What happened

On Wednesday, many investors unplugged from electric vehicle (EV) stocks, as well as other titles associated with alt-fuel transportation solutions. This followed a sharply negative reaction to an earnings report published by a top name in the EV industry.

The selloff was fairly broad; among others it affected luxury EV maker Lucid Group (LCID 0.41%), whose share price was sinking by nearly 2% in late trading Wednesday, and utility vehicle specialist Canoo (GOEV 2.59%), which was down by almost 6%. Truck manufacturer Nikola (NKLA 7.23%) wasn't spared either, as its price was plunging by over 11%.

So what

The peer providing the update was EV pickup and SUV manufacturer Rivian Automotive (RIVN 6.10%), which unveiled its second-quarter results after market hours on Tuesday. Rather oddly, investors sold out of the company's stock after it posted headline numbers that easily topped analyst estimates, and upped its estimate for vehicle production this year. Oh, and after a clutch of analysts raised their Rivian price targets.

Yet opening the hood and making a deeper inspection of the company reveals the need for some improvements. For all its recent success with production, Rivian is still losing gobs of money. In fact, its headline net loss, while narrower than expected by pundits, was still submerged deep in the red at nearly $1.2 billion for the quarter.

The company has more than $10 billion in cash in its coffers, but even a large pile has a way of burning off quickly in the auto industry -- vehicles are, after all, painfully expensive to produce (hence the reason scale is critically important in this business). Rivian is saddled with $2.7 billion in debt already, plus it burned $1.6 billion in the second quarter. Investors might be feeling that the cash runway is shorter than they'd like.

Lucid, Canoo, and Nikola are different animals than Rivian, of course. Each is jockeying for pole position in their niche, however it's tough to sell enough specialty vehicles to reach profitability -- particularly when they're powered with new-ish technologies that some consumers are still wary of.

Rivian's second-quarter negatives obviously resonated with investors, and mirrored their concerns about Lucid, Canoo, Nikola, and other aspiring EV niche players.

Now what

Additionally, while EV and other alt-fuel stocks can be volatile, for the most part they've done extremely well this year on the back of robustly increasing demand for such vehicles.

As often happens in such situations, some investors are getting nervous about the frequently sky-high valuations engendered by these swollen stock prices. It isn't hard to frighten such folks when there's even a hint of discouraging news in the wider industry, and it seems Rivian's earnings release provided that on Wednesday.