What happened
Rivian Automotive (RIVN 5.34%) stock is sinking lower and lower. As of 1 p.m. ET Friday, the electric vehicle (EV) company's shares were down by 7.5% as the market reacted poorly to its key numbers and outlook for 2022.
So what
Rivian shocked investors, analysts, and would-be customers alike earlier this month when it abruptly increased the prices for its EVs by up to 20%, including for pre-booked sales. This meant that people who'd already put down their $1,000 deposits for EVs at specific list prices were told they'd have to pay more. That retrospective aspect, of course, didn't sit well with customers. The backlash it triggered on social media sent the stock tumbling.
It took just two days for Rivian to reverse its decision to hike prices for vehicles booked before March 1, but investors were still eager to hear what the company had to say about the move on its fourth-quarter earnings conference call Thursday.
On that call, Rivian stated it had boosted its pricing only to factor in the cost of a new dual-motor propulsion system and a standard battery pack that it recently introduced. Rivian management, though, admitted it was a mistake to apply that move to its already-committed pre-order customers. "Our relationship with customers is the most important aspect of what we're building," said founder and CEO Robert Scaringe.
That explanation, however, failed to improve the mood of the market, more so because Rivian also failed to deliver on the metrics that matter.
Image source: Getty Images.
Rivian reported a net loss of $2.5 billion in the fourth quarter, up from a loss of $353 million in the prior-year period as operating expenses spiraled. Against that loss, the company generated revenue of around $54 million.
Things are unlikely to improve anytime soon: On adjusted earnings before interest, tax, depreciation, and amortization (EBITDA), Rivian foresees a loss of nearly $4.8 billion for 2022, and capital expenditures of around $2.6 billion.
In short, Rivian is accumulating billions of dollars in losses and burning through billions of dollars in cash to just deliver its first vehicles. Its cost overruns are so deep now, and its supply constraints so severe, that it expects to be able to produce only 25,000 vehicles in 2022, though as of March 8, it had 83,000 combined preorders for R1T pickup trucks and R1S SUVs, plus 100,000 orders for electric delivery vans. Analysts previously expected the company to produce at least 40,000 vehicles this year.
Now what
Rivian is getting hit from all sides. It already put its reputation on tilt with its price hike, and there's no escaping its surging raw material costs and supply chain issues. Suddenly, Rivian no longer looks like the hot and hyped EV company that debuted last year, and investors may be realizing there are better EV stocks they could bet on.
