Rivian Was Never Going to Be Amazon's Only Electric Van Maker

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This first week of 2022 brought a fresh reminder of just how irrational the land of EV stocks is, and how little attention investors are paying to details.

The market drama started on Wednesday, when Amazon announced it was buying electric vans from Stellantis, formed last year from the merger of Fiat Chrysler and PSA Group. The news sank shares of Rivian Automotive, the buzzy EV startup Amazon has funded to build thousands of electric delivery vans. Rivian raised $11.9 billion in last year's biggest IPO.

The pixie dust from Seattle gave Stellantis its much sought-after stock bump: shares were up 11%, headed for the biggest weekly gain in more than six months. The Amazon deal is good news for Stellantis, which is trying to tap into market mania for EVs by touting its electrification plans.

This is not bad news for Rivian. As several analysts have pointed out, Rivian was never going to be able to produce enough to satisfy Amazon's voracious e-commerce delivery needs, and it wasn't expected to. Amazon “always knew” it would “would require multiple electric delivery van providers” to meet its climate goals, the company said in an email after Rivian shares started dropping.

The retail giant started knocking on doors in Detroit years ago to get the electric vans it will need to achieve Jeff Bezos' 2040 climate goal. It turned to Rivian in part because Detroit automakers couldn't deliver zero-emissions trucks fast enough. Even so, Amazon is already a steady customer of Stellantis' Ram ProMaster and Mercedes Sprinter vans.

The real tension investors should be focused on is whether Rivian can deliver the vans it's promised. It's on the hook to deliver 10,000 of them to Amazon by the end of this year, and 100,000 by the end of the decade. That is a huge lift for an upstart electric vehicle company that only just began to roll vehicles off the line late last year. (Remember Elon Musk's “production hell?”) There's something to be said for Stellantis' century of manufacturing experience.

As my colleagues Ed Ludlow and Keith Naughton reported last year, Rivian has been under pressure from Amazon to deliver the vans, so much so that it prioritized them at the expense of its own consumer truck, the R1T. In its first quarterly earnings call last month, the company revealed a slower-than-expected ramp-up in production, which it attributed to supply chain challenges.

Rivian of course isn't alone in this. Startups and legacy manufacturers alike have been stymied by the global chip shortage, which by most automakers' accounts is going to stretch well into 2022.

Carmakers were so desperate for chips last year, they sacrificed much of their commercial vehicle sales in favor of pricey consumer trucks and SUVs to pad bottom lines and weather the shortages. U.S. fleet sales, which include everything from service vans for your cable company or plumber, to police and rental-car fleets, slipped to 1.6 million last year, according to researcher Cox Automotive. That's 4% lower than 2020, and 42% lower than where they were in 2019, before the pandemic hit.

Contrast 1.6 million with projections for the electric commercial vehicle market: BNEF expects there to be 3.4 million battery-electric light commercial vehicles on America's roads by 2040. Automakers are going to need all their chips to start hitting that pace.