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Bad news for Rivian investors

Unless you’ve been hiding from the news, you’ve probably heard that sales of electric vehicles (EVs) have slowed to a crawl in the US market. Concerns include the lack of affordable options and the lack of sufficient charging infrastructure.

But according to a recent study by McKinsey & Co. there is even worse news for investors of companies like Rivian automotive sector (NASDAQ: RIVN).

What is happening?

As part of its biennial survey, McKinsey asked approximately 200 questions to more than 30,000 consumers in 15 countries representing approximately 80% of global sales volume. And what the research reveals should be of interest to EV investors.

The survey found that more than four in 10 electric vehicle owners in the US are likely to purchase an internal combustion engine for their next car purchase. That’s a much higher percentage than the global 29% who said they plan to change the course of their EV purchase.

These results were a surprise to some: “I didn’t expect that,” said Philipp Kampshoff, leader of the consultancy firm’s Center for Future Mobility. Automotive News. “I thought, ‘Once an EV buyer, always an EV buyer.’”

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Respondents’ main concern was the lack of public charging infrastructure, but other concerns include high ownership costs and the difficulty of making long-distance journeys. It’s true that public charging infrastructure has been slower than expected, with only eight stations operational since the creation of the National Electric Vehicle Infrastructure program two years ago. Worse, only 23 states have provided funding from the $5 billion federal program.

In addition to the survey finding that more than 40% of American consumers want to switch from electric vehicles, 21% of global respondents are not ever want to switch to an EV, again citing concerns about charging infrastructure.

While these statistics should be concerning for EV investors, the news wasn’t all bad. The research also found that consumers overall are still slightly more likely to consider electric cars in the future. More specifically, 38% of non-EV owners say they expect a hybrid or full EV to be their next car, which is slightly higher than the 37% who expected it to be their next car from the 2022 survey.

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At the end of the road

Certainly, the news that many EV owners would prefer to switch back to combustion engines is not a good sign, but Rivian can only control what it can control. That means the company’s focus remains on refreshing its current R1 platform – which it recently completed – and preparing for the launch of its upcoming R2 crossover in 2026.

Rivian has even accelerated its launch schedule by planning to bring initial production to its Illinois factory, rather than waiting for the completion of its Georgia factory. It’s a move that will absorb excess capacity at the original facility and save the company more than $2.25 billion. This move is pretty much a no-brainer for a company that needs to launch its more competitively priced vehicle sooner or later.

Ultimately, the study’s findings are a bit troubling and the latest sign that the US EV market may be growing more slowly than hoped.

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Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Bad News for Rivian Investors was originally published by The Motley Fool

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