Why Rivian Stock Dropped on Friday

Rivian Automotive (RIVN -7.04%) the stock ends the week with a bang. Shares fell on Friday morning after the company provided its third-quarter vehicle delivery update and revised its 2024 production guidance.

Rivian shares fell as much as 8% when the company notified investors of a supply shortage issue. The stock was down 7.3% at 10:30 a.m. ET.

Production problem, not demand

Rivian said it now expects to produce between 47,000 and 49,000 electric vehicles (EVs) this year. That’s down from the previous guidance of 57,000. While many electric vehicle manufacturers have cited a lack of demand, Rivian’s problem is one of supply. The company revealed that production was halted due to a missing component that is used on both the R1 consumer models and its commercial delivery vans.

Rivian CEO RJ Scaringe mentioned the supply issue at an investor conference last month, without providing details. Scaringe stated: “We’ve had some issues with suppliers (recently) that have been challenging and in particular some issues with our internal engines with some of the components that have been painful and a reminder of how a multiple. – tiered supply chain can be difficult.”

Shares pared some of the decline this morning as investors realized that demand doesn’t appear to be an issue. Using existing inventory, Rivian still expects to deliver slightly more vehicles this year than it did in 2023.

With other EV manufacturers scaling back production due to a lack of anticipated demand, it’s encouraging news that Rivian hasn’t seen any drop in demand. How long the parts supply problem continues, however, is a big question for investors. Shares likely won’t recover from today’s news until investors learn more when Rivian delivers its full third-quarter report on Nov. 7. Some investors would rather wait on the sidelines for that.