't afford the prices of Rivian's current range of vehicles: the company's R1T electric pickup truck starts at almost $70,000, while its R1S SUV starts at almost $75,000. The company, which is not yet profitable, reported a net loss of $1.52 billion for the three-month period ending Dec. 31, compared with $1.72 billion during the same period a year earlier. Much depends on the company's plan to produce its more affordable R2, which will debut in March but won't begin mass production until 2026.
Despite years of growth in EV sales, mass-market customers remain distrustful of EV battery life, range, and the availability of reliable charging stations. That's why hybrid vehicle sales have grown along with electric vehicle sales, Caldwell said.
“It's not always easy to install a charger where you live,” he said. “At the end of the day, for electric vehicles to take off and become a mass market, there needs to be significant growth in infrastructure.”
That hesitation is reflected in Rivian's production and delivery expectations for 2024. The company said its order book had shrunk, partly due to fulfillment, but also due to cancellations and fewer new orders.
Rivian said it expects to produce 57,000 vehicles this year, which the company said was in line with 2023 numbers, 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, more than double the number in 2022.
This year's projections cast “a dark cloud over the story,” said Dan Ives, managing director and senior equity analyst at Wedbush Securities.
“Reduce costs and staff to reflect a weaker environment 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 deliveries to be “flat” in 2024, at 50,000 vehicles, down from his previous expectation of 65,000 vehicles.
“In our view, Rivian's rather bleak guidance for 2024, which includes zero volume growth and continued steep losses, shows the profound 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 he would continue its “enterprise-wide cost transformation program,” which he said helped drive down the price of the company's electric pickup truck, SUV and delivery van.
“We strongly believe in the full electrification of the automotive industry, but recognize, in the near term, the challenging macroeconomic conditions,” CEO RJ Scaringe said in the company's statement.
Rivian isn't the only electric vehicle maker reeling: Shares of electric car maker Lucid Group Inc. fell nearly 17% on Thursday after a disappointing earnings report. Although Tesla Inc. shares rose slightly on Thursday, the Elon Musk-led automaker warned last month of potentially lower growth in 2024. However, the company reported a small revenue increase for the fourth quarter.
For Rivian, details about the R2's debut will be especially important to consumers and analysts alike.
“Rivian is very interesting, their products are very interesting, they're definitely great, but there are questions about how much market and how much runway they have, particularly as they wait for R2,” Edmunds' Caldwell said. “If they can get to the point of getting a cheaper vehicle, they will naturally have a bigger market.”
