Rivian stock drops after pausing Mercedes electric van deal
EV-maker Rivian (RIVN) announced today it was pausing plans to co-develop an electric van with Mercedes-Benz (MBG.DE) and would no longer pursue a memorandum of understanding the two companies signed in September of this year.
“Our decision to pause this partnership with Mercedes-Benz is based upon our focus on prioritizing investments with the highest returns. We have a range of opportunities to invest our capital and are constantly evaluating and refining our analysis of these projects," Rivian CFO Claire McDonough said in a statement to Yahoo Finance. “The pausing of this partnership reflects our process of continually evaluating our major capital projects, while taking into consideration our current and anticipated economic conditions."
The Wall Street Journal first reported earlier today that Rivian executives were concerned about pursuing the joint venture to build vans with Mercedes at its plant in Poland, out of caution for overextending operations at a time of tight capital markets and rising global macro fears.
Mercedes says it will continue to build out its EV van operations with Rivian for the time being.
“While the timeline for our common European production joint venture is now on hold, the pace of our own electrification strategy at Mercedes-Benz Vans remains unchanged,” Mercedes-Benz head of vans Mathias Geisen said in a statement. “The ramp-up plan for our new EV manufacturing site in Jawor, Poland, is not affected. We will continue with full speed and determination to scale up electric vehicle production in our first dedicated electric van plant – designed for maximum flexibility and productivity.”
Though the deal is paused and effectively dead, both sides say they would like to explore strategic “opportunities” in the future.
For Rivian, the pause comes as it's in execution mode to deliver on its consumer business with the R1T and R1S adventure vehicles, and on the commercial side with its EDV van. Rivian has been under pressure to deliver 25,000 vehicles for the year, a target it had cut back in March due to parts shortage and factory ramp up.
In terms of its cash position, at the end of Q3, the company held $14 billion in cash and cash equivalents, after reporting a loss of $1.7 billion for the quarter. Rivian forecast it will lose $5.4 billion in 2022 on an adjusted EBITDA basis.
Of note is the Inflation Reduction Act’s incentives for clean commercial vehicles, that can extend from $7,500 for light and medium duty trucks to $40,000 for heavy duty trucks. Though the incentives don’t require assembly in North America, the vehicles must be homologated for the U.S. market, whereas Rivian’s deal with Mercedes would have been to supply the European market.
Editor's note: This story has been updated to include a comment from Rivian.
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Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.
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