Rivian Automotive Struggles to Compete in Electric Vehicle Market

Shares of Rivian Automotive RIVN have lost 93% of their value since their initial public offering in 2021. The company’s market capitalization has fallen to less than $12 billion today from $150 billion realized after its public trading debut in 2021. Rivian Automotive is struggling to compete in a crowded electric vehicle (EV) market.

Rivian Automotive has struggled, along with other EV startups, as it lacks the advantages of the cost savings that come from large-scale vehicle production. Also, raising capital to fund that larger-scale vehicle production has become increasingly difficult as the Federal Reserve continues to raise interest ranks and U.S. banks tighten their lending standards in the aftermath of the failures of Silicon Valley Bank, Signature Bank, and First Republic Bank. In addition, Tesla’s TSLA price cuts are pressuring other EV makers to do the same as they compete for market share. 

Some analysts believe Rivian Automotive will still need billions of dollars of additional investments before the company can boost production and compete in the EV market. SPEAR Invest said, “The market right now Is not willing to assign any value to Rivian’s growth prospects.” With cash and equivalents of $11.6 billion and debt at $1.6 billion, the company “still needs to invest several billion dollars to prove out its business model.”

Many analysts are losing confidence in Rivian Automotive’s prospects, as six analysts have cut their price targets on the stock in April alone. Also, RBC Capital Markets and Piper Sandler downgraded the stock to sector perform from outperform, citing diminishing prospects for profit margins. According to Bloomberg data, Rivian Automotive still has 13 buy ratings, seven holds, and two sell ratings. Also, Rivian Automotive’s Q1 revenue projections have fallen more than -25% since the beginning of the year. Analysts are anticipating sales of about $650 million when the company reports its Q1 results on May 9, an increase from $95 million in the same period a year ago.

With inflation boosting production costs and higher interest rates making auto loans less attractive for consumers, it is a tough time for Rivian Automotive to compete in the EV market. Rivian’s RIT pickup truck currently starts at $73,000, compared with Ford’s electric F-150 model, which starts at around $60,000. Piper Sandler estimates Rivian will need to raise more than $4 billion to fund growth beyond 2025 and said, “Rivian shouldn’t abandon its strategy, but until funding is addressed, we think the company will keep trading at book value.” 

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.