Why Rivian Stock Sold Off Today

Automotive stocks had a mixed Thursday after President Trump announced plans for additional new tariffs on imported vehicles and auto parts. Among the winners in that session was Rivian Automotive (NASDAQ: RIVN). The electric vehicle (EV) maker's stock jumped 7.6% based on its made-in-the-USA production strategy.

The theory was that those import tariffs won't affect it like competitors such as General Motors and Ford, which both make electric trucks and SUVs. So investors may be wondering why Rivian shares are plunging Friday. As of 12:52 p.m. ET, the stock was down by 5.7%.

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Another twist from President Trump

Trump's new 25% tariffs on imported vehicles would seemingly help Rivian become more competitive against its bigger rivals. GM currently sells its Equinox and Blazer EVs at much lower prices than Rivian's R1 SUV. Rivian's smaller R2, due to launch next year, is expected to be priced lower; starting at about $45,000, it would be more in line with the two aforementioned GM models. GM and Ford also manufacture the Silverado and F-150 Lightning electric pickup trucks, respectively, which directly compete with Rivian's R1T.

Currently, Rivian makes all its EVs at its Illinois plant, though it plans to build a second facility in Georgia. So if competitors raise their prices to compensate for the increased taxes they'll owe on the vehicles they manufacture internationally and import, Rivian theoretically should enjoy a cost advantage that would help it sell more vehicles. That's what investors were apparently thinking when they bid up the stock Thursday.

Various estimates have projected the new 25% tariffs could add between $5,000 and $10,000 to the average cost of some new cars. Rivian could substantially benefit if prices on competing vehicles rose by that amount. But Trump reportedly has warned U.S. automakers not to increase prices to compensate for those tariffs, according to media reports.

It would be damaging to automakers like GM and Ford if they had to absorb those higher costs. But that result would also not help Rivian sell more vehicles. And increased volume is what Rivian needs if it's going to move toward profitability. This helps explain why the stock is giving back much of Thursday's gain on Friday.

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Howard Smith has positions in Rivian Automotive. The Motley Fool recommends General Motors. The Motley Fool has a disclosure policy.