Rivian Automotive (RIVN) Speeds In Reverse As Recall Sparks Renewed Concerns About Production Target

2:01 pm Monday, October 10th, 2022

Just one week after Rivian Automotive (RIVN) reaffirmed its annual production guidance of 25,000 vehicles, the EV maker is being side-tracked with a major recall that will impact nearly every vehicle it has produced since September 2021. The Wall Street Journal first broke the recall story, reporting that the improper installation of a fastener is causing a potential steering issue. Fortunately, no injuries have occurred because of the defect, and RIVN estimates that only about 1% of its vehicles are affected by this flaw.

Of course, vehicle recalls are quite common, including for EV leader Tesla (TSLA). On September 22, reports surfaced that TSLA recalled nearly 1.1 mln vehicles in the U.S. due to an issue with the window’s automatic reversal system. The stock sold off sharply that day, but the stock market also dove lower. Typically, the shelf-life for recall news is pretty short and limited as investors digest the development and quickly move on. For instance, on June 17, the New York Times reported that Ford (F) was aiming to recall 2.9 mln vehicles over a gear shift issue. After dipping modestly lower that day, the stock was marching back higher again the following day.

For RIVN, though, the disappointment from investors could linger a little longer.

RIVN’s progress in ramping up production is the main focal point right now. That’s why the stock soared last Monday when the company missed Q3 delivery expectations but reaffirmed its annual production guidance. It’s also why the stock is diving lower today because there’s concern that the recall will set RIVN’s production timeline back. Time and energy that could be spent building new vehicles will shift to repairing vehicles that are already built.

The main takeaway is that RIVN continues to encounter speedbumps and hurdles as it tries to scale production. Recall that in March, the company cut its 2022 production target in half to 25,000 vehicles. With COVID cases also reportedly on the rise in China, concerns about fresh supply chain disruptions are adding to the negative sentiment emanating from the recall news.