Rivian Stock Plummets on Production Woes, Demand Dip

Rivian faced a harsh market reality Wednesday as shares plunged 17% in after-hours trading. The electric vehicle (EV) maker revealed plans to slash its workforce by 10% while projecting a disappointing production forecast for 2024 – far below analyst expectations.

So, what’s behind the roadblock?

Factory upgrades are causing costly downtime. Plus, the rising interest rate environment is taking a toll on wider EV demand. Rivian is not alone; Tesla CEO Elon Musk has warned about affordability issues due to these economic headwinds.

“We remain unwavering in our belief in a fully electric automotive future,” CEO RJ Scaringe reassured in a statement. “But the near-term macro picture presents significant challenges.”

Burning Cash, Losing Ground

The Amazon-backed startup is hemorrhaging cash as it ramps up production of its R1S SUV and R1T pickup. Expensive factory expansions and a hefty loss on each vehicle sold are fuelling the burn rate. To make matters worse, Rivian recently lowered prices by $3,100, mirroring the price war sparked by Tesla. Competitor Lucid also painted a grim outlook with lowered production forecasts, even after slashing prices of its luxury Air sedans.

Dwindling Cash Reserves

Rivian ended the December quarter with a slightly reduced $7.86 billion in cash on hand. Weak deliveries further underscored the struggle, falling 10% in the fourth quarter and missing estimates.

A Glimmer of Hope?

While Rivian’s fourth-quarter revenue managed to surprise at $1.32 billion, it continues to lose money on every vehicle it produces. The company desperately needs a win and hopes to post its first-ever profitable quarter later this year. All eyes will be on the unveiling of the more affordable, smaller R2 platform slated for next month.