Rivian, the Amazon-backed electric vehicle (EV) startup, has slashed its full-year production forecast due to a parts shortage and weakening demand for EVs.

This announcement came after the company missed its third-quarter delivery expectations, causing its shares to fall by nearly 4%.

Rivian Faces Supply Chain Challenges

The shortage of crucial parts used in Rivian’s flagship R1T pickup, R1 SUV, and delivery vans started impacting production in the third quarter and has worsened recently.

Rivian has revised its production forecast, now expecting to build between 47,000 and 49,000 vehicles in 2024, down from its previous target of 57,000.

This new estimate puts Rivian’s production below last year’s levels, raising concerns about the company’s ability to turn a profit.

Industry-Wide EV Demand

The EV industry as a whole has been facing challenges, with demand slowing as consumers turn to cheaper hybrid vehicles amid rising interest rates.

Market leader Tesla also missed its delivery estimates this quarter, showing that Rivian is not alone in facing these headwinds.

“The cut to its production guidance was substantial, and it will likely raise questions about Rivian’s ability to reach gross profitability,” said Garrett Nelson, a senior equity analyst at CFRA Research.

Efforts to Increase Profitability

In an effort to improve profitability, Rivian had closed its only manufacturing plant in Normal, Illinois, for three weeks earlier this year to streamline production and reduce costs.

The company is aiming to achieve its first profitable quarter by the end of 2024.

Rivian is focusing on lowering costs while ramping up production of its R1 models and preparing for the launch of its smaller, more affordable R2 models in 2026.

However, the production cut has cast doubt on whether Rivian can meet these ambitious targets.

Missed Deliveries and Future Plans

Rivian delivered 10,018 vehicles in the third quarter, falling short of analysts’ expectations of 12,078. Despite this, the company reaffirmed its full-year delivery target of 50,500 to 52,000 vehicles.

Rivian is also partnering with Volkswagen, which earlier this year announced an investment of up to $5 billion in a joint venture with the startup.

This collaboration could help Rivian boost its cash reserves and improve cash flow as it navigates a challenging market.