The electric vehicle (EV) sector is in a state of flux. Some manufacturers are pulling back as demand growth hasn't met or exceeded early expectations. But growth does continue and U.S. EV sales grew 7.3% in 2024 year over year, according to Kelley Blue Book.
That's crucial for start-ups like Rivian Automotive (RIVN -1.79%) as it needs volume to see sales turn into profits. But one new major headwind has Rivian stock sinking today. Shares dropped as much as 5.3% and remained lower by 2.2% as of 11:30 a.m. ET.
In its third-quarter earnings report, Rivian's management held to the prediction that it would achieve a positive gross profit in the fourth quarter thanks to ongoing cost reduction progress. Now investors are concerned that tariffs could impede progress.
While Rivian's only production plant is in Illinois, the automotive supply chain is global. That means costs could start to increase with imported parts impacted by tariffs. Even Tesla imports 15% of parts for the Model Y EVs it manufactures and sells in the U.S. from Mexico. Its production plants in California and Texas also import parts from Canada, according to Barron's.
Even with its cost-cutting campaign, Rivian said it only expected a "modest" positive gross profit in the fourth quarter. Investors will hear more when the company reports those results on Feb. 20. But the investing case for Rivian just got a bit more murky. And the 7% drop the stock has experienced since the start of the year might not represent the bottom if costs begin to increase for Rivian.
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