The economic markets are still suffering from general weakness and despite the sharp declines in the leading indices in trading on Friday, there is still no prospect of any recovery as investors have not yet received the bottom signs they would like to see.
Rivian is doing a massive recall
Rivian’s stock drops by about 9% at the opening of trading. The EV challenger has tried to maintain its production pace, but the production figures released on Friday could jeopardize the companies’ financial performance in the near term. Rivian said on Friday that it is recalling 13,000 vehicles, which are a significant part of the vehicles it has produced since the beginning of the year. The problem identified by Rivian involved a type of fastener connecting various components in the steering system.
The news comes less than a week after Rivian tried to cheer its shareholders with steady production figures. The company built 7,363 vehicles in the third quarter, bringing its total for the year to more than 14,300 cars. Rivian also estimated that it could meet a production target of 25,000 units for 2022, implying a substantial increase in capacity in the fourth quarter. Rivian stock has crashed 76% since its initial public offering in November 2021. Such setbacks will only force investors to be even more patient in hopes of seeing Rivian’s business take off in the years to come.
Wall Street doubts Ford and General Motors
Meanwhile, shares of major automakers are also down, with Ford down 7% in early trade and General Motors down 5%. Wall Street analysts have moderated their expectations for the two iconic American auto giants amid growing competition.
Ford received a downgrade from analysts at UBS, who lowered their rating on the automaker to ‘sell’. UBS lowered their target price for Ford shares by $3 to $10. Ford says its key performance indicators were the weakest among US automakers, making it more vulnerable than its peers to a potential recession. Moreover, Ford’s European business faces an even tougher headwind due to heightened macroeconomic pressures in the economically troubled continent. Despite price increases for vehicles like the electric F-150 Lightning, Ford seems to be struggling to withstand the forces driving its stock down.
Meanwhile, General Motors (GM) received a slightly more positive view from UBS, but its recommendation was downgraded from ‘buy’ to ‘neutral’. The company saw its stock price cut to $38 per share – down $18 per share. Despite better momentum on the EV front than Ford, GM still faces the threat that even as it intends to build inventory of parts and components for its vehicles, falling demand could cause it to discount its vehicles to clear dealer lots.
As Tesla increases its production capacity, many investors believe that it will be able to achieve the goal of producing an autonomous vehicle that does not require any human intervention to operate it. Neither Ford nor GM was able to fully meet the production of such vehicles.
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