Amazon.com Inc. and Rivian Automotive Inc. are in talks to scrap the exclusivity part of their electric-van deal, allowing the auto maker to sell to others, after the technology giant’s order for 2023, according to people familiar with the matter.
Under terms of a 2019 agreement, Rivian is required to sell all of the vans it makes to Amazon. In recent months, Amazon notified Rivian that it wanted to buy about 10,000 vans this year, which was at the low end of a range it previously provided the auto maker, the people said.
In response, Rivian sought to remove the exclusivity terms, the people said. Talks are ongoing, they said.
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An Amazon spokeswoman said the company remains committed to buying 100,000 vans from Rivian by 2030, which were the terms outlined in the original agreement. “Rivian remains an important partner for Amazon, and we’re excited about the future,” she said.
A Rivian spokeswoman said: “Our relationship with Amazon has always been a positive one. We continue to work closely together and are navigating a changing economic climate, similar to many companies.”
Executives at both companies have touted the deal, which gave Rivian an anchor customer and Amazon a key component of its pledge to slash carbon emissions. Amazon is Rivian’s largest shareholder, with a 17% stake in the company, according to FactSet, and Amazon is on Rivian’s board of directors.
Amazon has initiated cost-saving measures over the past year amid a slowdown in e-commerce sales, following a surge during the pandemic. The online retailer has said it is pausing construction on its second headquarters in the D.C. area and laying off more than 18,000 workers, one of the largest reductions among technology companies.
For Rivian, the Amazon contract has provided steady demand for one of the three vehicles the auto maker builds at its Normal, Ill., factory. If Amazon agrees to end the exclusivity arrangement, Rivian would need to find new commercial customers for the vans.
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The Amazon deal has been viewed favorably by investors as an important stabilizing factor for the startup auto maker and an endorsement of its technology.
“Amazon represents such a large customer, or such a large pool of demand for us,” said Rivian Chief Executive RJ Scaringe in late 2021, soon after the company’s initial public offering.
Amazon and Rivian worked together closely on the development of the electric van. A change in the Amazon relationship would mark the latest challenge for Rivian, which is under pressure to cut costs and boost factory output. The company also makes the R1T pickup truck and the R1S SUV for retail customers.
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Last month, Rivian’s shares fell after the company said it aimed to make 50,000 vehicles this year, below the estimates of Wall Street analysts.
Rivian is among the more prominent electric-vehicle startups to emerge in recent years, following the rise of EV leader Tesla Inc. Like other young EV companies, Rivian has been strained by rising costs and supply-chain disruptions. The company’s shares have dropped about 90% since their post-IPO highs in late 2021.
The Irvine, Calif.-based EV maker burned through $6.6 billion in 2022, after starting the year with more than $18 billion — much of it raised in the well-received IPO in November 2021. During an earnings call last month, Rivian executives said they have enough cash to last through 2025.
Last week, Rivian said it would raise $1.3 billion through the sale of green convertible bonds. Shares tumbled about 15% the following day.
To conserve cash, Rivian has conducted two rounds of layoffs and pushed back plans for future business lines, such as its more-affordable R2 line of vehicles. Mr. Scaringe has said the workforce cuts are a response to rising commodity costs, a changing economy and tightening capital markets.
He has emphasized that the EV maker needs to focus on vehicles and projects that are critical in the near term for helping it turn a profit. Several top executives departed in recent months, including the head of supply chain and the vice president overseeing body engineering.
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