What happened

Arrival (ARVL 40.00%) is one of many fledgling electric vehicle (EV) companies that merged with a blank check company to raise funds and go public in 2021. The company has aspirations to supply zero-emission electric buses to municipalities and commercial vans to businesses. But with its first commercial sales still ahead of it, investors are shunning Arrival along with other prerevenue companies in the EV space. The sell-off in Arrival stock is continuing today, with shares down 12.4% as of 1:56 p.m. ET.

So what

There's no specific news from the company today. But shares began selling off well before today, experiencing a drop of 70% over the past three months. Investor negativity accelerated when Arrival said it had underestimated its capital requirements and scaled back its growth trajectory. While it has provided some progress updates recently, this type of EV start-up is at the heart of the ongoing tech sell-off in the market, which helps explain today's outsize drop. 

Arrival electric bus with sign saying Clean Air Powered by Arrival in a parking area.

Image source: Arrival.

Now what

In its third-quarter financial update provided in November, Arrival told investors that its expected costs had increased with plans to assemble its battery modules in-house, its work to ensure an extended time frame of battery cell line capacity, and higher operating expenses related to raw materials and initial factory needs. The company therefore slowed its planned rate of expansion and raised additional capital. None of this news was welcomed by investors.

But Arrival has continued to make headway with its overall plans. Its electric bus entered the testing stage last month ahead of public road trials and certification, and it unveiled the design for an electric car that it is building in concert with ride-hailing company Uber Technologies.

Until more progress is made, and perhaps until it begins commercial deliveries, Arrival will likely remain out of favor with many investors. With the overall correction in the tech sector ongoing, investors should be prepared for Arrival shares to have more down days like today.