Rivian Automotive (NASDAQ:RIVN) fell 5% on news it is to build an electric van in Europe with Mercedes Benz (OTCMKTS:MBGYY). The two companies they would jointly build vans unlike those Rivian previously contracted to make for Amazon (NASDAQ:AMZN).
Rivian CEO R.J. Scaringe wrote that the two sides agreed to “pause discussions.” But the September memorandum of understanding .
RIVN stock opened Dec. 12 at $27 with a market capitalization of about $25 billion on expected 2022 revenue of $1 billion. When it came public in November 2021, Rivian shares sold for $78.
Rivian’s Slowdown
Rivian stock would have fallen further, except for news it is to the Nasdaq 100 index on Dec. 19. The news will force funds based on the index to buy Rivian shares.
The Amazon deal for , following a investment it led, put Rivian on the map. It also won
from Ford Motor (NYSE:F). This credibility, in turn, helped of government incentives to build a manufacturing plant in Georgia.
Taken together, the deals pushed the market cap of Rivian to more than $100 billion. Both Amazon and Ford wrote down Rivian estimates in 2022. Ford limited its losses by in May.
Analysts blame for killing the Mercedes deal. Alix Partners estimates the costs for making an electric vehicle (EV) have more than doubled over the last two years thanks to rising demand and the Ukraine war.
Rivian still had on its books at the end of September but it in just the September quarter.
What Happens Next for RIVN Stock?
Cancellation of the Mercedes deal looks like a bigger deal than inclusion in the index. Rivian’s power as an investment is based on its connections to big partners. Mercedes is worth over $72 billion, more than any U.S. auto company except Tesla (NASDAQ:TSLA).
The cancellation is also another indication of a likely recession in 2023.
On the date of publication, Dana Blankenhorn held a long position in AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
