Rivian’s shares slide 10%: Is the EV challenger falling short of expectations?

Rivian’s shares took a dip in after hours trading on Thursday December 16, following news it was going to fall “a few hundred vehicles short” of its 2021 production target.

This week, the company announced that it wasn’t going to meet its production target of 1,200 vehicles for the year. Supply chain issues as well as challenges ramping up production for the complex batteries that power its vehicles have derailed its progress and caused its share price to slide. For a historic view of the performance of this share, see the graph in our dedicated guide.

Following its IPO in November, Rivian became the third largest car company by market cap. As a result, the bar has been set high for the company. Many have hailed it the most realistic challenger to Tesla. But with this latest news, is Rivian likely to fulfill those expectations?

Is it just growing pains?

It could be easy to create a narrative that issues with production and reports of steep losses indicate a rocky road for Rivian. However, it’s important to remember that the company is still very much in a growth stage.

Its third-quarter results fell in-line with analysts’ expectations, largely due to the estimates released as part of its IPO. Rivian reported an operational loss of $776mn (£584.2mn) and a net loss of $1.23bn. It also posted a loss per share of $12.21 on revenue of about $1mn.

Supply chain issues have hampered the production of most car makers of late, so it’s not surprising that Rivian was impacted as well. The question becomes whether investors think the company is well positioned to successfully navigate the challenges.

What are the expectations?

Rivian said it expects capital expenditures of around $8bn through 2023. As part of its results announcement it also confirmed plans for a new $5bn plan in Georgia which will become operational in 2024.

There is obviously demand for its EVs. Total reservations for Rivian’s electric R1T pickup and R1S SUV increased 28% in December compared to the previous month. The crux of the issue is whether Rivian can ramp up its production capacity to meet the demand. Until it scales output, losses are to be expected.

But analysts remain optimistic about its chances. Deutsche Bank’s Emmanuel Rosner commented in a note to clients ‘we believe the company offers a particularly well thought-out business plan to become a large and profitable EV player, with unique characteristics in both hardware and software, and applying lessons from previous efforts by other players’.