Published - September 9, 2022 @ 11:56 AM (EET)

‍

On Thursday, Mercedes-Benz Vans and Rivian (NASDAQ:RIVN) announced they are partnering to establish a new European factory that would produce electric vans for both brands, sending Rivian shares up about 6%.

According to the signed memorandum, the vehicles will be tailored for individual customers, similar to the electric delivery vans (EDVs) Rivian currently produces for Amazon (NASDAQ:AMZN).

Starting in a few years, the two companies will make two large vans at the factory, one based on Mercedes-Benz's VAN.EA platform and the other on the Rivian Light Van electric platform.

Responding to the joint venture, Head of Mercedes' commercial unit, Mathias Geisen, said,

"We are sharing investments and technology because we also share the same strategic ambition - accelerating the electrification of the van market with sustainable and superior products for our customers."

The companies didn't disclose any details, including investment figures, of the 50-50 joint venture.  Moreover, the agreement is subject to Rivian and Mercedes entering into a final, binding agreement and obtaining the relevant regulatory approval.

WHY IT MATTERS

With automakers increasingly looking to gain market share in the development and production of EVs to catch up with giants like Tesla (NASDAQ:TSLA), companies are restructuring factories and model lineups

In a crowded field of startups trying to cash in on demand for EDVs, sharing the costs of a European assembly plant with Mercedes should help the newcomer, which scorched $1.2 billion in the second quarter.

Rivian said it produced 4,401 vehicles in the second quarter, a figure falling short of its target of 25,000 for the year.  

While output is improving, labor and overhead costs are weighing on its bottom line as its assembly lines are designed for building higher volumes than it has been producing, Rivian said.

The partnership thus comes at a crucial time for the automaker.

For the year to date, Rivian shares are down by about two-thirds as the adventure vehicle company struggles to increase production at its Illinois factory amid supply chain disruptions and rising materials prices that delay product programs.

‍