What happened

Today got off to a very rocky start for electric vehicle stocks. Shares of Rivian Automotive (RIVN 4.92%), Lucid Group (LCID 2.21%), and Lordstown Motors (RIDE 0.62%) were all tumbling this morning after the latest Bureau of Labor Statistics data showed that inflation increased by 0.4% in September -- much more than analysts were estimating.

The bad inflation news means that the Federal Reserve is likely to stay the course with aggressive interest rate hikes, which has investors very worried about the economy. 

As a result, Rivian's shares were down 3.8%, Lucid had slid 5.1%, and Lordstown had dropped 4% at 10:35 a.m. ET. 

So what

Today's inflation report showed that consumer prices increased by 0.4% last month, which is more than the 0.3% increase analysts were estimating. The increase means that inflation rose 8.2% on an annual basis and remains at a nearly 40-year high.

A red pickup truck outside.

Image source: Getty Images.

That news would be bad enough on its own, but what investors are very concerned about this morning is the fact that the Fed has already made multiple aggressive interest rate hikes in order to tame inflation -- and this new data shows that it hasn't worked yet. 

The Fed will now use this latest inflation data to make its decision on how much to raise rates at its upcoming meetings (in both November and December) and some analysts now think the Federal Reserve could potentially increase rates by 75 basis points at both meetings. 

Rivian, Lucid, and Lordstown investors are reacting strongly to the inflation data this morning because it likely means that there's continued pain ahead for the economy. 

Higher interest rates mean higher costs for consumers to take out vehicle loans and, more importantly, more interest rate increases could potentially tip the economy into a recession. 

Any significant slowdown in the economy could be very problematic for EV companies because consumers would likely delay purchases. 

Electric vehicle prices have soared over the past couple of years thanks to supply chain trouble, rising material costs, and a chip shortage. If the economy slows down too much, consumers may be less inclined to buy an expensive EV from these automakers. 

Now what

The latest inflation data adds to the difficult week that Rivian investors have already had. The company said earlier this week that it is recalling nearly all the vehicles it has sold so far due to a loose fastener that could affect the steering. 

That news sent the company's shares sliding and also caused Lordstown's shares to tumble as well. 

And the bad inflation data news comes on the heels of the positive news for Lucid this week in which the company said it's on track to meet its annual vehicle production goal of between 6,000 to 7,000 vehicles. 

It's worth mentioning that the latest inflation data doesn't mean that these companies are all bad long-term investments. But EV investors are certainly having their patience tested right now.

It's likely that there could be more pain down the road for Rivian, Lucid, and Lordstown shareholders as the Fed continues to raise interest rates to tackle inflation.