In a recent development, Rivian Automotive Inc. has revised down its annual production target due to a worsening supply chain crunch at its single US assembly plant. The company anticipates a potential 18% decrease in production this year attributed to a persistent shortage of a critical component essential for manufacturing its electric vehicles, including pickups, SUVs, and vans. Disappointingly, both third-quarter output and deliveries fell short of analysts' expectations, causing concern among investors.
Consequently, Rivian's stock experienced a sharp decline, initially dropping by 7.2% before settling at a 3.3% decrease in early trading in New York. This comes as another blow to the company, already grappling with various supply chain disruptions and a general softening in consumer demand for electric vehicles. Notably, a component scarcity earlier this year led to a temporary halt in the production of commercial vans produced for Amazon.com Inc.
While Rivian had initially projected manufacturing between 57,000 and 49,000 EVs this year, aligning with the previous year's figures, the current revised estimate stands at 47,000 to 49,000 units. Despite this setback, the company still aims to achieve a modest single-digit increase in annual deliveries.
Analysts at Bloomberg Intelligence suggest that this production dip could defer Rivian's plans to achieve positive gross profits by the fourth quarter, with forecasted gross margins expected to be negative 10% by the end of 2024. CEO RJ Scaringe recently acknowledged the challenges posed by supplier issues, particularly mentioning shortages in internally manufactured EV motors. The component shortage experienced in the third quarter has exacerbated in recent weeks, intensifying Rivian's production hurdles.
In the third quarter, Rivian recorded its lowest delivery total in eighteen months, amounting to 10,018 vehicles. Nevertheless, the company remains resolute in its expectation of achieving 50,500 to 52,000 deliveries by the end of the year. With ongoing supply chain constraints and production challenges, Rivian faces a tough road ahead to meet its targets and appease investors and consumers alike.