Written by Brenda Nakalema

Rivian and Mercedes Team Up

Rivian Automotive (ticker: RIVN) left investors excited with a plan tabled last week to team up with Mercedes-Benz (ticker: MBG). …

Rivian Automotive (ticker: RIVN) left investors excited with a plan tabled last week to team up with Mercedes-Benz (ticker: MBG). Wall Street shared in the excitement, too, and thinks the deal is a smart way for the EV start-up to expand its geographic presence.

Dan Ives, a Wedbush analyst, said on Monday that he sees European electric delivery van sales crossing over $20 billion annually in just a few years.

The planned partnership between Rivian and Mercedes, announced this past Thursday, sent Rivian stock up almost 11%. Rivian shares gained 17.1% last week, topping the 3.7% gain for the S&P 500 and the 10.9% gain for Tesla shares.

Rivian and Mercedes (ticker: MBG.Germany) will produce two large electric commercial vans: One based on Mercedes architecture and one based on the Rivian light van, or RLV, platform. This RLV will not be the same as the electric delivery van Rivian makes for Amazon.com.

The expectation is for the partnership to be producing vans “in a few years,” according to both companies.

“This plan should help [Rivian] save capital…and potentially accelerates their entry into Europe’s attractive van market,” wrote RBC analyst Joseph Spak in a Thursday research report. “Further, going in with [Mercedes]…and leveraging an existing facility is likely to reduce risk related to production ramp up.”

Production know-how will be a great learning curve for Rivian, especially since the start-up has experienced trouble ramping up production at its facility in Illinois. At the beginning of 2022, Wall Street believed the company would ship roughly 40,000 vehicles. That expectation is now closer to approximately 25,000 vehicles.

Rivian stock is currently rated a Buy by Spak, which has also set a price target of $75 per share. Baird analyst Ben Kallo also set the stock at a Buy rating. His price target is $51. Kallo also sees potential for Rivian with the new partnership.

Like Spak, the general belief held by most analysts is that this partnership will help Rivian establish a presence in Europe. Kallo also added in his Thursday report that the Rivian-Mercedes partnership is reminiscent of when Mercedes’ parent company, Daimler, bought a 10% stake in Tesla with the two working on battery systems together. Daimler eventually sold its stake over a decade ago.

According to Ives, “the partnership with Mercedes places Rivian in a strong position to capture market share in a relatively untapped market.”

He also rates the shares Buy, with a price target of $45 a share. They are three Buy-rated analysts. Rivian remains a Wall Street sweetheart, with roughly 62% of analysts rating the shares Buy.

Coming into Monday trading, Rivian shares have declined 64% year to date. Rising interest rates, supply chain struggles, and the difficulties experienced in increasing production have deflated investor confidence.

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