What happened
Many tech and growth stocks dropped in January, but the shares of electric vehicle (EV) maker Rivian Automotive (RIVN 1.85%) sank more than most. Rivian shares crashed 36.6% for the full month, according to data provided by S&P Global Market Intelligence.
So what
The significant underperformance by Rivian shares came from more concrete reasons than just the market sentiment against growth and tech stocks in the early days of 2022. One of the more obvious drivers is the growing competition for both electric vehicles and EV stocks. Trucks from legacy automakers like General Motors, Ford Motor Company, and others will directly compete with Rivian's R1T and R1S pickup and SUV models.
Image source: Rivian Automotive.
Additionally, as a growing number of start-up EV makers have gone public, investors are able to better compare valuations. With more choices, there is also likely money being shifted among stocks, rather than added to the overall pie. But perhaps the biggest news released in January to affect trading in Rivian shares was related to its relationship with Amazon.
Now what
The e-commerce giant led a $700 million investment round in Rivian in 2019, and Amazon's Climate Pledge Fund was also a participant in a $2.65 billion investment round in early 2021. Its interest in Rivian is tied to its commitment to achieving net-zero carbon emissions by 2040. That manifested in an agreement to purchase up to 100,000 electric delivery vans from Rivian.
Amazon plans to have 10,000 of the vehicles in service in 2022, with all 100,000 by 2030. But Rivian investors got spooked in January when Amazon announced that it would also partner with Fiat-Chrysler parent Stellantis to purchase electric commercial vans. The stock plummeted about 20% the week that news was released.
But investors may have reacted prematurely based solely on that news. More details from Amazon on its new partnership revealed that it shouldn't affect its relationship with Rivian. It won't begin buying Stellantis' Ram ProMaster commercial vans until 2023, and didn't commit to a specific volume. The companies did say that they plan to put "thousands of BEV [battery electric vehicle] ProMasters on the road every year."
But an Amazon spokesperson also said in an email to financial network CNBC, "We continue to be excited about our relationship with Rivian, and this doesn't change anything about our investment, collaboration, or order size and timing."
So the news that hit the stock doesn't appear to be as much of a red flag for Rivian as investors seemed to think. Its relationship with Amazon is an important one, and is something to watch. But with a market cap still above $60 billion, valuation should be more of a concern at this point. Investors should focus more on watching Rivian ramp up its pickup truck, SUV, and van production to see how quickly, or whether, it can grow into that valuation.
