Rivian shares (NASDAQ:RIVN) fell more than 6% in premarket trading on Friday after the company cut its full-year production guidance and disclosed a significant setback in its production plans due to a shortage of a common component used in both its R1 and RCV platforms.
Rivian said it now expects full-year production to be between 47,000 and 49,000 vehicles, below its previous forecast of 57,000 vehicles.
While Rivian managed to produce 13,157 vehicles and deliver 10,018 in the third quarter of 2024, the supply chain issue has worsened in recent weeks, impacting overall production.
Despite the production challenges, Rivian remains optimistic about its delivery outlook for the year. The company reiterated its expectation of low single-digit growth in deliveries compared to 2023, estimated at 50,500 to 52,000 vehicles.
The revised forecast shows that the company now expects to produce fewer vehicles than last year.
Demand for electric vehicles has waned as high interest rates and increased inflation have prompted consumers to look for cheaper alternatives.
The rising cost of owning an electric vehicle combined with economic uncertainty has led some potential buyers to rethink their decision and instead opt for lower-cost options in the current environment.
Morgan Stanley recently revised its forecast for the U.S. auto industry, downgrading it from “attractive” to “in line,” citing headwinds such as rising inventories, affordability concerns, and increasing competitive pressure from China.
As part of its sector review, Morgan Stanley downgraded Rivian as well as other major automakers to “underweight” from “equal weight.” The bank explained that the downgrade reflects “consideration of the capital intensity of AV/ADAS that may be required to meet the technological fundamentals that attracted Volkswagen (ETR:VOWG_p) as a joint venture partner.”
Morgan Stanley also lowered its price target on the stock to $13.00 per share from $16.00.
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Reference;
Boughedda, S. (2024) Rivian drops after cutting full year production guidance By Investing.com, Investing.com. Investing.com. Available at: https://www.investing.com/news/stock-market-news/rivian-drops-after-cutting–full-year-production-guidance-3648914 (Accessed: 4 October 2024).
