Once a darling of the electric vehicle world, electric truck maker Rivian is reeling

Rivian Automotive Inc. has emerged. As a darling of investors – a brand that promised to bring the “cool” factor to the once-hot electric vehicle market.

But the Irvine-based company ceased operations on Wednesday, announcing a 10% reduction in its workforce and lowering production expectations. The news sent its shares plummeting. Thursday's 25% drop in stock price was its worst day in its history.

It's all part of a larger calculation for electric car companies, which now face falling demand amid a shrinking pool of wealthy buyers who don't already have an electric car and lingering questions from the broader consumer market about whether electric cars can really fit into their lives and budgets. .

“We've been living in this wave of, 'Oh, electric cars are great, they're going to continue to grow exponentially and they're only going to get better,' and now it seems like it's reached that realistic point,” Jessica said. Caldwell, president of insights at Edmunds. “Buyers in a mass market have less income and a lot more questions.”

Rivian's trucks and SUVs are certainly getting attention — the sleek design and exterior features have sparked investors, analysts, and the public's interest in their potential. The company, which counts Amazon as an investor, blew the roof off during its initial public stock offering in 2021, ending the first day of trading worth nearly $88 billion.

But the average car buyer may not be able to afford the price points of Rivian's current lineup of vehicles — the company's R1T electric pickup truck starts at around $70,000, while the R1S SUV starts at around $75,000. The company, which has not yet turned a profit, posted a net loss of $1.52 billion for the three-month period ended Dec. 31, compared with $1.72 billion during the same period a year earlier. Much depends on the company's plan to produce the affordable R2, which will debut in March, but won't begin mass production until 2026.

Despite years of growth in electric vehicle sales, mass-market customers still worry about electric vehicle battery life, range, and the availability of reliable charging stations. That's why hybrid vehicle sales are growing alongside electric vehicle sales, Caldwell said.

“It's not always easy to set up a charger where you live,” she said. “Ultimately, for electric vehicles to take off and become a widespread market, there will have to be significant growth in infrastructure.”

That hesitation shows up in Rivian's production and delivery forecasts for 2024. The company said its backlog of orders has shrunk, partly due to fulfillment, but also due to cancellations and fewer new orders.

The company said it expects to produce 57,000 cars this year, which the company said was in line with 2023 numbers, although it disappointed Wall Street analysts who I expected this number to be higher. Last year, the company produced 57,232 cars and delivered 50,122 cars, more than double its numbers in 2022.

This year's expectations cast a dark shadow over the story, said Dan Ives, managing director and chief equity strategist at Wedbush Securities.

“Reducing costs and headcount to reflect a softer environment and production issues,” he wrote in an email. “Rivian has gone from a Cinderella story to a horror show.”

Deutsche Bank analyst Emanuel Rosner said in a note to clients that he now expects deliveries to be “shallow” in 2024 at 50,000 vehicles, in contrast to his previous forecast of 65,000 vehicles.

“Rivian's somewhat bleak guidance for 2024, including a lack of volume growth and continued steep losses, in our view, demonstrates the profound challenges the company faces going forward,” Rosner wrote.

The company attributed the lower expectations for 2024 to “economic and geopolitical uncertainty,” and highlighted the impact of higher interest rates on new car loans. Rivian said it would continue a “company-wide cost transformation program,” which it said helped reduce the price of the company's electric pickup truck, SUV and delivery truck.

“We firmly believe in the full electrification of the auto industry, but recognize the short-term are challenging macroeconomic conditions,” CEO RJ Scaringe said in a company statement.

Rivian is not the only electric car manufacturer suffering, as shares of electric car maker Lucid Group Inc. fell. By nearly 17% on Thursday after a disappointing earnings report. Although Tesla Inc shares rose slightly on Thursday, the Elon Musk-led automaker warned last month that growth could decline in 2024, but the company reported… Slight increase in revenue for the fourth quarter.

For Rivian, details around the R2's debut will be of particular interest to both consumers and analysts.

“Rivian is very exciting, their products are very exciting, and they're certainly great, but there are questions about the size of the market and the size of the runway that they have, especially as they wait for R2,” Edmunds' Caldwell said. “If they can get to the point of producing a cheaper car, it will naturally have a bigger market.”