Key points:
- Rvian has had a dismal start to the year, not helped by the rotation out of speculative tech stocks
- Rivian is lacking in production capacity compared to its competitors
- Following Ford's lucrative investment, Rivian brought the US long-standing manufacturer to a market cap of around $100B
- How reliant are Ford on Rivian for their continued expansion?
One of the hottest IPO’s of 2021, Ford-backed Rivian Automotive (NASDAQ: RIVN) was one of the many to join the ever-tightening EV race. A well-timed investment from Ford, the long-standing US manufacturer made $8.2B from its stake in Rivian; but looking at the market since the start of the new year; investors may be a little puzzled as to the heavy downtrend.
Unfortunately for the fresh-faced company, current market sentiment isn’t quite on the side of tech growth stocks. We’ve seen a massive retracement in the NASDAQ as investors turn away from tech stocks as the shadows of inflation and rising interest rates loom on the horizon.
It’s not a great time for highly speculative stocks, especially bearing in mind that Rivian’s profits, like many other emerging EV companies, are far and few in between, and are mostly based on future projections – something that doesn’t sit very well with investors wary about interest rates.
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Rivian has also run into a few issues with production, a common theme within manufacturers at the moment. The company only produced 1,015 vehicles across 2021, which isn’t exactly awe-inspiring, yet it was still 200 below the company goal.
Still, it seems that Ford has already reaped its rewards from its initial investment, lifting the company’s market capitalization to around $100B. However, what does Rivian’s current struggle mean for Ford? Will Rivian prove instrumental to Ford’s expansion? If so, this could prove problematic unless Rivian starts to seriously ramp up production and reignite investor faith.
