EV Flop: Rivian Market Cap Down 92 Percent, Stock Falls 60 Percent in Past Year

R1T outside startup Rivian Automotive's electric vehicle factory in Normal, Ill., on April 11, 2022. Kamil Krzaczynski/Reuters

Electric vehicle manufacturer Rivian is losing investor confidence as its market capitalization and share prices have both tumbled, with the company now competing in a difficult market, where leader Tesla is aggressively reducing prices.

In late 2021, when Rivian made its public trading debut, its market capitalization had crossed $150 billion. But now, the company’s market capitalization is less than $12 billion, representing a 92 percent wipeout in value. The stock price has fallen by 60 percent over the past year, as of May 1. The stock has declined 27 percent year to date. The company is backed by ecommerce behemoth Amazon.

At a time when major car firms are introducing various offerings into the EV segment and Tesla is pushing big discounts, Rivian is faced with the disadvantage of not having the scale necessary to save on costs. Earlier this month, Tesla implemented its fifth price cuts in the U.S. market for this year.

With the Federal Reserve on a monetary-tightening cycle, the prospect of Rivian raising enough funds to build the infrastructure necessary for such large-scale production has become a challenge.

Rivian also had a weak financial year in 2022. It registered a gross loss of $3.12 billion, up from a $465 million gross loss in 2021. The company’s loss from operations came in at $6.86 billion, up from $4.22 billion in the previous year.

“The market right now is not willing to assign any value to Rivian’s growth prospects,” said Ivana Delevska, chief investment officer at SPEAR Invest, according to Bloomberg.

The company currently has cash and equivalents of $11.6 billion and debt worth $1.6 billion. Rivian “still needs to invest several billion dollars to prove out its business model,” she said.

The situation of the company has forced a long-time bull investor to stop recommending Rivian. Alexander Potter of Piper Sandler Cos., who has had an “overweight” recommendation on the company’s stock since 2021, has cut it down to “neutral.”

Potter now maintains a target of $15 for the stock, down from the $63 target he held earlier. Rivian is currently trading at above $12.

Bleeding Cash, Funding Issue

In February, Rivian had announced plans to lay off 6 percent of its workforce in a bid to control costs as the company battled falling cash reserves. The firm has been losing money on the cars it manufactures.

According to a Reuters report, the cost of goods sold for Rivian was around $220,000 per car compared to the average selling price of $81,000 in the third quarter. To conserve cash, Rivian has also shelved its plans to build vans with Mercedes in Europe.

“They’re bleeding cash and would like to grow at a much faster rate, but they continue to struggle with their EV production ramp and have been unable to meaningfully drive down unit costs,” CFRA research analyst Garrett Nelson told Reuters.

According to Potter, unless Rivian raises more than $4 billion, the company will find it difficult to keep funding its growth beyond 2025.

“Rivian shouldn’t abandon its strategy, but until funding is addressed, we think Rivian will keep trading at book value,” he said.

Future Prospects

Rivian is scheduled to release its first-quarter 2023 results on May 9 after the market closes. The company is expecting gross margins for 2023 to remain in the red. Adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) is expected to be negative $4.3 billion.

“We continue to rationalize our capital expenditures due to a greater focus on our core business. Capital expenditures in 2023 are expected to be $2,000 million, driven by additional investment in our Normal factory, next-generation technologies, our Georgia facility, and go-to-market operations,” the company said in its fourth-quarter 2022, shareholder letter (pdf).

According to data compiled by Bloomberg, Rivian’s revenue projections for the first quarter by analysts have fallen by more than 25 percent since December-end.

In the first quarter of this year, Rivian produced 9,395 vehicles at its manufacturing plant in Illinois and delivered 7,946 vehicles, which is within the firm’s expectations.

According to Rivian, it is on track to manufacture 50,000 vehicles by the end of this year, in line with the annual guidance that was earlier reported.