Rivian ($RIVN) is in talks with its largest shareholder and business partner, Amazon ($AMZN), to end a significant portion of its 2019 Electric Delivery Van (EDV) deal.
Amazon initially invested $700 million in Rivian in 2019, launching its first electric delivery van later that year, built and designed by the young electric vehicle maker.
In September 2019, Amazon pledged to purchase more than 100,000 Rivian Electric Delivery Vans (EDVs), which are expected to be deployed by the end of the decade as part of Amazon’s co-founded environmental commitment, The Climate. Pledge, to achieve net zero carbon by 2040.
The first Rivian and Amazon EDVs began making deliveries across Los Angeles in February 2021, reiterating plans to expand service to new cities. Last year, the service expanded to more than 100 U.S. cities, with 1,000 Rivian electric vehicles launched during the 2022 holiday season.
Executives from both companies have welcomed the relationship, with the financial backing giving Rivian a lifeline as it ramps up production of electric vehicles. It also helps Amazon meet its climate goals.
However, a new report from The Wall Street Journal On Monday, Rivian is in talks with Amazon to end the exclusive portion of the original contract.
Rivian and Amazon discuss EDV contract options
According to sources familiar with the matter, speaking to WSJthe contract talks come after Amazon informed Rivian that it wanted to buy 10,000 VDEs in 2023, the lower end of the e-commerce giant’s previous forecast.
For this reason, Rivian is looking to remove the exclusive part of the contract, which would open up the possibility of signing new business customers.
A Rivian spokesperson said the relationship with Amazon “has always been positive,” adding:
We continue to work closely together and navigate a changing economic climate, like many businesses.
The “changing economic climate” that Rivian refers to is rising interest rates and slowing demand across the economy after several years of explosive growth.
Both Rivian and Amazon have cost-cutting plans in place to reduce expenses and increase profitability.
Amazon is laying off more than 18,000 workers, while Rivian said it was also laying off 6% of its workforce as it worked to cut spending in February.
Electrek’s Grasp
Although the end of the exclusivity clause in the Amazon EDV contract would open up the possibility for Rivian to seek other business customers, it could be detrimental to the EV startup in the future.
Amazon’s support was a lifeline for Rivian as it ramped up production. Many investors ignored electric vehicle makers on $1 billion losses ($1.7 billion in the fourth quarter) saying Rivian had the backing of Amazon and Ford.
Well, Ford reduced its stake last month to just 1.15% ownership, and Amazon, with 17% ownership, is apparently trending in the same direction.
With losses mounting on every vehicle produced and major shareholders fleeing, this could be a long way for Rivian to go. While the Rivian R1T and R1S are fantastic vehicles, if the company can’t make a profit on them, investors will look the other way. Especially with many looking to reduce risk in this economy.
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