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The US government has finalized lower fuel economy standards, reversing a previous push for much higher efficiency in gas-powered cars. This change makes it cheaper and easier for traditional automakers to keep selling gas vehicles for longer.
For an electric-only company like Rivian, this is a shift in the competitive landscape. While it does not change Rivian's own products, it reduces the regulatory pressure that was forcing rivals to move into the electric market as quickly as possible. This could slow the overall transition to electric trucks and SUVs where Rivian competes.
Source: Reuters
Rivian is recalling 98,828 vehicles in the U.S. due to a software or hardware issue that can block the driver's view when reversing. The National Highway Traffic Safety Administration, the federal agency that oversees road safety, noted that the obstructed image increases the risk of a crash.
While recalls are common for young car companies, the size of this one is notable as it covers a large portion of the vehicles Rivian has produced to date. If the fix can be delivered through a remote software update, the cost will be minimal, but any requirement for physical repairs at service centers would add unexpected costs during a period when the company is focused on reaching consistent profitability.
Source: Reuters
U.S. inflation data came in higher than expected this week, which makes it more likely that the Federal Reserve will raise interest rates to cool the economy. Higher rates make it more expensive for people to take out car loans, which can hurt demand for expensive items like electric trucks.
For a company like Rivian that is still spending heavily to build its new Georgia factory, higher rates also mean it costs more to borrow the money it needs to grow. While the company has a large cash cushion from its partnership with Volkswagen, a longer stretch of high interest rates makes its path to becoming fully profitable more difficult.
Source: Bloomberg Markets and Finance
The US economy added 162,000 jobs in August, nearly triple what economists expected. While a strong job market is usually good, it gives the Federal Reserve, the central bank that sets interest rates, less reason to cut rates quickly. This matters for Rivian because most people buy cars using loans.
When interest rates stay high, monthly payments for a new truck or SUV go up, which can hurt demand just as Rivian is trying to sell its more affordable R2 model to a wider group of buyers. Higher rates also make it more expensive for the company to borrow the cash it needs to finish its new factory in Georgia.
Source: Proactive Investors
Stifel Nicolaus set its price target for the stock at $22 this week. This is higher than the average analyst target of $17. While price targets are just estimates of where a stock might trade in the future, this call suggests the firm sees more value in Rivian's growth plans than many of its peers do.
Source: Stifel Nicolaus
Management consistently sets a beatable bar and clears it, often reporting smaller losses than analysts expect even as the company spends heavily to grow.
| Expectation | |
|---|---|
| EPS | $-0.67 |
| Revenue | $1.95B |