What happened
Lordstown Motors (RIDE 12.12%) is not Rivian Automotive (RIVN 2.44%), but on Monday, it had to pay for the apparent mistakes made by its peer, which also makes electric vehicles (EVs). After Rivian announced a major recall, Lordstown stock fell by 4.8%, in sympathy.
So what
Rivian's recall, due to a possible loose wheel fastener that could threaten the driver's control over steering, is a big deal on paper. It covers 12,212 vehicles produced from Dec. 10, 2021 to Sept. 27, 2022. That number comprises the vast bulk of the 13,198 deliveries the company has made so far this year, although it believes only roughly 1% of the recalled products might have the fastener problem.
The recall surely won't bring Rivian to a grinding halt. Still, it was a little too close for comfort for Lordstown investors. After all, their company also manufactures an EV pickup truck, the Endurance.
In contrast to the RT1, though, the Endurance hasn't yet hit the market. Lordstown announced late last month that production of the vehicle had begun, with deliveries to start in the fourth quarter of this year.
Now what
Investors often panic-sell on news of (relatively) big recalls, and the Rivian reaction and associated Lordstown blowback feel like overreactions. After all, it doesn't seem like the fastener issue is widespread in the RT1s, and Rivian is simply (and properly) exercising caution.
Still, it's worth remembering that both companies are fairly early stage in terms of the wider automotive industry, particularly the pre-delivery Lordstown. Young companies can be very volatile investments, and anyone considering buying in should weigh the risks inherent in such business.
