What happened

Every time investors in Rivian Automotive (RIVN -2.52%) think the electric vehicle (EV) stock has hit rock bottom, it throws up another nasty shock. Shares of Rivian are tripping lower and lower day after day. This week alone, Rivian stock lost nearly 17.4% value by Friday at 12:30 p.m. ET, according to data provided by S&P Global Market Intelligence.

A warning from Rivian CEO RJ Scaringe and multiple analyst downgrades are largely to blame for the meltdown in Rivian shares this week.

So what

The last day of March, when Rivian filed its annual 10-K report, the company confirmed it was facing a major shortage of key parts, like semiconductors, and that it's being forced to make changes to its processes that are only adding to costs.

Investors thought it couldn't get any worse as Rivian had only recently said it expects to produce only 25,000 vehicles this year, or half of what it could have produced if not for supply challenges.

A Rivian RT pickup truck on a rocky road with  hills in the background.

Image source: Rivian Automotive.

Yet, on April 18, Scaringe warned investors of a looming and even bigger threat to growth -- a battery supply crunch. Rivian stock plunged as Scaringe said a battery shortage could even surpass the semiconductor crunch. For perspective, the semiconductor chip shortage that was first reported in 2020 has only worsened and hit the automotive industry the hardest. EVs in particular use more chips than traditional combustion-engine cars.

In the days that followed, several analysts downgraded their ratings and price targets on Rivian stock. Notable ones include:

  • Piper Sandler analyst Alexander Potter, who cut the stock's price target to $112 a share from $130 per share.
  • Mizuho analyst Vijay Rakesh, who cut Rivian's price target to $90 per share from $95 a share.

That pretty much explains the weakness in Rivian shares, but what I'm worried about is that this EV stock could struggle to find any positive triggers in the near term. 

Now what

Rivian has too many problems at hand: It faces a shortage of key raw materials and struggles to ramp up production while burning through cash rapidly. Additionally, the company faces increasing competition with each passing day. For example, Ford will start selling its much-awaited F-150 Lightning all-electric pickup trucks from April 26. Tesla (TSLA -3.10%), meanwhile, opened its Gigafactory in Texas this month where it plans to manufacture a Cybertruck touted to compete with Rivian's R1T electric truck.

Tesla, in fact, must single-handedly be giving Rivian sleepless nights. Just a couple of days ago, Tesla reported solid delivery and production numbers despite the supply challenges, which means Tesla's vehicle price hikes aren't hurting demand. Rivian, on the other hand, had to roll back part of its decision to increase prices of its EVs in March after a public backlash.

With Tesla also warning that the supply headwinds could remain through the rest of this year, I'm unsure if Rivian will have any encouraging news to give to its investors on May 11 when it releases its first-quarter numbers after market close.