Investors pushed the shares away Rivian car industry (NASDAQ: RIVN) higher by as much as 5% on Wednesday morning. Two news reports released today were interpreted as tailwinds for the electric vehicle (EV) manufacturer. Rivian shares pared those gains as the market retreated from the morning highs, but remained up 2.2% as of 1:05 PM ET.
Investors received a positive data point this morning in the battle against inflation. That could lead to meaningful help for Rivian in the future as the company struggles to grow electric vehicle sales and stem losses. At the same time, new European Union (EU) tariffs on imported Chinese EVs could help European and US EV manufacturers increase their market share in EU countries.
Rivian may still need to raise new capital
News that the consumer price index (CPI) was flat in May helped lift the bond market, sending 10-year Treasury yields to their lowest level since April. That may not impact Rivian Automotive today, but financing costs could become a big story for Rivian sooner than some investors think.
While the company ended the first quarter with nearly $7.9 billion in cash and equivalents, that was down more than $1.5 billion since the start of the quarter. Rivian’s capital expenditures and operating losses are quickly depleting Rivian’s cash supply. That large amount of cash was only partly there because Rivian also raised almost $3 billion in 2023.
If the disinflation from the CPI report helps lead to rate cuts, Rivian’s additional capital needs would come at a lower cost. This is crucial as the company continues to expand its operations.
The other news – that the EU will impose a tax of up to 38% on imported Chinese electric cars found to be unfairly subsidized – could mean additional sales for Rivian in Europe as production levels rise.
Neither news helps Rivian’s business today, but investors looking to the future should feel good about it.
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Howard Smith holds positions in Rivian Automotive. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Why Rivian Stock Jumped Today was originally published by The Motley Fool
