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 “in a few years,” the two revealed Thursday, sending Rivian shares soaring 11%, their biggest jump in four months. Thin as the announcement was on detail, it sent an obvious signal. Yes, this young plug-in pickup maker is having trouble ramping up production, but one of the most storied manufacturers in the world still sees real potential.

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 General Motors and Ford 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’s senior-most executives at the time later bragged about “stealing” a promising investment from its Detroit-based nemesis at the 11th hour.

There’s another “blast from the past” element to this from Mercedes’s perspective, as Baird analyst Ben Kallo put it in a note to clients Friday. 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.

There’s a lot left to unpack about this new tie-up — how and why it came together, what it means and who wins and loses. Here are a few thoughts and questions to ponder:

Conserving cash

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 the company’s plant in Normal, Illinois, which isn’t assembling nearly as many R1T trucks, R1S SUVs and Amazon delivery vehicles as hoped. Supply chain woes are plaguing all of the auto industry but hitting inexperienced companies particularly hard.

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 boost the company’s credibility with suppliers and prospective customers that might otherwise have been skittish.

A lot of 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.

Burden-sharing with Mercedes may also reflect how difficult it’s become for companies in the EV sector to raise capital, D.A. Davidson analyst Michael Shlisky wrote in an email. In a July memo to staff about cutting 6% of Rivian’s workforce, CEO RJ 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.

Ford ties

After Ford worked so hard years ago to beat GM to the punch in linking up with Rivian, their relationship has taken many curious twists and turns.

First, Joe Hinrichs, the former Ford president who played a leading role in brokering the partnership, abruptly retired and left Rivian’s board. Soon thereafter, the companies called off plans that had been announced three months earlier to jointly develop Lincoln’s first fully electric model. Alexandra Ford English, the great-great granddaughter of founder Henry Ford, replaced Hinrichs as a Rivian director, but didn’t stay on for long. Yet another replacement stepped down leading up to Rivian’s IPO, leaving Ford without a board seat.

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 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.

Upside for Amazon

What Rivian, Mercedes and Ford all have in common is Amazon.

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. 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.

Amazon has exclusive rights to Rivian’s delivery vehicles for four years after receiving its first one, as well as the right of first refusal to buy its vans for two years after that. It’s surely hoping the Rivian-Mercedes deal will mean more electric van availability, and ideally at lower costs.

Carry on

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

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

In one indication of just how eager leaders were to land the investment, then-Prime Minister Boris Johnson tried to woo Scaringe himself, Sky News reported late last year.


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