Shares of electric vehicle startup Rivian Automotive (NASDAQ: RIVN) were under pressure on Tuesday, declining as much as 5.2% in early trading. The stock’s slump came after reports that the Biden administration is considering pushing back aggressive targets for emissions reductions from cars and light trucks.
The timing of this potential policy shift couldn’t be worse for Rivian, which is set to report its Q4 and full-year 2023 financial results on Wednesday after the market close. Investors will be keenly focused on any updates the company provides on production, demand, cash burn, and outlook amidst growing concerns about the pace of EV adoption in the U.S.
Biden’s Reported Backtrack on Ambitious EV Goals
Over the weekend, news emerged that the Biden administration may be reconsidering its audacious goals for forcing a rapid transition to electric vehicles. In 2022, the Environmental Protection Agency (EPA) proposed stringent vehicle emissions standards that would essentially require 60% of new car sales in America to be electric vehicles by 2030, and up to two-thirds by 2032.
EPA Administrator Michael Regan had touted the regulations as “the strongest-ever federal pollution standards for cars and trucks.” However, major automakers have struggled with the economics of EV production and lower-than-expected demand from consumers. This has caused some to scale back their EV production plans.
With adoption lagging, reports indicate the Biden administration is now weighing an extension of the emissions targets timeline through 2030. This would provide more runway for the industry and marketplace to adjust to making EVs more affordable and desirable to buyers.
Rivian’s High-Stakes Growth Sprint
The potential for a policy change comes at a critical juncture for Rivian. The company just crossed the milestone of producing over 57,000 EVs in 2023, more than doubling its output from the prior year. It is already working to build a second factory to increase capacity.
Rivian bulls are betting the company can rapidly scale production to become a formidable player in the EV space with its innovative pickup and SUV models. The company ended 2023 with over $12 billion in cash and equivalents to fund its growth.
However, the startup is also burning billions in cash each quarter. Any signals that demand for its products is not living up to expectations could spell trouble. A delayed timeline for forcing automakers to electrify through new emissions rules would remove one potential catalyst.
In its Q3 2022 shareholder letter, Rivian touted EPA regulations among other government policies as “important demand drivers” for bringing costs down through scale and making EVs more affordable overall.
Outlook Crucial for Battered Rivian Stock
Rivian shares have been hammered so far in 2023, declining over 30% year-to-date amid a broader selloff in EV and growth stocks. The stock trades at around $14, well below its IPO price of $78.
With sentiment already fragile, the company will need to restore confidence when it reports results and provides updates on Wednesday. Investors will be laser-focused on any insight into production, spending plans, vehicle reservations, and overall demand.
While the business faces considerable execution risks, Rivian’s unique SUV and truck offerings and substantial cash reserves could still make it an interesting speculative bet for patient investors. But stakes are high. Any misstep in the company’s results or commentary could send the stock reeling further.
