rivian

Rivian stock (NYSE: RIVN) is trading higher in US premarket price action today and has recouped its losses. It was trading lower in post-market trade yesterday after it released its earnings for the second quarter of 2022.

While Rivian posted a massive loss in the quarter, it maintained its 2022 production guidance of 25,000 vehicles. Markets seem impressed with the guidance as some expected Rivian to lower the guidance.

2022 has been tough for EV (electric vehicle) companies amid the fall in loss-making growth stocks. To make things worse for the EV industry, most startup companies are facing production headwinds amid global supply chain issues.

Yesterday only, UK-based EV company Arrival said that it expects to deliver only about 20 vehicles in 2022, which is way below the previous guidance of delivering between 400-600 vehicles. As a result, it does not expect to post meaningful revenues in the year. The stock crashed after the earnings release.

Last week, Lucid Motors, which like Rivian, went public in 2021 only, also lowered its 2022 production guidance to 6,000-7,000 units. Its original guidance for the year was 20,000 which it lowered to 12,000-14,000 vehicles subsequently.

In his remarks, Lucid Motors’ CEO Peter Rawlinson said, “Our revised production guidance reflects the extraordinary supply chain and logistics challenges we encountered.”

The entire automotive industry is facing supply chain woes even as the severity varies by different companies. Tesla, for instance, reported a sequential fall in Q2 2022 deliveries due to lockdowns in China. In the first half of 2022 Warren Buffett-backed, BYD Motors sold the most new energy vehicles globally.

Notably, Tesla’s CEO Elon Musk had mocked Rivian’s valuation. At one point, Rivian’s valuation had surpassed $150 billion.

Rivian’s Valuations Have Crashed: Some See It as a Buying Opportunity

Rivian’s market cap has now fallen to $35 billion while it had over $15 billion as cash and cash equivalents on its balance sheet at the end of the second quarter. Lucid Motors also has a comfortable cash position and ended the quarter with total cash and cash equivalents of $4.6 billion. The company estimates that the cash can fund its operations until the end of 2023.

However, the cash positions of some of the other startup EV companies like Lordstown Motors and Arrival is quite precarious. The former even sold its manufacturing plant to Foxconn which would now make cars on its behalf.

As Rivian stock crashed amid the market sell-off, Morgan Stanley advised investors to buy Rivian stock. The brokerage is also bullish on Tesla and analyst Adam Jonas is among the most vocal Tesla bulls.

Tesla meanwhile finds itself in a new controversy after former US presidential candidate Ralph Nader has called upon the NHTSA (National Highway Traffic Safety Administration) to issue a recall for Tesla’s FSD (full-self-driving), which is the autonomous driving software in the company’s vehicles.

Rivian is also working on autonomous driving technology. Big Tech companies also see autonomous driving as a key long-term growth driver.

Coming back to Rivian, like fellow EV companies, it is also facing supply chain issues. In the earnings release, it said, “Supply chain continues to be the limiting factor of our production; however, through close partnership with our suppliers we are making progress. We expect to be able to add a second shift for vehicle assembly towards the end of the third quarter.”

The company had an order backlog of 98,000 vehicles. It has another 100,000 orders for its EDV from Amazon.

Both Amazon and Ford Have Reported Loss

Both Amazon and Ford reported billions of dollars of losses on their Rivian investment in the first two quarters of 2022. Ford has even trimmed some its stake to monetize the investment. Ford has also been upping its game in the EV industry and from the next year, it would report the earnings of its EV business separately from the ICE (internal combustion engine) business.

Ford is investing $50 billion in EVs until 2026 and is targeting a 50% EV mix by 2030 and carbon neutrality before 2050. Ford is ramping up EV production and forecasted production of 14,000 electric cars globally in July. It expects its annual EV production run rate to reach 600,000 by the end of 2023 and 2 million by 2026.

The company’s pickup truck, the F-150 competes with Rivian’s model. In 2023, Tesla would also start delivering its Cybertruck which would only spice up the competition in the electric pick-up market.

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