Quite recently, the share of the Rivian automobile company’s stocks crashed after it released its first quarterly results for the electric vehicle as a public company. The stocks fell increasingly. The company delivered its first R1T pickup trucks and RIS sport vehicles. The demand for Rivian EVs has been strong which resulted in large pre-orders for R1S that went from 48,000 on 30th September to 71,000 on 15th December. Rivian dealt with a few challenges like management due to which some hundred vehicles were short when compared to the production target. The losses for Rivian are increasing as it is vigorously spending to elevate its manufacturing capacity. It had an operating loss of $776 million in the third quarter.
As said by CEO RJ Scaringe, the supply chain bottlenecks can be solved and can be finished. The company has a plan of making a $5 billion investment in the development of a manufacturing facility in Georgia. The construction is expected to start in mid 2022 while the production is expected to start in 2024. The plant will be producing 400,000 vehicles in a year once it will be fully functional.
The stocks crashed after Amazon had closed its deal with Stellantis of buying their electric vehicles in 2023. Stenllantis was created in January 2021 after the two groups Fiat Chrysler Automobiles and Peugeot S.A. Groupe (PSA) merged and announced to work with Amazon so that they can deliver software solutions for the new digital cabin platform for Stenllantis which is the STLA SmartCockpit which is going to start in 2024. With that announcement, the Rivian shares dropped by 11% to $90 which is one of the greatest drops since November 2021. The company started the initial public offering in November 2021 which got the company second place behind Tesla which is considered one of the largest US carmakers.
Rivian shares were around 57% in the first 2 days on Nasdaq. The first day was ended with Rivian being a public company that is valued at $88 billion. This figure is more than triple as compared to the last private evaluation. But soon afterward the announcement of not developing an electric vehicle with ford, the stocks crashed.
Ford, GM, Tesla are some big names in the electrical vehicles industry which can be definitely a competition to the Rivian company. Now, even the sony group is planning to make a electrical vehicle. As a lot of these ev manufacturing startups have gone public, investors have a greater range of choices increasing the competition for EV stocks and electric vehicles.
Rivian is facing some supply chain issues that can be a big challenge to the company. Rivian could not get all the parts it needed to build the vehicles as global supply chain issues appeared. Another thing the investors are upset about is Rivian reported manufacturing 1000 vehicles in September which is below its target which happened due to supply chain carries. The company lost money due to these issues. The loss per share was expected to be around $2.05 but it came around to be $2.43. The Q4 revenue was $54 million which was $10 million below the target expected.
Amazon made an investment of $700 million in Rivian in 2019 and Rivian also got an investment of $2.65 billion from Amazon’s climate pledge fund. It was interested in Rivian due to the goal of achieving net-zero carbon emissions by the year 2040. 100,000 electric delivery vans were purchased from Rivian after this agreement. Amazon was planning to have 10,000 vehicles in service by 2022 and 100,000 vehicles in service by 2030. But after Amazon announced that it would partner with Stellantis, Rivian’s stock fell immediately. Investors may have reacted to the news but this should not affect Amazon's relationship with Rivian as it did not commit to buying a specific volume and as said by an Amazon spokesperson in an email to CNBC they are still excited about their partnership with Rivian and they won’t alter anything about their collaboration, investment, timing, and size. So this can’t be considered a major red flag as some investors have reacted to it.
Rivian can be considered to become a big competitor for Tesla despite the stocks falling when it announced its IPO in November. A lot of major firms have started their coverage on Rivian on Monday by forecasting that it can eventually compete with Elon Musk’s Tesla. The firm states that Rivian has an edge in a less discussed market area which is its electric delivery vans. The price target was set for $147 for the stock which implies an approximate 35% upside from Rivian’s current price. Many other firms like the Bank of America, Mizuho, Piper Sandler, and Deutsche Bank also remain hopeful about the company’s business plan. They believe that it has an attractive product and it can be a big deal for Tesla. According to the analysts at Mizuho Rivian will redefine the electric vehicles industry 15 years after Tesla with the help of its pickup trucks, electric SUVs, and electric delivery vans. It can become a $1 trillion manufacturer for the original electrical vehicle components in the long run. Fargo admitted that investors are excited about Rivian. Their main concern is the high valuation of Rivian.
Rivian became a public company with a $90 billion valuation on 10 November 2021. These were one of the greatest IPOs of 2021. Some of the investors were betting that it can be the next Tesla. Rivian observed its stock to increase immediately after its public market debut. It can be considered a demonstration of enormous investor interest in electric vehicles although it has not made any revenue yet. The company has a massive market value of more than $93 billion and despite the falling of shares in recent weeks, Rivian stocks are still up around 40% from its IPO price of $78 per share.
Comments