More and more signs point toward a future where the roads are filled with electric vehicles (EVs), but the U.S. is heading to that future a little slower than some investors hoped. Reports indicate that the sales growth in EVs slowed this past year and the prices of EVs are dropping too. While Rivian (NASDAQ: RIVN) has so far been immune to weakening demand, we’re seeing it nearly everywhere else.
For instance, Ford Motor Company (NYSE: F) just made a big move to cut production of its key EV model, the F-150 Lightning. Is this news a reason for Rivian investors to worry about demand for its R1T truck?
Ford’s Workforce Reduction
Let’s first take a look at what Ford’s big move was. The folks at the Blue Oval announced it would cut two-thirds of the jobs at its Michigan plant that builds the F-150 Lightning — a critical component to Ford’s EV growth — as it slows production.
More specifically, Ford is asking 1,400 workers at the plant to either retire or move to another facility as it drops the F-150 Lightning to only one daily production shift — compared to its previous two-shift, three-crew operation.
This is a move that aligns with Ford’s target to reduce F-150 Lightning production in half in 2024 due to “changing market demand,” from 3,200 trucks a week to 1,600. In the bigger picture, Ford is delaying roughly $12 billion in EV investments, including postponing opening one of two battery plants planned in Kentucky.
The big question for Rivian investors remains, “Does this mean demand is due to soften for the R1T?”
Signs of Softening Demand
The truth is that Rivian might already be seeing a softening demand for its R1T. If investors recall, during the third quarter management announced that production of the R1S had overtaken the R1T for the first time. Initially, it was received as good news, considering the R1S is currently more profitable than the truck. In hindsight, it’s possible that was just showing Rivian’s production flexibility to match softening demand for the truck while boosting production for the more profitable R1S.
The X-factor here is that we have no clue what Rivian’s backlog of orders looks like. The company stopped updating its backlog many quarters ago, and it’s possible Rivian has seemed more immune to a slowdown in demand due to its once-healthy backlog of orders.
Delivery Slowdown
Rivian’s fourth-quarter production was solid, but there was a slowdown in deliveries.
Image source: Author. Data source: Rivian production and delivery releases.
If you dig deeper into the details, the slowdown was largely related to Amazon not accepting deliveries of its electric van during its holiday season. But the truth is Rivian won’t be immune to softening EV demand forever, even if we haven’t quite seen it yet. In the grand scheme of things, this is a very small development to react to. In the long term, immense growth for EVs is possible, even if we’re getting there a little slower than anticipated.
EV stocks are still a long-term play, with many ups and downs in the meantime as companies adjust to price and demand fluctuations. If you can stomach these ups and downs, EV stocks still have a bright future as long as they have the cash to fund operations until demand gains traction again.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Daniel Miller has positions in Ford Motor Company. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.