What happened
One analyst said Rivian Automotive (RIVN -5.12%) was facing headwinds yesterday, and shares of the EV start-up plunged today after the company acknowledged that view. Rivian stock was down 13.3% as of 10:30 a.m. ET.
So what
The drop is coming a day after the stock also declined when fellow EV start-up Lucid Group slashed its production estimates for 2022 due to supply chain and logistics struggles. Also yesterday, Wells Fargo analyst Colin Langan cut his price target for Rivian as he feared the company is facing near-term headwinds, according to Barron's. The big news today is that Rivian acknowledged he is right, as increasing costs are forcing the company to significantly raise prices on its electric pickup truck and SUV models.
Image source: Rivian Automotive.
Now what
Langan pointed to rising interest rates, increasing competition, and the potential for disappointing vehicle delivery data when Rivian reports its fourth-quarter and full-year 2021 results next week on March 10. Langan also cut his target price on Rivian shares from $110 to $70 per share.
Lucid told investors yesterday that because of supply chain issues, its projected 2022 production volume would drop by up to 40%. Rivian had similar comments when it missed its own projected delivery volume for 2021, but it hasn't yet addressed its projections for 2022.
However, Rivian Chief Growth Officer Jiten Behl said in a statement, "Like most manufacturers, Rivian is being confronted with inflationary pressure, increasing component costs, and unprecedented supply chain shortages and delays for parts (including semiconductor chips)," reports Reuters. Because of those increasing costs, the company said it will have to raise the base price of its R1T pickup truck from $67,600 to about $79,000. And the R1S SUV model will jump from a starting price of $70,000 to $84,500, according to the report.
That's not good news for a start-up company looking to quickly grow customer loyalty and its brand. And it's not good news for shareholders today, either.
