What a horrible year: Rivian is tempted to say.
Everything has gone wrong on the stock market for the young electric vehicle maker, considered one of Tesla’s most serious rivals.
Let’s examine the numbers that tell the nightmare of the company in Irvine, California. But first it should be mentioned that Rivian produces the R1S SUV, the R1T pickup/truck and the EDV commercial van.
They revive (RIVN) – Get a free report Shares started the year on Wall Street at $103.69. At the time of writing, shares of Rivian are trading around $19.14. In one year, the group’s shares have lost 81.5% of their value.
The market cap, which was $91.6 billion as of December 31, 2021, has melted away to $16.9 billion. Basically, nearly $75 billion in market value completely evaporated in one year.
On November 10, 2021, Rivian made a stunning entrance on Wall Street. For this IPO, Rivian’s share price was $78. The company raised $12 billion in the largest initial public offering since Facebook’s 2012 debut. 75.5% of its IPO price.
Whatever metric we compare Rivian to, it’s clear that the company is going through a real stock market rout. The only consolation for Rivian is that Lucid Group (LCID) – Get a free report, Tesla’s other young rival with whom it is often compared, also had a bad stock year. Lucid’s shares have lost 82.4% of their value this year.
Finally Tesla (TSLA) – Get a free report it is also in turmoil. The share price of Elon Musk’s group is down 65% this year. But Rivian should be concerned to see that legacy automakers like Ford (f) – Get a free report and GM (GM) – Get a free report saw less sharp falls in stocks: -43.5% for Dearborn Group stock and 42% for shares of the Detroit, Michigan automaker.
The reasons for Rivian’s problems have been the same since the beginning of the year: constant supply chain disruptions that are driving up costs and having a colossal impact on its ambition to mass-produce vehicles.
2022 was supposed to be the year of ramping up production to meet strong demand, but it turned out to be a year of costly missteps, such as sudden price hikes that tarnished the group’s reputation.
In late February, the company raised the price of its R1T electric pickup truck by 17% and its R1S SUV by 20% due to material costs and chip shortages, it said at the time. The price increase applied to all customers, both new and already ordered. In the face of protests and cancellations, Rivian apologized.
“We have mistakenly decided to apply these changes to all future deliveries, including pre-existing configured pre-orders,” chief executive RJ Scaringe apologized at the time.
The automaker also concluded a few days ago a strategic partnership with Mercedes-Benz, which would have allowed it to penetrate the European market and reduce costs.
“We have decided to suspend discussions with Mercedes-Benz Vans regarding the memorandum of understanding we signed earlier this year for the joint production of electric vans in Europe,” Scaringe said on Dec. 12. “As we evaluate growth opportunities, we pursue the best risk-adjusted returns on our capital investments.”
Rivian is burning through a lot of cash and facing rising costs due to, in particular, rising raw material prices and other logistics costs. In the near term, the end of the partnership complicates Rivian’s ambitions to compete with Tesla, which is present in three important markets: North America, China and Europe.
Some investors are starting to lose patience, such as billionaire George Soros, who further reduced his stake in the third quarter. Soros Fund Management held 16.36 million Rivian shares as of September 30, down 8.2% from the second quarter.
Ford also sold a large portion of its stake after significant asset writedowns. Amazonia (AMZ extension) – Get a free reportwhich on 29 September held approximately 17.34% of the capital, has instead maintained its confidence in Rivian for the time being.
The other big question is whether Rivian will be able to meet its conservative goal of producing 25,000 vehicles this year. The company has a net order backlog of 114,000 units in addition to Amazon’s 100,000 orders. The problem is not knowing when Rivian will be able to deliver these vehicles.
During the third quarter, the company expanded its losses, posting a net loss of $1.72 billion, versus $1.23 billion in the third quarter of 2021.
“Throughout the quarter, our cost of materials was impacted by inflationary pressures, which we believe will continue to impact our gross margin for the foreseeable future,” said Rivian.