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Electric vehicle manufacturer Rivian Automotive (RIVN -1.02%) is scaling back its ambitions as we enter what could be a difficult patch for automakers. Investors are apparently getting worried: They sent Rivian shares down by 42.5% in December, according to data provided by S&P Global Market Intelligence.
Rivian joined the public markets in November 2021 to great fanfare, with its share price surging by as much as 53% following its initial public offering and valuing the electric vehicle manufacturer to a market cap of more than $100 billion. The expectations baked into a valuation like that, however, can be hard to meet, and the company has since then faced several challenges that tempered investors’ enthusiasm for the stock.
Manufacturing vehicles at scale is difficult and costly. Rivian last year raised the prices on its well-received electric pickup, and in September announced it would work with Mercedes-Benz Group to jointly manufacture electric delivery vans instead of going it alone.
Then in December, Rivian scaled back its expectations further: It put the partnership with Mercedes on hold to conserve capital for use in other areas of its business. The announcement came at a time when a range of auto retailers, including CarMax, were warning that consumers are increasingly facing affordability challenges that could limit the sales of high-end vehicles.
In a weak market for growth stocks in general, Rivian’s company-specific news sent investors racing for the sidelines.
In the wake of the December decline, Rivian shares are now 83% below the price where they debuted just over a year ago. Investors who were once intrigued by the potential of the company are now very much in wait-and-see mode, and it could be a while before a catalyst emerges to get the stock charging higher again.
Rivian has a healthy order book, and there’s clear demand for its delivery vehicles from Amazon (a Rivian investor) and others. The company is ramping up production and working through some of the supply chain issues that held back sales in 2022. But we are facing an uncertain economic climate, and a host of automakers are increasingly adding electric vehicles to their offerings in what is becoming a crowded market.
It’s way too soon to call Rivian a failure, but after a roller-coaster 2022, it appears many investors are content to wait to see what the future brings before buying the shares, even at their current low prices.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Lou Whiteman has positions in Amazon.com. The Motley Fool has positions in and recommends Amazon.com and CarMax. The Motley Fool has a disclosure policy.
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