{"id":31207,"date":"2022-09-11T09:03:42","date_gmt":"2022-09-11T13:03:42","guid":{"rendered":"https:\/\/autosector.com\/?p=31207"},"modified":"2022-09-11T09:03:42","modified_gmt":"2022-09-11T13:03:42","slug":"rivian-mercedes-van-partnership-analysis","status":"publish","type":"post","link":"http:\/\/autosector.com\/?p=31207","title":{"rendered":"How Rivian got a $3 billion boost from making\u00a0Mercedes a frenemy | Autoblog"},"content":{"rendered":"

Rivian<\/a> just added almost $3 billion to its market capitalization in a day, and all it took was a fairly bare-bones deal with a new frenemy.<\/p>\n

The upstart and Mercedes-Benz<\/a> will join forces to build big electric vans in Europe \u201cin a few years,\u201d\u00a0the two revealed\u00a0Thursday<\/a>, sending Rivian shares soaring 11%, their biggest jump in four months. Thin as the announcement was on detail, it sent an obvious signal.\u00a0Yes, this young plug-in pickup maker\u00a0is having trouble ramping up production, but one of the most storied manufacturers in the world still sees real potential.<\/p>\n

A friendship with a competitor is\u00a0nothing new for Rivian. One of the reasons investors were so high on the company when it was preparing to go public a year ago was the way General Motors<\/a> and Ford<\/a> raced one another to strike a strategic partnership with the up-and-comer around the time it was in the process of securing major backing from Amazon. One of Ford\u2019s senior-most executives at the time later bragged about \u201cstealing\u201d a promising investment from its Detroit-based nemesis at the 11th hour.<\/p>\n

There\u2019s another \u201cblast from the past\u201d element to this from Mercedes<\/a>\u2019s perspective, as Baird analyst Ben Kallo put it in a note to clients Friday. Daimler<\/a> played a critical role in helping Tesla<\/a> get off the ground by\u00a0acquiring a stake during the great financial crisis and buying drivetrains\u00a0from the company to power\u00a0Mercedes hatchbacks. Elon Musk<\/a> has\u00a0described that deal as fundamental to Tesla surviving\u00a0its early struggles.<\/p>\n

There\u2019s a lot left to unpack about this new\u00a0tie-up \u2014 how and why it came together, what it means and who wins and loses. Here are a few thoughts and questions to ponder:<\/p>\n

Conserving cash<\/strong><\/h3>\n

In the months before and after its blockbuster initial public offering in November, Rivian was furiously hiring and building out its sales and service operations to support its growth ambitions. Those have been held up by\u00a0the company\u2019s plant in Normal, Illinois, which isn\u2019t assembling nearly as many R1T<\/a> trucks, R1S<\/a> SUVs and Amazon delivery vehicles as hoped. Supply chain woes are plaguing all of the auto industry but hitting inexperienced companies particularly hard.<\/p>\n

While Rivian still had $15.5 billion in the bank at the end of June, management has made several moves lately to be more capital-efficient amid rising costs and concern about a global downturn. The joint venture with Mercedes will be a cheaper way to enter the European market and\u00a0boost the company\u2019s credibility with suppliers and prospective customers that might otherwise have been skittish.<\/p>\n

A lot of Rivian\u2019s cash is also already earmarked for other expensive projects. It has yet to break ground on a $5 billion factory near Atlanta, and executives have said the amount the company has on hand offers just enough runway to get to the start of production of the mid-price car to be built at that plant by 2025.<\/p>\n

Burden-sharing\u00a0with Mercedes\u00a0may also reflect how difficult it\u2019s become for\u00a0companies in the EV sector to raise capital, D.A. Davidson\u00a0analyst Michael Shlisky wrote in an email. In a July memo to staff about cutting 6% of Rivian\u2019s workforce, CEO RJ Scaringe noted that global capital markets were tightening.\u00a0\u201cWe need to be able to continue to grow and scale without additional financing in this macro environment,\u201d he wrote.<\/p>\n

