Photo: Rivian/Mercedes-Benz/edited by autoevolution
When Rivian and Mercedes-Benz announced they would produce electric vans together in September, that looked like a pretty smart move. The startup would not invest in a new factory, the German carmaker would have a partner in one of its existing plants, and everybody would win. Three months later, Rivian decided to “pause” this joint venture – if that is even possible.
The American startup did not provide any explanation for suspending the deal. It just told Reuters that this was a good example of its “process of continually evaluating” its “major capital projects” after considering its “current and anticipated economic conditions.” As you certainly noticed, none of that explains why the company gave up on making its vans with Mercedes-Benz in Europe so soon after announcing it would.
The closest to an explanation was Rivian telling Reuters that it will focus on becoming “cash flow positive in its U.S. operations.” If that is true, it is a massive strategy shift from the startup, which has a lot of cash in the bank and strong investors such as Amazon, Cox Automotive, and Ford.
Until now, it seemed like Rivian was betting on a fast expansion not only in production, but also in its lineup. Tesla only made a profit after it started delivering the Model 3 for a simple reason: mass production depends on high volumes to pay off. To get there, Rivian would need its new Atlanta factory operating and selling vehicles based on the R2 platform, which is more affordable. The R1 EVs are expensive and have relatively low sales numbers.
Another critical revenue stream for Rivian comes from the EDV vans that Amazon ordered. If Rivian could also deliver them in Europe, it would speed up generating money on a global scale. With the Mercedes-Benz deal, Rivian would save investments in a European factory.
Had the joint venture not been a good deal, Rivian should not have announced it before making sure it was. If it were, Rivian “pausing” it suggests it was not able to pursue it, possibly failing with its share in the joint venture. This hypothesis also sounds weird for the startup: car companies do not change their minds that easily or quickly unless they did not adequately do their homework. The most recent example we can recall is GM backing out of making the Nikola Badger pickup truck and reducing its involvement with that startup. What made Rivian change its mind about this partnership with Mercedes-Benz? Good question.
The closest to an explanation was Rivian telling Reuters that it will focus on becoming “cash flow positive in its U.S. operations.” If that is true, it is a massive strategy shift from the startup, which has a lot of cash in the bank and strong investors such as Amazon, Cox Automotive, and Ford.
Until now, it seemed like Rivian was betting on a fast expansion not only in production, but also in its lineup. Tesla only made a profit after it started delivering the Model 3 for a simple reason: mass production depends on high volumes to pay off. To get there, Rivian would need its new Atlanta factory operating and selling vehicles based on the R2 platform, which is more affordable. The R1 EVs are expensive and have relatively low sales numbers.
Another critical revenue stream for Rivian comes from the EDV vans that Amazon ordered. If Rivian could also deliver them in Europe, it would speed up generating money on a global scale. With the Mercedes-Benz deal, Rivian would save investments in a European factory.
Had the joint venture not been a good deal, Rivian should not have announced it before making sure it was. If it were, Rivian “pausing” it suggests it was not able to pursue it, possibly failing with its share in the joint venture. This hypothesis also sounds weird for the startup: car companies do not change their minds that easily or quickly unless they did not adequately do their homework. The most recent example we can recall is GM backing out of making the Nikola Badger pickup truck and reducing its involvement with that startup. What made Rivian change its mind about this partnership with Mercedes-Benz? Good question.
Google News