Rivian Seeks To Loosen Its Ties To Amazon
In 2019, Amazon made a major investment in Rivian — $1.345 billion, to be precise. In 2021, the two companies entered into an agreement that gave Amazon exclusive rights to the battery-electric delivery van Rivian is building in addition to the R1T pickup truck and R1S SUV. But there were some interesting provisions in that agreement that are only now becoming relevant.
Amazon agreed to purchase up to 100,000 vans over the next 4 years, but promised only a minimum of 10,000 in any one year. If it failed to order that many, Rivian would be free to sell its electric delivery vehicles to other customers. The first of the Rivian-built vans were delivered to Amazon last summer and in November the company said it had over 1000 electric delivery vehicles in service in the US and together they had delivered over 5 million packages to customers.
Those of us who have been following Rivian closely know it is suffering many of the same hurdles Tesla did 5 years ago. Designing new vehicles is easy. Getting them into production before the money runs out is hard. Rivian has missed some important production goals. Partly that may be due to supply chain interruptions related to the global pandemic that are beyond Rivan’s control, but the reality is that its stock price has taken a big hit and Amazon reportedly lost nearly $4 billion last year on its investment in Rivian as a result.
Rivian said it would deliver 25,000 vehicles in 2022, but fell short by almost 5,000 units. Production hell is a real thing, and meanwhile the money keeps going out even if the money coming in falls short of expectations. Now, both the Wall Street Journal and CNBC are reporting that Rivian wants to renegotiate its commitment to sell its delivery vans exclusively to Amazon for 4 years. Amazon has ordered the bare minimum under the agreement — just over 10,000 — and Rivian needs cash to keep going. The market for electric delivery vans is hot and getting hotter with GM’s Brightdrop division getting rolling and Ford ramping up production of its E-Transit vans to meet orders from the US Postal Service and others.
There are a number of moving parts here. First, last last year, Rivian cancelled its agreement with Mercedes to jointly develop electric delivery vans for the European market. At that time, CEO RJ Scaringe said, “We’ve decided to pause discussions with Mercedes-Benz Vans regarding the memorandum of understanding we signed earlier this year for joint production of electric vans in Europe. As we evaluate growth opportunities, we pursue the best risk-adjusted returns on our capital investments.
“At this point in time, we believe focusing on our consumer business, as well as our existing commercial business, represent the most attractive near-term opportunities to maximize value for Rivian. We share the same goal as Mercedes-Benz Vans, to help the world transition to electric vehicles, and we look forward to exploring opportunities with them at a more appropriate time for Rivian.”
Another piece of the puzzle according to The Verge is that Amazon just reported its first net operating loss since 2014. It has announced plans to lay off 18,000 employees and has halted work on its second headquarters in Arlington, Virginia. Clearly it is less interested in spending on new delivery vans than it was previously as it tightens its corporate belt in response to fluctuating economic conditions. The recent collapse of the Silicon Valley Bank has a lot of people on edge and wondering if we are on the precipice of yet another global financial crisis like happened in 2008.
Officially, all is calm and bright at Rivian and Amazon. “While nothing has changed with our agreement with Rivian, we’ve always said that we want others to benefit from their technology in the long run because having more electric delivery vehicles on the road is good for our communities and our planet,” Amazon spokesperson Kate Scarpa says in a statement to The Verge.
Rivian spokesperson Marina Norville said, “the details regarding exclusivity in the 2021 article are inaccurate,” but declined to provide any further insight on what is incorrect. She added, “Our relationship with Amazon has always been a positive one. We continue to work closely together and are navigating a changing economic climate, similar to many companies. The relationship we have with Amazon is a very positive one.”
That’s some serious happy talk right there — corporate-speak at its finest. What the truth is remains hidden behind those happy corporate smiles. But we can surmise a couple of things based on a few other tidbits in the news this week. According to Autoevolution, Charles Sanderson, the engineer responsible for perfecting the electro-hydraulic roll control system used by Rivian (there is nothing new under the sun — Citroen pioneered a similar system in 1954), the system replaces the anti-roll bar commonly used by virtually every auto manufacturer to control how much a vehicle leans in hard cornering. It is one of the reason Rivians corner so well both on the road and in off-road environments.
Sanderson was deeply involved in creating the over-the-air update platform for Rivian and was also involved in the battery pack design which departed from the cell layout favored by Tesla. He has now left Rivian and returned to his former employer, McLaren, where he will be the chief technical officer for the celebrated British carmaker. In addition, Rivian also lost its chief regulatory counsel last week, causing Autoevolotion to wonder in print if these two moves by key personnel are a bad sign for Rivian. Is it bleeding talent as well as cash?
At CleanTechnica, we are strong advocates for all forms of electric transportation. The word we hear around the company sauna (heated by natural hot springs) is that the fortunate few who own a Rivian are pretty pleased with the product. There are lots of folks who might consider the R1S when it gets into full production. Perhaps we should say if it gets into full production.
This is a tough time to be building a new business and there are no guarantees that Rivian is going to emerge from production hell to become a successful EV manufacturer. If Rivian could sell some electric delivery vans to companies other than Amazon, that could bring some much needed cash in the door. That in turn could be the key to Rivian surviving today so it can thrive in the future.
I don’t like paywalls. You don’t like paywalls. Who likes paywalls? Here at CleanTechnica, we implemented a limited paywall for a while, but it always felt wrong — and it was always tough to decide what we should put behind there. In theory, your most exclusive and best content goes behind a paywall. But then fewer people read it! We just don’t like paywalls, and so we’ve decided to ditch ours.
Unfortunately, the media business is still a tough, cut-throat business with tiny margins. It’s a never-ending Olympic challenge to stay above water or even perhaps — gasp — grow. So …