Electric vehicle stocks have had a tough time in 2022, with companies across the industry feeling the pain. Even as customers remain hungry for EVs, manufacturers have faced challenges in a number of areas, from getting the parts and supplies they need to build vehicles to finding ways to deliver them successfully to buyers.
Rivian Automotive (RIVN 3.65%) in particular has suffered considerable share-price declines, with the stock down 75% from its highs shortly after its December 2021 initial public offering. Despite showing considerable promise early on, Rivian hasn't been able to convince investors more recently that it can compete effectively against larger automakers that are finally making their presence felt in the electric vehicle space. On Monday, Rivian only added fuel to the fire in making a key strategic decision that represents an about-face from its plans just a few months ago.
Rivian's Mercedes plans stall out
Rivian announced early Monday that it would pause its plans to produce electric commercial vans in Europe. As a result, it no longer plans to pursue the memorandum of understanding that it executed with German automaker Mercedes-Benz just three months ago. The stock fell 4% in response Monday morning.
Rivian CEO R.J. Scaringe said that the decision reflected new priorities for the EV maker. According to Rivian, the prospects for its consumer business and its existing projects in the commercial arena offer the best risk-adjusted returns on its capital investments, and the EV maker hopes to generate maximum value from those opportunities. Despite sharing the Mercedes-Benz goal of making a successful transition to EVs more broadly, Scaringe put off any forward movement on the partnership until what the CEO said would be "a more appropriate time for Rivian."
For Mercedes' part, it intends to keep ramping up its own presence in the EV industry. With plans for a new manufacturing plant in Poland, Mercedes signaled that it won't be waiting on Rivian to move forward, albeit leaving open the option of exploring strategic opportunities with Rivian in the future.
Giving back its gains
The news is a disappointment to Rivian shareholders, who had initially celebrated the Mercedes partnership as validation of the EV maker's plans to bolster its own production capabilities. Rivian stock climbed more than 10% on Sept. 8 following the announcement, as investors hoped that it meant the company would be able to do in Europe what it had already done with electric delivery vans for e-commerce giant Amazon.com (NASDAQ: AMZN).
Yet in the three months since then, Rivian has dealt with worsening industry conditions. Its third-quarter financial report failed to match the revenue levels that investors had anticipated, even though production levels continued to scale up. Rivian investors have focused most of their hopes on the EV maker's assertions that it will meet its 25,000 vehicle production target for the full 2022 year.
More broadly, supply chain disruptions are hitting most companies in the EV space, along with ongoing shortages of some semiconductor components. Even with some efforts recently to loosen COVID-related restrictions in China, the economic impact of the pandemic continues to hold back the world's second-largest economy and a key market for electric vehicles.
Can Rivian bounce back?
As much as it might seem like Rivian isn't taking full advantage of all of its opportunities, its decision to hit the brakes on its Mercedes partnership might actually reflect success in other parts of its business. Even in early November, Rivian reported a backlog of more than 114,000 orders for its consumer pickup-truck and SUV offerings. That figure was higher than it had been three months earlier, showing that Rivian hasn't been able to produce enough vehicles to keep up despite having looked to get more capacity from its factory in Illinois.
Rivian will have to deal with highly competitive conditions in the EV industry, but the real proof of how well it can match up against its rivals will come as its consumer vehicles become more readily available. If customers like what they see, then Rivian could indeed start to recover some of its lost ground over the past year.
