Rivian Revisits Its Exclusivity Agreement With Amazon
As Rivian’s largest shareholder, Amazon has exclusive purchase rights for Rivian’s all-electric delivery vans. However, Rivian’s production capabilities outpaced Amazon’s demand for the new EV delivery vans. Now, Rivian needs a substantial cash infusion to develop its R2 passenger EV lineup. So, what’s the solution?
Rivian’s production woes
In this case, cash flow problems, not supply chain issues, form the basis of Rivian’s production woes. In addition to EV delivery vans bound for Amazon, Rivian produces an EV pickup truck called the Rivian R1T and an SUV dubbed the R1S. While the R1 lineup is doing well in the market, CNBC says that Rivian’s plan to develop and launch its new R2 lineup requires the company to raise over $1 billion in cash.
Rivian hopes to exit its exclusivity agreement with Amazon
One avenue for raising the needed funds is ramping up production of the already developed EV delivery van model. However, Rivian EV delivery van sales are currently under an exclusivity agreement with Amazon.
Rivian’s delivery van production line is already set up and running, so increasing its production rate requires no capital expenditure. However, until Amazon releases Rivian from the agreement, the automaker can only sell its delivery vans to Amazon.
Amazon’s exclusive rights to purchase Rivian EV delivery vans stems from a 2019 agreement between the two companies. In that deal, Amazon committed to purchasing 100,000 Rivian EV delivery vans. According to The Verge, scheduled delivery began in February 2021 at a planned minimum annual rate of 10,000 units. Rivian hopes to end the exclusivity part of the agreement while still providing EV delivery vans to Amazon and other customers.
Is Amazon agreeable to renegotiating its deal with Rivian?
Amazon remains steadfast that it’s meeting its annual order commitment of 10,000 EV delivery vans from the EV automaker. Where Rivian points out that the 10,000 units only meet the agreed-upon yearly minimum order quantity, Amazon claims that number fulfills the original commitment.
Amazon’s stance on the subject appears softer than that statement indicates. An Amazon spokesperson said that the company believes everyone should enjoy Rivian’s technology because the transition to EV delivery vans is not only good for communities but also beneficial to the planet.
Are the EV delivery vans meeting Amazon’s needs?
In March 2023, Electrek said that Amazon has over 3,000 EV delivery vans operating in its fleet. According to Amazon, the delivery service used those 3,000 electric vans to deliver 70 million packages in the five months between November 2022 and March 2023.
Amazon remains committed to its “Climate Pledge” and its goal of a net-zero carbon footprint by 2040. Furthermore, in addition to its Climate Pledge commitment, Rivian investment, and the broader electrification trend of the industry, Amazon has also invested $700 million investment to retrain its employees for a growing and diversified workspace, according to TechCrunch.
Amazon also employs other electric delivery vehicle (EDV) types, such as e-cargo bikes and e-rickshaws, a type of electric three-wheeled vehicle. Additionally, Amazon recently implemented new materials and technology to eliminate over 1.5 million tons of packaging, further reducing the company’s greenhouse gas emissions.