Why Rivian Stock Plunged Friday

Rivian Automotive (NASDAQ: RIVN) stock is ending the week with a thud. Shares tanked Friday morning after the company provided its third-quarter vehicle delivery update and revised its 2024 production guidance.

Rivian shares plunged as much as 8% when the company notified investors of a part supply shortage issue. The stock remained lower by 7.3% as of 10:30 a.m. ET.

Production issue, not demand

Rivian said it now expects to manufacture between 47,000 and 49,000 electric vehicles (EVs) this year. That's down from its previous guidance of 57,000. While many EV makers have cited a lack of demand, Rivian's issue is one of supply. The company revealed that production has been disrupted due to the shortage of a component that is used on both its consumer R1 models as well as its commercial delivery vans.

Rivian CEO R.J. Scaringe mentioned the supply issue at an investor conference last month without providing details. Scaringe stated, "We've had a couple of supplier issues [recently] that have been challenging and in particular, a few issues around our in-house motors with some of the components that have been painful and a reminder of just how a multi-tiered supply chain can be difficult."

Shares pared some of the drop this morning when investors realized that demand doesn't seem to be an issue. Using existing inventory, Rivian still expects to deliver slightly more vehicles this year than it did in 2023.

With other EV makers cutting production due to lack of anticipated demand, it's promising news that Rivian didn't note any demand drop. How long the part supply issue continues, though, is a big question for investors. The stock likely won't recover from today's news until investors hear more when Rivian provides its full third-quarter report on Nov. 7. Some investors would rather wait for that on the sidelines.

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Howard Smith has positions in Rivian Automotive. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.