California EV start-up Rivian may end the exclusivity clause in its deal to provide electric delivery vans (EDVs) to retail heavyweight Amazon as early as Q4 this year, according to analysts at financial services firm Cantor Fitzgerald.
The ending of the exclusivity agreement would allow Rivian to branch out to other commercial fleet customers. But it is not expected to cut off its relationship with Amazon or curtail the firm’s existing order with the automaker.
The exclusivity deal with Amazon propped up Rivian’s revenue, accounting for 21pc of revenue last year, equal to $343mn. The company also expects a similar proportion of revenue from Amazon this year, Cantor analysts calculate.
This revenue is driven by a 2019 order of 100,00 Rivian EDVs to be delivered by 2030. In July, Amazon said that it currently operated more than 5,000 EDVs in more than 800 cities across the US, along with more than 1,000 EDVs in Germany.
Rivian was first reported to be in talks to end exclusivity with Amazon in March this year. And CFO Claire McDonough hinted at the expansion beyond the exclusivity deal in June when speaking at the Deutsche Bank global auto industry conference.
“As you think about what it would take to fill that 65,000 units of commercial van capacity that is continuing to build out, a broader commercial pipeline of customers — that is clearly with Amazon as that flagship customer for us — but building out more of a long tail of potential commercial customers to fill the capacity,” McDonough said.
Upside
With a capacity to produce 65,000 EDVs/yr, and the high margin that Rivian can make on the vehicle, the potential of the company broadening its commercial fleet vehicle customer base beyond Amazon has analysts bullish, given the company’s current guidance only factors in Amazon as customers for its fleet vehicles.
Rivian reiterates that it expects to reach positive gross margins by 2024 as EDV and Enduro R1S production ramps up, but McDonough stated at Q2 results that all “guidance or comments that we provided around Rivian’s financials through 2025 have historically just contemplated Amazon as that full commercial customer”. Any expansion to fleet customers beyond Amazon could therefore lead to an upward revision of the company’s guidance in the next few quarters.
“Those exclusivity conversations are likely ending, maybe as near as this Q3 earnings call,” Cantor Fitzgerald analyst Andres Sheppard tells EV inFocus. “And so that opens up a whole other vertical for them to pursue the commercial ownership. They have these vans that we forget, and if they can start selling them to other consumers, then that is a whole other additional revenue stream that analysts are not taking into consideration.”
In the event that Rivian does end the Amazon exclusivity agreement in Q4, “we would see that as an advantage,” Sheppard says, “since that would allow and enable the company to pursue additional commercial relationships which would then lead to additional revenue.”
In September 2022, Rivian announced a joint venture to produce bespoke large electric vans for German OEM Mercedes-Benz. The plan had been to build electric vans under both the Rivian and Mercedes marque in an electric-only production facility leveraging an existing Mercedes site in Europe, the company said. But the agreement was put on hold in December 2022.
Any further commercial partnerships enabled by a suspension of exclusivity with Amazon, could see Rivian once again explore partnership options for joint production of electric vans.
Q3 sales
Rivian’s share price fell on Monday after the company released its Q3 sales report. Despite strong deliveries and being on track to eclipse its full-year production guidance, this was not reflected in the company’s valuation. Rivian’s longstanding partnership with Amazon was one factor in the cautious outlook ahead of Rivian’s Q3 results, Sheppard says.
“We are conservative in our price target for a number of reasons, one of those being that we only give them credit for 70pc of their Amazon agreements, meaning that we are only assuming that 70,000 vans get delivered to them [when it is] supposed to be 100,000. So, if they are able to surpass that, that is additional upside, that is additional increments to our price target,” Sheppard says.
Rivian will announce its third quarter results on 7 November.
Ciaran has written about finance, politics and culture. He is passionate about e-mobility and what it means for our way of life.
Ciaran has a Masters in Ancient Philosophy from Oxford University.