Ford ties<\/strong><\/h3>\n

After Ford worked\u00a0so hard years ago to beat GM<\/a> to the punch in linking up with Rivian, their relationship has taken many curious twists and turns.<\/p>\n

First, Joe Hinrichs, the former\u00a0Ford president who played a leading role in brokering the partnership,\u00a0abruptly retired\u00a0and left\u00a0Rivian\u2019s board. Soon thereafter,\u00a0the companies\u00a0called off plans that had been announced three months earlier to jointly develop Lincoln<\/a>\u2019s first fully electric model. Alexandra\u00a0Ford\u00a0English, the great-great granddaughter of founder\u00a0Henry\u00a0Ford<\/a>, replaced Hinrichs as a Rivian director, but didn\u2019t stay on for long. Yet another replacement stepped down leading up to Rivian\u2019s IPO, leaving Ford without a board seat.<\/p>\n

Ford and Rivian have been relatively mum about their future together. Now the former, which still owns a 9.6% stake in the latter, may end up with more formidable competition in the commercial vehicle<\/a> business that is a huge point of pride and emphasis for Ford CEO Jim Farley. The automaker announced plans just this week to start selling the electric version of its best-selling European delivery van, the E-Transit Custom, roughly a year from now.<\/p>\n

Upside for Amazon<\/strong><\/h3>\n

What Rivian, Mercedes and Ford all have in common is Amazon.<\/p>\n

The e-commerce giant has a contract with Rivian for 100,000 electric vans due to be delivered\u00a0by the end of the decade. It also buys vans from Ford, Mercedes and others. Given the size of Amazon\u2019s global fleet and its ambitious sustainability targets, it has to look beyond just Rivian for electric last-mile delivery options.<\/p>\n

Amazon\u00a0has exclusive rights to Rivian\u2019s delivery vehicles for four years after receiving its first one, as well as the right of first\u00a0refusal\u00a0to buy its vans for two years after that. It\u2019s surely hoping the Rivian-Mercedes deal will mean more electric van availability, and ideally at lower costs.<\/p>\n

Carry on<\/strong><\/h3>\n

Rivian seeking to establish production in Europe is not a surprise: Executives have had their eye on the market for some time.<\/p>\n

The company scouted locations for a potential factory in locations including the UK, Germany and Hungary, people familiar with the matter\u00a0told Bloomberg\u00a0in February last year. Rivian opting\u00a0to set up shop with Mercedes somewhere in central or eastern Europe will be a letdown to those who courted the company.<\/p>\n

In one indication of just how eager leaders were to land the investment,\u00a0then-Prime Minister Boris Johnson tried to woo\u00a0Scaringe himself, Sky<\/a> News reported late last year.<\/p>\n","protected":false},"excerpt":{"rendered":"

Rivian just added almost $3 billion to its market capitalization in a day, and all it took was a fairly bare-bones deal with a new frenemy. The upstart and Mercedes-Benz will join forces to build big electric vans in Europe \u201cin a few years,\u201d\u00a0the two revealed\u00a0Thursday, sending Rivian shares soaring 11%, their biggest jump in […]<\/p>\n","protected":false},"author":1,"featured_media":31208,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[2],"tags":[],"class_list":["post-31207","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-industry"],"_links":{"self":[{"href":"http:\/\/autosector.com\/index.php?rest_route=\/wp\/v2\/posts\/31207","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/autosector.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/autosector.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/autosector.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/autosector.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=31207"}],"version-history":[{"count":0,"href":"http:\/\/autosector.com\/index.php?rest_route=\/wp\/v2\/posts\/31207\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/autosector.com\/index.php?rest_route=\/wp\/v2\/media\/31208"}],"wp:attachment":[{"href":"http:\/\/autosector.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=31207"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/autosector.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=31207"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/autosector.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=31207"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}