Rivian Automotive (NASDAQ:RIVN)
Rivian Automotive (NASDAQ:RIVN) stock fell this morning after the EV manufacturer backed out of a possible deal with the world’s most famous luxury car brand just three months after saying they would. Within minutes of the markets opening on Monday, Rivian stock fell 5.2%.
But as of 11 a.m. ET, the EV stock had recovered some of its losses, trading down by just 2.6% as investors sought to make sense of Rivian’s decision to cancel the transaction.
What’s the Reason?
At the beginning of September, Rivian and Mercedes-Benz announced a partnership to produce reasonably priced commercial electric vehicles. The partnership would first focus on producing two huge vans. They planned to use an existing Mercedes-Benz European plant to construct a new all-electric manufacturing facility to make the two vans over the next three years.
The news caused a surge in Rivian stock, as investors saw the partnership with a worldwide luxury manufacturer as a validation of the company’s work in the EV market.
Investors may have missed that Rivian and Mercedes-Benz simply signed a memorandum of understanding (MoU), a nonbinding agreement, and that final, binding agreements were still needed before the joint venture could be formed.
Legally enforceable agreements will never be made public. Rivian said this morning that it would not pursue the MoU with Mercedes-Benz and would concentrate on its current consumer and commercial activities.
What’s Next?
The cancellation of the agreement with Mercedes-Benz may seem to be a devastating setback for Rivian at first glance.
Admittedly, Rivian may have benefited from a joint venture with such a reputable brand in terms of client acquisition and progress in the promising commercial EV market. However, to get there, Rivian will need the financial means to engage in a new joint venture and the time and attention to devote to it.
That’s a really high bar to set.
R1T pickup trucks and R1S sport utility vehicles (SUVs) are Rivian’s current consumer offerings. At the same time, EDVs (electric delivery vans) are the company’s current business offerings. Rivian has a full order book, with over 114,000 preorders across its two R1 models as of November 7 and 100,000 orders for EDVs from e-commerce giant Amazon. Still, it needs help producing at scale.
Only around 25,000 electric vehicles are anticipated to be manufactured by the company this year. Meanwhile, Rivian is rapidly depleting its financial reserves and has delayed the release of its new R2 platform until 2026, from its original target date of 2025.
In light of this situation, prioritizing delivery to meet its current backlog seems like a more financially responsible course of action than investing money elsewhere.
Featured Image – Pexels © Mike B
Author Shariq Khan 
