Key Tesla rival Rivian contends with recall and drop in deliveries

The stock of the Amazon-backed electric-vehicle maker was designated by an analyst as a 'best idea' for 2024.

Jan 3, 2024 - 23:30

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Key Tesla rival Rivian contends with recall and drop in deliveries

Rivian Automotive (RIVN) - Get Free Report is starting the New Year on a rough note as the electric-vehicle company contends with a recall and disappointing delivery numbers.

Amazon-backed (AMZN) - Get Free Report Rivian, which makes electrified trucks and SUVs, announced a recall of nearly 7,800 R1S and R1T EVs.

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The recall applies to vehicles made between June 2021 and October 2022.

A letter from the National Highway Traffic Safety Administration said "the accelerator pedal may not detect when the driver releases the pedal, failing to activate 'auto-hold' or 'park' as intended."

“Failure to activate ‘auto-hold’ or ‘park’ can result in unintended vehicle movement, increasing the risk of a crash," NHTSA said.

The company said a software update had been deployed to fix the problem with the accelerator pedal, and customers are being urged to install the update.

Letters notifying owners are expected to be mailed Feb. 16.

Rivian seen as 'best idea' at Baird

Meanwhile, on Jan. 2, Rivian said it delivered 13,972 vehicles from October through December, which was in line with Wall Street's forecasts and down 10.2% from the third quarter of 2023.

Analysts surveyed by FactSet had expected Rivian to deliver roughly 14,000 vehicles during the quarter.

On the same day, Tesla (TSLA) - Get Free Report delivered a record 484,507 new cars over the three months ended in December, up 19.6% from the year-earlier period and 11.4% north of the 435,059 tally reached over the three months ended in September.

Analysts' forecasts for deliveries ranged from 465,000 to around 482,000, with Refinitiv pegging the December-quarter target at 473,000.

Baird analyst Ben Kallo recently designated Rivian stock a "best idea" for 2024.

The analyst wrote on Dec. 28 that Rivian has remained supply-constrained relative to demand longer than several of its EV peers, and Baird expects this to continue.

Kallo noted that "production improvements, use of in-house-developed components, and streamlining supply-chain relationships are levers for margin upside." He expects Rivian to flip to gross-margin positive in the fourth quarter.

Analyst sees Rivian set for strong 2024

The analyst sees Rivian as well positioned for a strong 2024, and gives the stock an outperform rating with a $30 price target. Rivian shares at last check were down 3.6% at $20.34.

Goldman Sachs analyst Mark Delaney raised his price target on Rivian to $20 from $19 and kept a neutral rating on the shares.

Following the company's deliveries report, Delaney said key debates would shift to Rivian's 2024 volume guidance, the company's ability to reach a positive gross margin later in 2024, and to what extent it can sustain pricing and growth despite a more competitive market.

Delaney said the neutral rating reflected the sharp competition in the industry and the potential for this to hurt profit, especially as Rivian grows and given its still relatively limited product set.

Rivian's stock debuted on Nov. 10, 2021, with an initial price offering of $78 a share. The stock closed at $100.73 on its first day.

The company's stock took a beating in October when Rivian said it planned to issue $1.5 billion in convertible bonds to support its R2 vehicle and $5 billion Georgia plant.