Rivian (RIVN) Stock Falls Ahead of Nasdaq 100 Entry

Rivian Automotive (NASDAQ:SHORE) fell 5% after the announcement of the cancellation of its project to build an electric van in Europe with Mercedes Benz (OTCMKTS:MBGYY). The two companies announced in September that they would jointly build vans unlike those that Rivian had previously contracted to manufacture for Amazon (NASDAQ:AMZN).

Rivian CEO RJ Scaringe wrote that the two sides agreed to “suspend discussions.” But the September memorandum of understanding will no longer be continued.

RIVN stock opened Dec. 12 at $27 with a market capitalization of approximately $25 billion on expected revenue of $1 billion in 2022. When it went public in November 2021, shares from Rivian sold for $78.

Rivian Slowdown

Rivian’s stock is said to have fallen again, barring the news that it’s being added to the Nasdaq 100 index on December 19. The news will force index-based funds to buy Rivian shares.

Amazon’s deal for 100,000 electric vans, following a $700 million investment it led, put Rivian on the map. It also won a $500 million investment from Ford engine (NYSE:F). That credibility, in turn, helped her win $1.5 billion in government incentives to build a manufacturing plant in Georgia.

Taken together, the deals pushed Rivian’s market capitalization to over $100 billion. Amazon and Ford both noted Rivian’s estimates in 2022. Ford limited its losses by selling some of its shares in May.

Analysts blame rising material costs for killing the Mercedes deal. Alix Partners estimates that the costs of manufacturing an electric vehicle (EV) have more than doubled in the past two years thanks to rising demand and the war in Ukraine.

Rivian still had $13.7 billion in cash on its books at the end of September, but it burned through $1.67 billion in the September quarter alone.

What happens next for RIVN Stock?

Canceling the Mercedes deal looks like a bigger deal than inclusion in the index. Rivian’s power as an investment is based on its links with great partners. Mercedes is worth more than $72 billion, more than any American automaker except You’re here (NASDAQ:TSLA).

The cancellation is also another indication of a likely recession in 2023.

As of the date of publication, Dana Blankenhorn held a long position in AMZN. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.