Electric-vehicle startup Rivian Automotive and German automaker Mercedes-Benz have signed a memorandum of understanding to make large electric vans for each of its brands, according to a joint statement Thursday. RIVN stock jumped on the news.
The companies intend to open a new factory in Central/Eastern Europe, where Mercedes-Benz has an existing site. The joint venture would start production "in a few years," according to the statement.
"This is a major step toward the European strategy with a key partner such as Mercedes," Wedbush analyst Dan Ives told IBD. "Rivian has a unique window of opportunity to go after the European commercial opportunity into 2023 and beyond."
Mercedes already makes commercial vans. The plan is for the two companies to produce two large electric vans: one based on the electric-only platform of Mercedes‑Benz Vans and the other based on the second-generation electric-van Rivian Light Van (RLV) platform.
Rivian makes commercial vans for Amazon. The online retail giant rolled out its first Rivian-made electric vans on July 21. Amazon, which has an 18% stake in Rivian, has ordered 100,000 of its electric vans.
Meanwhile, CFRA Research analyst Garrett Nelson is cautiously optimistic about the deal's impact on Rivian's business in the long term.
"Rivian's MoU with Mercedes is a positive, although it does little to change the company's near-term prospects and cash burn rates, which are of greater concern to investors, particularly with a handful of upstart EV companies having either recently declared bankruptcy or warning of liquidity issues," he told IBD.
Rivian's Q2 sales were around $364 million. But it reported an adjusted net loss of $1.62 per share. It had about $15.46 billion in cash and cash equivalents, about $1.5 billion less than at the close Q1.
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Rivian Stock
Rivian shares rallied nearly 11% to 36.88 on the stock market today. RIVN stock is far from actionable, though, as its trading well below its IPO price of $78.
Rivian stock is trading above its slumping 50-day line, according to MarketSmith. But it's well below its relatively new 200-day moving average.
Shares have a weak RS Rating of 19 out of best possible 99.
Rivian Production
Rivian produced 4,401 vehicles in Q2, a 72% jump from the previous quarter. It delivered 4,467 vehicles, a 264% surge from Q1.
The company reiterated it's on track to meet its production goal of 25,000 EVs for 2022, but that's half its original estimate of 50,000.
Rivian says it doesn't expect to be profitable for the foreseeable future. The production ramp-up has been choppy, with the typical growing pains for a startup. Industrywide supply-chain issues have hit Rivian especially hard as it has not yet established strong relationships with suppliers.
"As supply headwinds continue to challenge Rivian's ability to put out vehicles, the production story will be under the bright spotlight over the coming quarters," Ives said in a recent report to clients.
Nevertheless, Ives maintains an Outperform rating while raising RIVN stock's price target from $40 to $45, "reflecting further confidence in the production story."
Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.
