Rivian (NYSE: RIVN) has partnered with Mercedes-Benz to produce electric vans. The deal might serve as a template for similar deals between other automakers.

As part of the agreement, the two companies would build a factory in Europe to produce electric vans. The two companies expect to start production at the plant in a “few years” but did not commit to a hard timeline.

Mercedes-Benz said, “The target is to build an all-new electric-only production facility leveraging an existing Mercedes‑Benz site in Central/Eastern Europe.” The plant would look to produce two vans, one running on the Mercedes-Benz platform and the second on Rivian’s platform.

The release said, “The joint venture mirrors the common objectives of Mercedes‑Benz Vans and Rivian: both companies plan to rapidly scale the production of electric vans to help the world transition to cleaner transportation.”

It added, “By working together, they will be able to leverage operations synergies and substantially increase cost efficiency to help make the vans more affordable for commercial customers driven by total cost of ownership.”

Global EV (electric vehicle) sales are expected to rise multi-fold over the next decade. However, startup EV companies, which includes Rivian also, have been struggling with deliveries. Lucid Motors has had to lower its 2022 production guidance twice this year and the new guidance is a third of what it originally guided for.

EV Companies Are Ramping Up Production

Also, building EV plants entails a lot of capital. Last month, both Lucid Motors and Nikola announced capital raising plans. Li Auto also raised cash by selling shares in the US in the second quarter of 2022.

At the end of June, Lucid Motors had $4.6 billion in cash on its balance sheet, which it said was sufficient to fund its cash burn until the end of 2023. The company intends to raise $8 billion to augment its cash position. It is building its second plant in Saudi Arabia, which is not surprising as the country’s sovereign wealth fund is its biggest stockholder.

Meanwhile, while several analysts have been getting bearish on startup EV companies, Ray Dalio bought more Lucid Motors shares in the second quarter. The billionaire also added more shares of Ford, NIO, and Xpeng Motors in the quarter.

Rivian Expects to Sell 25,000 Cars in 2022

Rivian has a massive cash pile of $15 billion at the end of June. It raised billions of dollars from its US IPO last year, which was the biggest listing since 2014. It posted a massive loss in the second quarter of 2022 but maintained its guidance of producing 25,000 cars in the year.

Rivian has produced 8,000 cars so far and has an order of 98,000 vehicles for its R1 series. In addition, it has another 100,000 EDV orders from Amazon, which is also its investor. Both Amazon and Ford reported billions of dollars of losses on their Rivian investment in the first two quarters of 2022.

Ford has even trimmed some of its stake to monetize the investment. Ford has also been upping its game in the EV industry and from the next year, it would report the earnings of its EV business separately from the ICE (internal combustion engine) business.

As Rivian stock crashed amid the market sell-off, Morgan Stanley advised investors to buy Rivian stock. The brokerage is also bullish on Tesla and analyst Adam Jonas is among the most vocal Tesla bulls.

Rivian Needs to Challenge Tesla’s Dominance

EV startups like Rivian need to challenge Tesla’s dominance in the US EV market. TrueCar estimates that Tesla’s market share in the US almost doubled YoY and reached 4.1% in August. The figures are for the total car sales and not only EVs.

We might see more partnerships in the automotive industry. NIO has a partnership with state-owned JAC Motors to produce its cars. Lordstown Motors also partnered with Foxconn to produce its cars. Fisker has partnered with Magna for its first car and Foxconn for the second.

Apple Is Looking to Enter the EV Market

Meanwhile, the biggest challenge to Tesla might not come from an EV company but from Apple. Apple has long been rumored to be working on an electric and autonomous car under an internal project named “Titan.”

Strategic Vision conducted a survey of 200,000 new car buyers and for the first time, it included Apple cars on the list of potential cars that buyers would like to buy. 26% of the respondents said that they would ‘Definitely Consider’ an Apple car in the future. Ford came fourth with 21% while Tesla was in the fifth position with 20% saying they would consider a Tesla car in the future.

Apple is reportedly looking at partners for its EV project. However, it hasn’t been able to shortlist one so far.

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