The automotive industry faces two puzzles that at least for now seem unsolvable.
One is the supply-chain disruption caused by the covid-19 pandemic. Lockdowns and other restrictions forced and still are forcing vehicle manufacturers to temporarily close factories.
The other is soaring raw-materials prices, prompted by Russia's February 2022 invasion of Ukraine. The prices of nickel, cobalt and other raw materials used in electric vehicles have jumped. Both countries are key suppliers of strategic metals.
All this has substantially increased the costs for car manufacturers. The cost of battery development has more than doubled since the coronavirus pandemic, AlixPartners has calculated.
The costs of raw materials (cobalt, nickel, lithium) for an individual EV have on average increased by almost 144% in two years to $8,255 as of last May, according to the research firm. As of March 2020, these costs amounted to $3,381.
The overall cost of developing the average electric vehicle has increased by about $2,000 over the past two years, the research firm added.
Rivian and Mercedes Join to Produce Electric Vans
For startups trying to disrupt the automotive sector, these issues have sharply hobbled their efforts. Rivian (RIVN) is one of them, but the Irvine, Calif., company seems to have found a solution to share and limit these costs.
Rivian has just agreed to a strategic partnership with Mercedes-Benz (DDAIF) to produce electric vans together in Europe. "The partnership will enable the companies to cooperate on the production of electric vans," the vehicle makers said in a joint statement.
Terms of the memorandum of understanding say the two firms will invest in and operate a Mercedes-Benz factory in Eastern or Central Europe. This factory will produce vans for both companies, starting "in a few years."
"The target is to build an all-new electric-only production facility leveraging an existing Mercedes-Benz site in Central/Eastern Europe," the two companies said.
They plan to produce two large vans, one based on Mercedes engineering and the other based on the second-generation electric van at Rivian, the Light Van.
The Prospect of a Mercedes-Rivian Car
Rivian for several months has been producing an electric delivery van, and the biggest customer for the vehicle is Amazon (AMZN). The tech and e-commerce giant, which is also the largest shareholder in Rivian with a 17.43% stake as of June 29, has ordered 100,000 vans from the young EV manufacturer.
If for many people Mercedes-Benz is a brand associated with luxury sedans and SUVs/crossovers, the German car manufacturer has also been producing vans for decades.
The company currently offers four battery-electric vans: the eVito Panel Van, the eSprinter, the eVito Tourer and the EQV. The company sold 334,000 vans in 2021, including more than 9,000 electric units.
"We are sharing investments and technology [with Rivian] because we also share the same strategic ambition: accelerating the electrification of the van market with sustainable and superior products for our customers," Mathias Geisen, head of Mercedes-Benz Vans, said in a statement.
The two companies have not said whether their joint venture will be owned equally. But Rivian and Mercedes-Benz promise to jointly explore ways to cut costs.
"Further options for increased synergies from the joint venture will also be explored," the two companies said.
In addition to electric vans, which are mainly commercial vehicles, the two carmakers also manufacture electric vehicles intended for passengers. There's no reason, then, that they couldn't extend their partnership to this segment, which is currently dominated by Tesla (TSLA).
Rivian is currently having difficulty managing increases in production rates.
