What happened
Electric vehicle (EV) stocks are dropping today after multiple disappointing news items. Rivian Automotive (RIVN -3.62%), Lordstown Motors (RIDE 2.91%), and Canoo (GOEV -6.90%) were down 7.9%, 14%, and 10.1%, respectively, at 12:05 p.m. ET. And there was a good reason Lordstown was leading the way lower.
So what
While Lordstown released some company-specific bad news, the overall sector was heading lower after early-stage luxury EV maker Lucid Group reported its fourth-quarter and full-year 2022 results last night. That has investors worried about what Rivian will say when it provides its quarterly update early next week.
Lordstown had even more troubling news than Lucid, though. After only recently starting production of its electric Endurance pickup truck, Lordstown today announced a recall along with the suspension of production and deliveries due to quality problems.
Image source: Lordstown Motors.
Now what
Lordstown only began commercial production of the Endurance at the end of September. Today it said the vehicles have experienced performance and quality problems that have led it to recall 19 of the trucks that are with customers or being used internally by Lordstown. The company said the recall was initiated "to address a specific electrical connection issue that could result in a loss of propulsion while driving." Lordstown also plans to retrofit vehicles that are still in the production process once a solution is identified.
The news from Lordstown highlights the difficulties that can affect start-up EV manufacturers. And it comes just after Lucid updated investors after its first full year of producing its luxury Air sedans. Lucid had previously reduced its production guidance multiple times. While it surpassed its latest projection by making just over 7,000 vehicles in 2022, investors were disappointed with the rate at which it expects to boost that production level this year.
That has investors nervous about what Rivian will say when it reports its quarterly results next week, on Feb. 28. In addition to wanting to see a sharp increase in production, investors will be looking at Rivian's financial condition. Lucid reported having only enough current financing to get to the start of 2024. In its third-quarter report, Rivian said it had enough cash on hand to fund its operations through 2025.
Investors will be watching to see if that capital position changes. It's clear that Lucid will have to raise additional capital after its update. Other start-ups like Canoo have also recently said it would be raising new capital that would result in dilution for existing shareholders.
Rivian has already said it is working to control costs as its ramping up of production has taken longer than expected. The stock will likely move based on what it says next week, but we won't know until Tuesday which direction that will be. Today, investors seem to be saying they want to wait for that information before buying the stock.
