How Rivian benefits from Mercedes electric van partnership

Rivian recently announced a partnership with Mercedes-Benz Group, which is big news for the automaker and is going to increase its credibility, and visibility, giving it additional advantages and major headway into new markets and vehicle categories. In today’s post, we are going to see how this new partnership will benefit rivian.

For starters, Rivian’s stock price jumped 11 percent and added $3 billion to its market capitalization in a day, as the two signed a Memorandum of Understanding for a strategic partnership and joint production of electric vans. The planned joint venture seeks to develop and produce large electric vans for Rivian and Mercedes-Benz.

Under the terms of the deal, a new electric-only manufacturing facility will be built using an existing Mercedes-Benz site in Central or Eastern Europe. The financial terms of the partnership have not been disclosed.

First, to understand how big of a deal this partnership is. In the US, pickup trucks are the most sought-after vehicle. The Ford F-150, for example, is the highest sold vehicle in the united states. So any good truck maker is in for big business in the united states. 

The same is true for Europe but with vans. Vans have versatile use in Europe and are particularly sought after as delivery vehicles since they can be used as lockable storage and can be made to custom sizes.

The startup electric pickup, SUV, and van automaker and Mercedes-Benz will join forces to build big electric vans in Europe “in a few years,” 

It’s fantastic and jaw-dropping news because even though Rivian is having trouble ramping up production right now, but one of the world’s biggest and most reputable automakers has seemed to see its potential in the future of electric transport and hauling.

A friendship with a competitor is nothing 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 GM and Ford raced one another to strike a strategic partnership with Rivian.

Rivian announced a strategic partnership with Ford Motor Company a couple of years ago to create a platform for the two companies to collaborate on electric vehicle development and production. 

Under the partnership, Ford was to provide capital and expertise to help Rivian grow its R&D operations and manufacturing facility. In addition, Ford was to have access to services such as procurement, engineering, marketing, and distribution services.

Ford saw it as an opportunity to break into the EV sector and consequently sell more electric vehicles, especially if they could tap into Rivian’s production line. The partnership also had the potential to revolutionize the automotive industry. If this is successful, it could lead to more interest in electric vehicles in general, which would benefit not only these two companies but all others that adopt this technology as well.

Ford lost a lot of money on Rivian. According to the company’s 10-K, Ford saw a loss of $1.9 billion in 2017 from investing in Rivian and its previous partnership with Mitsubishi. Rivian, on the other hand, had a loss of $928 million for the same period.

Ford and Rivian no longer plan to work jointly on electric vehicles. Now, the two companies are going to work independently of each other. The news was a blow for the automaker, and we couldn’t tell what it meant for Rivian’s future of its electric vehicle program. Perhaps it meant that Rivian would need to get other partners in order to stay competitive. 

Maybe its partnership with Mercedes is it.

Rivian has also had a partnership with Amazon, which is still standing, with the latter giving an order of 100000 electric delivery vans to be manufactured by rivian. 

This partnership looks to have a lot of opportunities and advantages for rivian. Let’s take a look.

An easy European manufacturing plant

News headlines in the past couple of years have shown Rivian’s interest in opening a European manufacturing plant to supply the European market. Executives have had their eye on the market for some time. That dream looks to be a step closer and more to that sponsored by Mercedes Benz.

Rivian scouted locations for a potential factory in locations including the UK, Germany, and Hungary, as a slew of reports came in around February last year. Though no major headway has been announced for that project until now, there have been few breakthroughs in locating a manufacturing plant in Europe. For example, In one indication of just how eager leaders were to land the investment, then-Prime Minister Boris Johnson tried to woo Rivian CEO RJ Scaringe himself late last year. Surely, Rivian opting to set up shop with Mercedes somewhere in central or eastern Europe will be a letdown to those who courted the company.

This new manufacturing location, provisioned in the new deal, will locate a new electric-only manufacturing facility to be built using an existing Mercedes-Benz site in Central or Eastern Europe. Financial terms of the partnership have not been disclosed, but we think that might be on Mercedes Benz’s dime. 

Mercedes Benz’s dime

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 activities have been trimmed down drastically, and even some non-vital employees let go after the automaker saw the trying times ahead and decided to become more prudent with spending. 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. To make matters worse, the startup manufacturer is not assembling nearly as many R1T trucks, R1S SUVs, and Amazon delivery vehicles as hoped due to supply constraints. 

The joint venture with Mercedes will be cheaper to enter the European market and boost the company’s credibility with suppliers and prospective customers that might otherwise have been skittish.

