Why Mercedes-Benz cooperates with the American startup company – Rivian?

By Jeff Lee / Mike Song 2022-10-06

In the era of ICE cars, carmakers diametrically opposed and competed with others in the sales strategies. However, when the era of BEVs comes, the implementation of new technologies changed the rules that competitors might become the strategic partners to cope with mega changes they couldn’t deal with on their own; For instance, such as Volkswagen and Ford, GM and Honda. Similarly, traditional carmakers might cooperate with BEV startup brands to get through tough times faced by each other. For example, the cooperation of commercial vehicles development between Mercedes-Benz and Rivian recently can be regarded as the status quo of German automotive industry and American startup companies. The evolvement and changes in the future is worthy of close attention.

Mercedes-Benz and Rivian jointly announced to cooperate on the production of electric vans in early September. The content of this project to establish an all-new manufacturing plant in the land of middle/east Europe acquired by Mercedes-Benz. The models to be developed will be based on two platforms…  Mercedes-Benz’s Van.EA, and Rivian’s RLV. Furthermore, there is a possibility to jointly develop new platform in the future. This is the first time that international major carmaker and startup brand cooperate to mass-produce new cars (not just for investment), and will be done by high-end brand – Mercedes-Benz. What are their intentions? Especially Mercedes-Benz?

Firstly, let’s take a look at the consideration of Mercedes-Benz… It’s not a new news for Mercedes-Benz to cooperate with other brands in the history of the technology development and the production of the commercial vehicles. Either with Mitsubishi, Volkswagen, local carmakers in USA or India, MB have vast and long-lasting records of cooperation. When the era of BEVs comes, the electrification of commercial vehicles will be inevitable. However, most of the R&D resources of Mercedes-Benz has been allocated in the electrification of passenger cars and autonomous driving technologies. Therefore, they have to seek supports externally  in the field of commercial vehicles development, so they can catch up with the progress of the electrification of passenger cars; Meanwhile, the startup company that is developing electric commercial vehicles – Rivian is way ahead of other traditional commercial vehicle brands at the technologic progress of electrification, and that is what Mercedes-Benz needs. On the other hand, Mercedes-Benz  must build an independent factory to solely share the latest BEV technologies with Rivian, so that other traditional carmakers won’t be easy to catch up with them, and Rivian will not be the direct competitor of Mercedes-Benz in terms of the financial resources and the background of automotive engineering within a short-term period.

Secondly, let’s take a look at the consideration of Rivian… After becoming a listed company, the market cap of Rivian had once skyrocketed to the 3rd place of all the carmakers around the world. However, when the major investor – Ford announced to develop electric commercial vehicles on their own, and the production capacity of Rivian becomes an issue, the stock price began dropping to the current point that is less than 30% of the highest point last year. Last year, Rivian claimed to reach the annual goal of 25,000 units of production this year, and they had produced just 7,000 units in H1 this year, which incurs financial problems. Consequently, in this situation, the most important thing for them is to find a carmaker that can help them solve the problem of production. Mercedes-Benz commercial vehicles department’s intention is the result that both of them could take what they need. Certainly, it will take at least 2 years for Mercedes-Benz to build manufacturing plant in Europe, and I assumed that Mercedes-Benz might be the key role of whether Rivian can get through the financial crisis within the next 2 years. Maybe, Mercedes-Benz’s future investment in Rivian will ensure the cooperation and the advantages of the technology of electric commercial vehicles.

The difficulties of the cooperation between traditional carmakers and BEV startup companies can be summarized as follows … one is the big gap of technology background between them (the former is established from the machinery industry, while the latter mostly came from the ICT industry); the other one is the big gap of the work culture between them (the former emphasizes strict and conservative work process, while the latter is full of creativity and allows making mistakes). If the cooperation model of commercial vehicles between Mercedes-Benz and Rivian can be proven successful, then there will be more traditional carmakers to follow this way; otherwise, startup brands will be even harder to grow up, but traditional carmakers, with the advantages of their mature manufacturing capability, can still keep seeking for the opportunity to cooperate with the IT industry.