On the back of blue-sky investor sentiment, little-known electric vehicle maker Rivian went public last year as the third most valuable automotive company in history – but it wasn’t to last.
Long hailed as a future giant of electric vehicle production, Rivian has struggled to ramp up since a high-profile IPO in November 2021 – causing $US127.37 billion to be wiped from its valuation.
Stocks have since dropped to $US28.78 and the company is today worth $US25.93 billion, representing a collapse of approximately 85 per cent – including a 17 per cent drop in the past week alone.
So where did it all go wrong, what is driving the catastrophic slump, and can the company still turn itself around to be the Tesla rival its supporters long claimed was inevitable?
Rivian was founded as an electric vehicle specialist 13 years ago in California by engineer Robert Scaringe, and is now backed by big-name investors including Ford, Amazon, George Soros, D1 Capital Partners, and the Vanguard Group.
These were underpinned by a shared skateboard platform available with dual or quad motors; offering impressive performance, a maximum range of 643km, clever packaging, and quirky features including a built-in kitchen (shown below).
Once the hype died down however, the transition to from privately-owned small start-up to public multi-billion-dollar volume producer was fraught with difficulty.
According to industry experts and international media reports, three primary factors are responsible for the downturn: production challenges, unfavourable economic conditions, and the upcoming expiry of an initial public offering (IPO) lock-up.
After multiple delays and false starts Rivian claimed it had capacity to build 50,000 vehicles in 2022, however now says manufacturing difficulties and an industry-wide shortage of parts including semiconductors will reduce this number to 25,000.
A second $US7 billion factory in Georgia was announced to boost supply in December last year alongside a $US1.5 billion state-funded subsidy package, however local dissatisfaction has since threatened to sink the project.
Market conditions outside of Rivian’s control have also hampered development, with runaway inflation and climbing interest rates hitting high-growth and low-profit companies particularly hard throughout 2022.
In March this year the company announced it was hiking prices of current and future orders, however subsequently reneged the bulk of the price rises following a backlash from existing deposit holders.
Further, the 180-day Rivian IPO lock-up – a clause preventing company insiders from selling off stock immediately after a company goes public – is due to expire at the end of this month (May 2022).
With the company already struggling to contain the aforementioned challenges, investors fear big stake holders including Ford or Amazon could sell out – flooding the market with shares, and further reducing their value.
While Amazon has suggested it has no immediate plans to terminate its relationship with Rivian, Ford did not respond to request for comment from Drive and multiple other media outlets when quizzed on its own strategy.
A spokesperson for Rivian did not respond when approached by Drive for comment on its current position, however this story will be updated if more information becomes available.
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