Why Rivian shares fell 14% in August after a massive rally

Rivian Automotive (RIVN 1.70%) The stock gained 84% in the three months between May and July. That seemingly unstoppable rally came to a screeching halt last month, with electric vehicle (EV) stocks losing 13.9% of their value in August, according to data from S&P Global Market Intelligence. Rivian shares remain under pressure and are down another 4% this month at the time of writing.

What happens to Rivian shares?

Rivian continues to suffer heavy losses

Rivian announced its second-quarter numbers in August, and they looked promising. Rivian’s second-quarter shipments rose 9% year-over-year to 13,790 units, generating revenue of about $1.2 billion. However, its production fell sharply, or 31% year-on-year, to 9,612 vehicles. That production drop shouldn’t have come as a surprise, as Rivian had already announced a planned Q2 downtime at its sole Illinois manufacturing plant for a major retooling.

The retooling update was important because Rivian expects much greater production efficiency and cost benefits going forward — so much so that it is confident of a positive gross profit in the fourth quarter. For perspective, Rivian generated a negative gross profit of $451 million in Q2. The factory is now ready to ramp up production of electric vehicles on Rivian’s second-generation platform. Moreover, Rivian also reiterated its full-year production guidance of 57,000 units, despite lower output in Q2.

So far, so good. So why have Rivian shares fallen in recent weeks? There are a few reasons.

First, Rivian reported a wider net loss, or nearly $1.5 billion in Q2, compared to $1.2 billion in the year-ago quarter. Second, there were some hiccups for the electric vehicle maker in August, such as a fire at its factory that damaged several electric vehicles. The parts shortage also forced Rivian to temporarily suspend production of electric delivery vans (EDVs) for the e-commerce leader. Amazon last month. Rivian has an order to ship 100,000 EDVs to Amazon by the end of this decade.

Should You Buy Rivian Stock Now?

There’s been a lot going on at Rivian that’s piqued investor interest in recent months. One of the recent highlights was the deal with Rivian Volkswagenthe two companies intending to form a joint venture. Under the deal, Volkswagen has made an initial investment of $1 billion in Rivian, with plans to pump another $4 billion into it by 2026. The project will likely focus on the R2, Rivian’s affordable SUV that should go into production in 2026.

Meanwhile, interest rate cut expectations have also sparked investor interest in Rivian stock as lower interest rates will reduce funding. Still, Rivian is flush with cash for now, having ended the second quarter with nearly $7.9 billion in cash and cash equivalents and short-term investments.

Some market players may have taken profits off the table last month after the stock rallied, but investor interest in Rivian is likely to remain high as the company’s gross margins improve and production of the R2 SUV begins.