Published - October 11, 2022 @ 2:57 PM (EET)

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Shares of Rivian (NASDAQ:RIVN) fell sharply Monday after the California-based company said it would recall nearly all of its vehicles.

According to a letter CEO RJ Scaringe sent customers late Friday, Rivian recalled about 13,000 of its electric vehicles after discovering that a fastener connecting the front upper control arm and steering knuckle may not have been "sufficiently torqued."

The recall includes all Rivian R1T pickups and R1S SUVs made through late September, as well as some of the EDV delivery vans the company produced for Amazon (NASDAQ:AMZN).

In rare instances, the company said, the fastener could come completely loose, which could result in losing steering control and potentially a crash.

"While we've only seen seven reports potentially related to this issue across our fleet to date, even one is too many," Scaringe wrote.

Shares of the electric vehicle maker closed 7.3% lower.

WHY IT MATTERS

So far, the company has delivered 13,198 vehicles since it started selling electric vehicles in the third quarter of last year.

While Rivian increased production steadily in the third quarter this year, with plans to reach 25,000 vehicles produced during 2022, the latest report has heightened investor fears that the company may not meet its target.

Though almost all automakers have recalls from time to time, Wedbush analyst Dan Ives weighed in on the matter, calling it a "black eye" for Rivian. Ives noted that while the recall was primarily related to a structural issue, it doesn't look good for a startup that was only beginning to ramp up production efforts.  

However, the Wedbush analyst maintained its Outperform rating and $45 price target and said the recall was just a "slight step back" for Rivian.

NOW WHAT

With $15.5 billion on hand as of the end of the second quarter, far more than most rival EV startups, the cost of the recall is unlikely to dent Rivian's substantial cash hoard.

Rivian's stock experienced a drastic selloff earlier this year, with the stock roughly 69% lower for 2022.

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