Rivian just added $3 billion to its market capitalization with a new deal with a frenemy. The Upstart and Mercedes-Benz join forces to build electric vans in Europe. The two revealed that they will be building big ones in a few years. With this deal, Rivian shared went soaring by 11%, thus staining their biggest jump in four months.
The announcement details have been a thing, but the signals they are sending are huge. Rivian being a young plug-in pickup maker, seems to have issues with ramping up its production. However, there is potential that is unutilized, that most storied manufacturers in the world see.
An alliance 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.
Overcoming crisis
Rivian is not the only company that has ever done this. 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.
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.
Evidently, 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. 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 which 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.
