Rivian (RIVN), Mercedes to Produce Electric Vans in Europe
Rivian Automotive RIVN recently announced a joint venture with Mercedes-Benz Group AG MBGAF to manufacture large commercial electric vans. The joint venture (JV) would cater to the increasing demand for cleaner and sustainable commercial vehicles.
Per the memorandum of understanding, the companies will invest in the vehicles that will be sold under the Mercedes-Benz and Rivian brands. The jointly-formed new company intends to set up a factory in central or eastern Europe at an existing Mercedes-Benz site within a few years. The factory has a target to manufacture vehicles based on the current electric vans both companies produce.
There will be two van models. One will be built on Mercedes’ Vans Electric Architecture (VAN.EA) platform and the other on Rivian’s second-generation electric van platform, the Rivian Light Van (RLV). The companies have not yet shared details and the timeline of the venture.
Both companies are driven by their vision of electrifying the van market. Mercedes-Benz is a resource-rich company with a long-standing reputation for more than two decades of building commercial vans. The partnership will benefit a young automaker like Rivian by providing leverage to Mercedes’ resilient supply chains. Through this, Rivian’s electric platform expertise will also be enhanced. The company currently has only one manufacturing facility in the United States. The new announcement marks its entry into the new market of Europe.
The announcement follows the earlier one by Rivian in July. RIVN stated that it would supply electric delivery vans to Amazon.com AMZN for delivering its packages and supplies. Rivian EVs have hit the road in Baltimore, Chicago, Dallas, Kansas City, Nashville, Phoenix, San Diego, Seattle and St. Louis, among others. Amazon expects to have a massive number of Rivian vans in more than 100 cities by the end of this year and set a goal of having 100,000 across the United States by 2030. Since 2021, the two companies have been testing vehicles for delivery. After production suffered earlier this year due to supply-chain disruptions, Rivian has been scaling up efforts.
Although Rivian has a long way to go in the electrification space, the production of R1T pickups and R1S SUVs at its Illinois plant has improved this year. It has provided guidance of 25,000 vehicles for 2022. In December 2021, RIVN came out with plans to build a second plant in Georgia to ramp up production. With an investment of $5 billion, the facility is expected to have a capacity of 400,000 vehicles annually and commence in 2024.
Rivian expects to gain from the recently-enacted Inflation Reduction Act, which offers incentives for buying electric vehicles, thereby likely increasing sales.
The new company, with shared capital, is likely to spur Rivian’s growth and enable it to thrive in the highly-competitive EV market with its limited resources. It will be a step closer to bolstering its electrification efforts and pushing it closer to long-standing players.
Shares of RIVN have lost 62.7% over the past year against its industry’s 3.3% rise.
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Zacks Rank & Key Pick
RIVN carries a Zacks Rank #3 (Hold), currently.
A better-ranked player in the auto space is Tesla Inc. TSLA carrying a Zacks Rank #2 (Buy), currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Tesla has an expected earnings growth rate of 76.5% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised 1% upward in the past 30 days.
Tesla’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters. TSLA pulled off a trailing four-quarter earnings surprise of 32.17%, on average. The stock has increased 21% in the past year.
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