Why Rivian shares fell 21% in September

What goes up must come down. Rivian Automotive (RIVN 1.10%) The stock’s stunning run in the three months to July looked unsustainable, and that’s what investors are now witnessing. The stock of electric vehicles (EVs) has declined by double-digit percentages for two consecutive months. After losing nearly 14 percent of its value in August, Rivian shares tumbled another 20.6 percent in September, according to data from S&P Global Market Intelligence.

Unfortunately, Rivian’s latest announcement sends its stock further down this month; and there is a chance it will head even lower before bottoming out.

Rivian’s production woes continue

By early August, Rivian was confident it would ramp up production the rest of the year and produce 57,000 vehicles in 2024, despite a planned downtime that will affect production in the second quarter. Rivian was also confident of achieving a positive gross profit in the fourth quarter, despite negative profits in Q2.

But there was one problem that investors didn’t pay much attention to. Rivian was facing a parts shortage, and the company even temporarily suspended production of electric delivery vans (EDVs) for the e-commerce leader. Amazon a few weeks ago.

The problem got worse — Rivian just cut its full-year production guidance to just 47,000 to 49,000 vehicles, citing a “production disruption due to the lack of a shared component on the R1 and RCV platforms.” Rivian makes the R1S SUV and R1T pickup trucks on its flagship R1 platform and EDVs on its RCV platform. The development hit Rivian stock hard.

Rivian shares could remain under pressure

Although Rivian still expects to deliver between 50,500 and 52,000 vehicles this year, a modest gross profit through Q4 looks uncertain now. The missing parts and components could become more expensive to purchase, even if Rivian will have to spread its fixed costs over fewer units produced. These are just a few of the factors that could affect Rivian’s profits.

Meanwhile, Rivian is preparing to launch an R2 mid-size SUV and an R3 mid-size crossover in the near future, with R2 production expected to begin in 2026. These will require billions of dollars in investment. Rivian has his support Volkswagenbut at least one analyst thinks the electric vehicle maker will still have to pay more.

last month, Morgan Stanley analyst Adam Jonas cut his price target on Rivian stock from $16 per share to $13 per share, citing the company’s limited ability to “drive competitive progress in computing in a financially prudent manner.” Simply put, Jonas expects Rivian’s capital expenditures to be higher than forecast.

With Rivian also struggling to boost production, the stock will need a solid catalyst to bounce back. The only one I see in the near term is a positive gross profit in Q4, but that is uncertain at the moment.