Shares in Rivian fell sharply on Monday after the electric vehicle maker said it was acting “urgently” and voluntarily recalling thousands of vehicles due to a potential risk associated with driving.
The company recalled 13,000 of its vehicles late Friday after a manufacturing defect was discovered in seven cars. The mounting on the front steering knuckle “may not have been tightened enough” when the vehicles were manufactured, CEO RJ Scaringe wrote in an email to employees that was reviewed by Insider.
The company’s shares fell as much as 11% to $33.30 in premarket trading before paring the loss to 7%. The stock has fallen roughly 67% this year.
“In rare cases, the fastener has completely loosened,” Scaringe wrote. “I want to reiterate that this is extremely rare, but it reinforces why we are acting with urgency and caution.”
A Rivian spokesperson told Insider that vehicle tests at the company’s service centers will be free and that the cost of making the change is not “substantial.” The tests should take a few minutes.
“[This] is a black eye for Rivian as the company is just starting to hit its 25,000 production target for 2022 and has around 100,000 bookings in hand for its EV SUVs with clear momentum through 2023,” Wedbush analyst Dan Ives wrote. on Monday, saying challenger Tesla delivered 14,3000 vehicles annually.
“The last thing any Rivian investor wants to see in an uncertain market is a broad recall that damages the brand and causes some lingering credibility issues for future production,” he said. The pullback is an “acceleration” in Rivian’s growth story, Ives added, as he reiterated his outperform rating and $45 price target for the company.
The withdrawal should not affect Rivian’s production or delivery targets for 2022, he said.