Rivian Turnaround Crippled by Recall

With the announcement of a new plant in Georgia made earlier this month, and a deal with Volkswagen several months ago, it looked like Rivian Automotive Inc. (NASDAQ: RIVN | RIVN Price Prediction), which has lost billions of dollars and will probably lose billions more, was on the road to a better future. However, the National Highway Traffic Safety Administration reported it had begun a preliminary investigation into 17,198 Rivian electric delivery vans over seat belt flaw concerns. Rivian only produced 5,979  vehicles in its most recently reported quarter.

“According to the NHTSA’s Office of Defects Investigation (ODI), six complaints from vehicle owners described cables that frayed, broke or unraveled, leaving drivers at risk of being unrestrained in a crash or sudden stop,” USA Today reported. The term “risk” stands out as worrisome.

While Rivian can afford a recall, even of over 17,000 vehicles, the announcement will hurt its rebounding image. Rivian offered good news recently as it said it would open a plant in Georgia at a cost of $4 billion. It will use the facility to build its R2 SUV and R3 crossover. Both will be priced well below its R1T and R1S, which carry base prices over $79,000 and can hit $100,000. Additionally, while the deal with Volkswagen is for over $5 million, the final payout may not hit that level.

With the announcement of the new plant, CEO R.J. Scaringe said, “R3 represents a real big market unlock for us. It gets you into that category of purchases and prices that’s meaningfully below the average.” However, vehicles like Ford’s Mustang Mach-E, with a price tag below $40,000, already crowd the segment.

The news of the recall will create a new set of doubters about Rivian’s future. Another worrisome sign is that Rivian may deliver as few as 40,000 vehicles this year. In the June quarter, deliveries were just above 10,000. Revenue in the most recent quarter barely moved from $1.2 billion to $1.3 billion year over year. Rivian lost $1.2 billion in the period, compared to $1.4 billion last year. The company continues to bleed cash.

The stock is up over 16% this year, but a recall may change that.

Rivian Stock Price Prediction and Forecast 2025-2030