Rivian looks past Amazon for EDV deliveries after contract talks

Rivian ($RIVN) is in talks with its largest shareholder and commercial partner, Amazon ($AMZN), to terminate a significant portion of its 2019 electric delivery van (EDV) deal.

Amazon initially invested $700 million in Rivian in 2019 and released its first electric van later that year, built and designed by the fledgling EV maker.

In September 2019, Amazon pledged to purchase more than 100,000 Rivian electric vans (EDV), which are expected to be rolled out by the end of the decade as part of Amazon’s co-initiated environmental commitment, The Climate Pledge, to net zero carbon by 2040. reaches.

The first Rivian and Amazon EDVs began deliveries in February 2021 in Los Angeles, reiterating the intention to expand the service to new cities. Last year, the service expanded to more than 100 U.S. cities, with 1,000 Rivian EDVs debuting during the 2022 holiday season.

Leaders of both companies have praised the relationship, with the financial backing giving Rivian a lifeline as it ramps up EV production. It also helps Amazon meet its climate goals.

However, a new report from The Wall Street Journal claims Monday that Rivian is in contract talks with Amazon to end the exclusivity portion of the original contract.

Rivian and Amazon discuss EDV contract options

This is reported by sources familiar with the case WSJthe contract talks come after Amazon informed Rivian it wanted to buy 10,000 EDVs by 2023, the lower end of the e-commerce giant’s previous guidance.

For this reason, Rivian is trying to remove the exclusivity part of the contract, which would open the possibility of attracting new commercial customers.

A Rivian spokesperson said the relationship with Amazon “has always been positive”, adding:

We continue to work closely together and, like many companies, navigate through a changing economic climate.

The “changing economic climate” Rivian refers to is higher interest rates and slowing demand across the economy after several years of explosive growth.

Rivian and Amazon have both implemented cost reduction plans to reduce costs and increase profitability.

Amazon is laying off more than 18,000 employees, while Rivian announced it would also lay off 6% of its workforce as it works on cost-cutting efforts in February.

Electrek’s Take

While ending the exclusivity clause in the Amazon EDV contract would open up the opportunity for Rivian to seek other commercial customers, it could be detrimental to EV startups in the future.

Amazon’s backing was a lifeline for Rivian as it ramped up production. Many investors overlooked EV makers with billions of dollars ($1.7 billion in Q4) losses and claimed Rivian had backing from Amazon and Ford.

Well, Ford cut its stake to just 1.15% ownership last month, and Amazon, with 17% ownership, seems to be moving in the same direction.

With losses mounting on every vehicle produced and major shareholders fleeing, it could be a long road ahead for Rivian. While the Rivian R1T and R1S are fantastic vehicles, investors will look the other way if the company can’t make them profitable. Especially since many in this economy want to reduce risk.