Rivian’s 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.

Rivian hopes this partnership with Mercedes Benz will help it get into the European market sponsored by Mercedes. For states, and as we mentioned earlier, Mercedes has already offered an old manufacturing plant that will be rehabilitated and retrofitted to suit the production of electric vehicles. 

Also, considering how difficult it is to ramp up production for a new vehicle, Burden-sharing with Mercedes may be the ideal way for rivian to enter into the European market. 

Moreover, Rivian could leverage Mercedes’s known working strategies to raise capital and other relationships to further its agenda in Europe, as Scaringe said when he laid off 6 percent of Rivian’s workforce. Scaringe noted that global capital markets were tightening. “We need to be able to continue to grow and scale without additional financing in this macro environment,” he wrote.

Guaranteed business

Amazon’s lofty and ambitious sustainability goals make it insatiable when it comes to the demand for electric delivery vans. Given the size of Amazon’s global fleet and its ambitious sustainability targets, it has to look beyond just Rivian for electric last-mile delivery options to make it attainable. The eCommerce giant has already made an exclusive deal with rivian to get the first 100000 delivery vehicles from the companies manufacturing plants. These cars are just for the united states. 

The e-commerce giant has a contract with Rivian for 100,000 electric vans due to be delivered by the end of the decade. It also buys vans from Ford, Mercedes, and others. 

Amazon has an electric delivery fleet. Yes, the online retail behemoth has been testing its own fleet of electric delivery vehicles for over a year now. The company even created a documentary about its experiences with the first-of-its-kind DMT vans at its fulfillment centers in Nevada and Arizona. Called “The Last Mile,” the video highlights what happens when you have to cover the final miles between warehouses and customers’ homes before deliveries can commence.

But Amazon doesn’t just have vans; it also has an electric trucking operation as well. According to a recent report by Green Car Reports, Amazon operates two types of trucks: big rigs and smaller Class 8 trucks. These range from tractors that transport trailers up to semis with sleeper compartments for housing inventory or other cargo. This is how Amazon tackles its last mile challenges: With electrified trucks! As of this writing, Amazon is still in the test phase, but we are expecting significant growth soon enough as they are expected to start commercial operations on most of their fulfillment centers.

Though the company is still testing different models of delivery vans and all-electric trucks, Amazon does have some fascinating data, such as the fact that the average daily distance traveled by these vehicles is just over 100 miles. This means that most of these deliveries travel less than 10 miles at a time.

Amazon has not yet disclosed how many electric vans it plans to put into its fleet, but CEO Jeff Bezos said he expects “thousands” to be in use. But who will develop and produce these vehicles?

Amazon has been on a mission to transform its logistics operations with electric vans that can cover the final miles between warehouses and customers’ homes before deliveries can commence. The company made an agreement with Stellantis to buy three of its electric Ram ProMaster delivery vans for the Amazon fleet in 2023.

In addition, Amazon has exclusive rights to Rivian’s delivery vehicles for four years after receiving its first one and the right of first refusal to buy its vans for two years after that. Surely this is just for North America. However, Amazon’s sustainability goals are a global project, meaning they would have to get electric vans to replace their existing gasoline delivery vans wherever they operate. 

Rivian’s deal with Mercedes will make it a unique and desirable place to fulfill this order in Europe. So there are electric vans to be made.

This strategy seems to be one that Rivian has taken off of Tesla’s playbook.

Daimler played a critical role in helping Tesla get off the ground by acquiring a stake during the great financial crisis and buying drivetrains from the company to power Mercedes hatchbacks. Elon Musk has described that deal as fundamental to Tesla surviving its early struggles.

Daimler AG acquired an equity stake of nearly 10 percent of Tesla Motors Inc. in April of 2010. This investment deepened the relationship between the inventor of the automobile and the newest member of the global auto industry at that time, which was Tesla. Tesla Was the only production automaker selling a highway-capable electric vehicle in North America and Europe.

The two companies had been working closely to integrate Tesla’s lithium-ion battery packs and charging electronics into the first 1,000 units of Daimler’s electric smart car. The investment enabled the partners to collaborate even more closely on developing battery systems, electric drive systems, and individual vehicle projects to benefit from each other’s know-how.

This partnership has more in store for Rivian than we can imagine right now. We will be watching this space to bring you the latest updates on the matter.

Hanson F.
Hanson is a lover of electric cars especially Rivian. He is a contributor for The Volter as well as other news hubs

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