It was always going to be tricky for Rivian Automotive Inc., as it faced a steep ramp to make as many of its luxury electric vehicles as fast as it could.
That volume production ramp has gotten harder for the company, which is dealing with supply-chain constraints, a PR black eye around its decision to increase prices, and even an unwitting entry into the culture wars.
stock price has reflected those difficulties. Shares are down more than 50% this year, with a drop of 37% in January alone, the cruelest month in their short life as publicly traded securities.
The stock is also down about 35% from its initial public offering price in November. Rivian took the market by storm, seeming to exemplify all the hopes of a future dominated by EVs. Its valuation soon soared above Ford Motor Co.
and General Motors Co.
“It was never going to be easy, no matter what,” said Brian Moody at Autotrader.
Rivian executives are building an all-new automotive company from the ground up, with no legacy product or name recognition to lean on, he said.
Despite hiccups, Rivian is likely to be successful, he said. “They already have trucks in the hands of customers, and that’s more than other companies can say.” And the company also offers a “unique product that looks and feels different than anything else already out there,” he said.
Sweeping vistas, pricey EVs
Rivian bills its full-size electric SUVs and pickup trucks as “adventure vehicles,” and the company’s promo materials show them amid sweeping vistas after conquering rough off-road terrain.
To gin up brand loyalty, Rivian late last year started offering memberships, which carry practical perks such as free charging but also the promise of creating a community of like-minded EV owners and future “memorable, one-of-a-kind adventures.”
It remains to be seen how many people will be charmed by those adventures, while also being well-heeled enough to afford Rivian vehicles.
A PR nightmare
The size of its potential market and the cost of its vehicles were already concerns for Wall Street, when Rivian recently increased the prices of its full-size SUV and pickup truck by 20% and 17%, citing inflation, rising costs, and supply-chain constraints.
In the process, it angered several of those who had placed reservations for vehicles. After a swift and intense backlash, the company said it would honor existing orders, admitting Thursday that it had made a mistake.
The company also launched cheaper versions of the SUV and truck, but those are still in the $70,000 range and two years away from being available.
“It is bewildering and quite frankly astonishing that Rivian would increase prices to this level and the demand impact is potentially a major negative,” Wedbush analyst Dan Ives told MarketWatch.
“We can see demand destruction of up to 15% due to these price increases, which are inconsistent with any other in the industry globally,” he said. “The production issues have been a dark cloud over the company with management’s execution and leadership coming into question on the Street.”
Rivian is expected to report fourth-quarter earnings on March 10, and its production outlook and updated order book will be “the key investor topics,” analysts at Evercore ISI said in a recent note.
The FactSet consensus calls for an adjusted loss of $1.65 a share on sales of $61 million.
The company spooked investors in December, when it reported quarterly results for the first time. The worries about its mounting losses and costly production ramp intensified after Rivian executives detailed production headwinds amid heated demand.
Rivian faces a “predicament,” Garrett Nelson with CFRA said in a recent note.
The company will likely struggle to meet certain benchmarks on its path to profitability, such as positive gross margin followed by positive EBITDA and finally a net income, absent higher price realizations or “significantly higher sales volumes,” he said.
The macro backdrop for “unprofitable high-growth companies” has become more difficult, and Rivian’s decision to increase prices created a fallout that likely outweighed the benefits, he said, as he lowered his rating on the company’s stock to hold.
The culture wars
Rivian late last year announced it had selected Georgia as the site of its second U.S. factory, with construction slated to start this summer and production to start in 2024.
The facility, straddling Morgan and Walton counties in north-central Georgia, is expected to employ more than 7,500 people at peak production, the EV maker has said.
The $5 billion development deal to bring the factory to Georgia has attracted fierce local opposition.
And an investment by George Soros, one of many the EV maker has garnered, put the company squarely on the map for right-wing conspiracy theorists.
The proposed factory also has fueled a spat in Georgia’s gubernatorial Republican primary between challenger and former U.S. Sen. David Perdue and incumbent Brian Kemp.
The Georgia factory, expected to be the largest in the state, would join Rivian’s factory in Normal, Ill.
Despite the ups and downs for the stock and the concerns for its production ramp, many on Wall Street view Rivian as the EV maker to watch, and the one to possibly beat Tesla
at its own game.
The company’s backers include Amazon.com Inc.
which is buying electric last-mile vans from Rivian, and Ford, which in January said it booked an $8.2 billion profit on its investment in the EV maker.
Rivian benefits from a “Tesla halo,” Autotrader’s Moody said.
“Tesla taught us what we really want in an EV,” which is a high-performance, good looking, luxury electric car, he said.
For Rivian, there’s a lot of work to be done in terms of advertising, marketing, and communicating what the company is about. But there are many EV companies saying they would do this and that, that then haven’t, he said.
“Rivian has an actual product delivered to customers,” Moody said. “And it looks cool.”