EV Makers Rivian and Lucid Grapple with Tariff Headwinds Amidst Slowing Sales
Electric vehicle (EV) manufacturers Rivian and Lucid are sounding alarms about the escalating costs stemming from U.S. tariffs on imported vehicles and automotive components. This challenge emerges at a particularly vulnerable time for the EV market, which is already experiencing a slowdown in sales due to broader economic uncertainties that are impacting consumer sentiment. As a result, many potential buyers are either delaying vehicle purchases altogether or opting for more budget-friendly hybrid alternatives.
Rivian’s CEO, RJ Scaringe, has cautioned that the tariffs are expected to inflate the cost per vehicle by approximately a couple of thousand dollars. He noted that consumers are exhibiting increased price sensitivity and a reluctance to make substantial purchases. In response, Rivian is actively restructuring its supply chain to mitigate the financial impact of these tariffs.
Adding to their woes, Rivian anticipates a more significant drop in deliveries for 2025 than previously projected. The company now forecasts deliveries of between 40,000 and 46,000 units, a downward revision from their earlier estimate of 46,000 to 51,000 vehicles.
Meanwhile, Lucid’s interim CEO, Marc Winterhoff, has revealed that the luxury EV maker is bracing for an overall cost increase of 8% to 15% as a direct consequence of the tariffs. This calculation does not even account for any potential cost-saving measures the company might implement.
Despite these financial pressures, Lucid is maintaining its production target of 20,000 units for the current year. Winterhoff described this target as already conservative, considering the impending launch of their new SUV, the Gravity.
The market responded with mixed reactions to these announcements. Rivian’s stock, known for its R1S SUVs and R1T pickups priced from around $70,000, experienced a decline of 1.4% in after-hours trading. Conversely, Lucid’s shares, associated with the Air sedans that also start at approximately $70,000, saw a modest increase of 1.3%.
The tariffs in question were initially introduced by the Trump administration, imposing a 25% levy on imported vehicles and auto parts. While the previous administration recently signed two orders aimed at alleviating the burden through a combination of credits and exemptions from other material-related levies, the overall impact continues to weigh heavily on the EV industry.
The prevailing uncertainty has prompted several automakers, including industry giant Tesla, to reassess their full-year targets. The landscape is rapidly evolving, demanding agility and adaptability from all players.
In a proactive move to address these challenges, Rivian announced a $120 million investment to relocate its key parts suppliers closer to its manufacturing facility in Illinois. This strategic decision is intended to streamline operations and prepare for the production of its smaller, more affordable R2 SUVs, slated for launch next year.
Lucid, too, is planning to introduce a midsize vehicle with a target price of approximately $50,000 next year. However, Winterhoff indicated that Lucid is contemplating initiating production of this vehicle in Saudi Arabia, a major market and investor in the company, rather than in the U.S., primarily due to the tariff-related cost disadvantages. While this plan remains under consideration, it underscores the significant influence of tariffs on strategic decision-making.
The successful launch of more accessible and affordable EV models is widely regarded as a crucial step for both Rivian and Lucid. By expanding their product offerings to cater to a broader customer base, they aim to stimulate demand and solidify their positions in the competitive EV market.
Despite the challenges, both Rivian and Lucid reported smaller-than-expected losses per share in the first quarter, a testament to their efforts to aggressively cut costs. This financial discipline provides a foundation for navigating the current headwinds.
Rivian, further bolstered by a $5.8 billion software joint venture with Volkswagen, reported a gross profit of $206 million and reaffirmed its commitment to achieving a modest gross profit for the year. This strategic partnership provides Rivian with a valuable source of capital and technological expertise.
However, the company has increased its forecast for capital expenditures for the year to between $1.8 billion and $1.9 billion, up from the earlier projection of $1.6 billion to $1.7 billion. This increase is primarily attributed to the impact of tariffs on plant expansion costs. The tariffs are not only affecting the cost of materials but also hindering the pace of infrastructure development.
In conclusion, Rivian and Lucid are navigating a complex environment characterized by tariff-induced cost pressures, slowing EV sales, and heightened consumer price sensitivity. While both companies are actively implementing strategies to mitigate these challenges, including supply chain adjustments, cost-cutting measures, and strategic investments, the road ahead remains uncertain. The success of their future vehicle launches, particularly in the more affordable segments, will be critical in determining their long-term viability and market position. The decisions of where to manufacture vehicles is also key to their long term success.
