Rivian Stock Falls After The Company Pauses Its Tie-Up With Mercedes-Benz To Produce Electric Vans

Rivian Stock

Just three months after it was launched, Rivian Automotive (Rivian stock) has decided to stop its joint venture with Mercedes-Benz Group to construct commercial vans in Europe. It’s possible that the manufacturer of electric vehicles, whose stock has plummeted this year, will take another look at how it’s spending its cash.

Rivian (NASDAQ:RIVN) and Mercedes-Benz (MBG.Germany) agreed in September to form a joint venture in which they will develop substantial electric vans for both the American manufacturer of electric vehicles and the German multinational automotive corporation. It constituted an effort to scale production by utilizing pooled investments and expenditures as leverage. The companies announced on Monday that the transaction had been put on hold for the time being.

The commercial van that Rivian is currently selling to Amazon.com was not going to be similar to the vehicle that was going to be developed (AMZN).

The Chief Executive Officer of Rivian, R.J. Scaringe, stated in a statement that the company has “chosen to stop conversations with Mercedes-Benz Vans.” “When we are looking at potential expansion prospects, one of our primary goals is to get the highest possible risk-adjusted returns on our capital investments. At this point in time, we think that focusing on both our existing commercial business as well as our consumer company represents the most appealing prospects to maximize value for Rivian in the short term.

The balance sheet for Rivian is not capable of handling everything. At the close of the third quarter, Rivian’s cash on hand amounted to around $14 billion. During the first three quarters of this year, the corporation burned through about $5 billion in cash reserves. Another cash outflow of $2.1 billion is anticipated for the fourth quarter, followed by cash outflows of $6.1 billion in 2023 and $4.1 billion in 2024, respectively, according to projections made by Wall Street. Starting from scratch with a car business is an expensive endeavor.

The cooperation with Mercedes remains a possibility that could prove fruitful in the future. It is possible that it will assist Rivian in breaking into the lucrative European market for electric commercial cars. According to the projections of Dan Ives, an analyst at Wedbush, by the middle of the next decade, revenues in this industry should reach approximately $20 billion annually.

Rivian Stock Price Decline

On Monday, neither company’s stock is benefiting from the suspension in trading. Rivian stock saw a loss of 3.4% during the premarket trading session and was down 73% in 2022 prior to the start of trading on Monday. Mercedes-Benz was down less than 1% in Frankfurt trading.

Neither business has dismissed the possibility of working together in the future. Rivian has stated that it is looking forward to discussing potential with Mercedes-Benz “at a more appropriate time” for the company. On the other hand, the German manufacturer has stated that there is still the possibility of strategic opportunities in the future.

While the schedule for our common European production joint venture has been put on hold for the time being, the rate at which we are moving forward with our electrification strategy at Mercedes-Benz Vans has not changed, according to Mathias Geisen, the head of Mercedes-Benz Vans. The expansion plan for our new electric vehicle manufacturing site in Jawor, Poland, has not been altered in any way.

 

Featured Image: Megapixl @ Michaelvi

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About the author: Valerie Ablang is a freelance writer with a background in scientific research and an interest in stock market analysis. She previously worked as an article writer for various industrial niches. Aside from being a writer, she is also a professional chemist, wife, and mother to her son. She loves to spend her free time watching movies and learning creative design.