Rivian Warns Dispute With Seat Supplier Threatens Production of Amazon Delivery Vans

Commercial Vehicle Group, a publicly traded auto supplier, denies the claims, saying in court filings that it wasn’t contractually obligated to the lower price and raised it only after Rivian submitted multiple engineering and design changes.

Rivian specified in the lawsuit that there is no alternative supplier for the custom-designed seat packages for the electric van and it could take well over a year for it to find another vendor.

Rivian warned that if Commercial Vehicle Group stopped delivering the seats, the EV maker would face an imminent shutdown of its van production, which is just launching, according to the documents filed in Wayne County Circuit Court in Detroit. Rivian has an order for 100,000 vans from Amazon, an early investor in the startup holding a roughly 18% stake.

In the lawsuit, Rivian says the parts dispute would specifically affect production of the Amazon-Rivian Prime Van, or RPV as it is known for short. Rivian has said previously it aims to fill the 100,000 van order by 2025, describing Amazon as one of its largest customers.

The legal challenge, which hasn’t been previously reported, comes at a sensitive time for the young car manufacturer as it has encountered other challenges trying to get its factory in Illinois in full swing.

A court docket shows a hearing on motions filed by the two sides is scheduled for Tuesday. An attorney for the supplier, Laura Baucus, said Monday the hearing had been canceled but declined to comment further.

In a joint statement, Rivian and Commercial Vehicle Group said the supplier has continued to provide seats to Rivian and the parties are discussing a resolution.

The California-based startup in mid-March asked a judge in Michigan for an emergency order to require Commercial Vehicle Group to keep making the seats at the lower price, the court records show.

“This is a shakedown, pure and simple,” Rivian’s attorneys said of the price increase in its legal filings.

Wayne County Circuit Court Judge Brian R. Sullivan granted a temporary emergency order, requiring the supplier to continue providing seats at the initial price while the matter was being litigated.

Disputes between auto makers and suppliers aren’t unusual in the industry, but this legal confrontation could have broader implications for Rivian’s business, because Amazon is one of its largest initial customers and the company only last fall began manufacturing vehicles. It also illustrates how quickly supply-chain complications can arise for auto startups attempting to make vehicles for the first time.

Rivian has worked with Amazon to finalize details of the van and has begun producing and delivering them, Chief Executive RJ Scaringe told analysts during a conference call last week. He declined to say how many of the 5,000 total vehicles Rivian has produced since the start of production last fall are vans for Amazon.

“The deliveries that are now happening are going to start to ramp up,” he said. “You’re going to start to see a lot more of them, hopefully, coming into all of our neighborhoods delivering packages.”

Rivian’s stock has been under pressure in recent months as executives have detailed obstacles with logistics and getting parts, leading it to a slower-than-anticipated ramp up of factory production. The car company is building two other models at the Illinois assembly plant in addition to the van: an electric pickup and battery-powered sport-utility vehicle.

Ford Motor Co.

, an early investor in Rivian, has been selling down its shares in the startup, following the expiration of a post-IPO lockup period earlier this month. On Friday, in a regulatory filing, Ford said it sold another seven million Rivian shares, on top of the eight million it sold nearly a week earlier, leaving its total holdings in the startup at 9.7%.

The sales by Ford have further weighed on Rivian’s stock price, down 74% since the start of the year at Friday’s close. Its weak performance of late stands in contrast to the enthusiasm investors showed for the young company in November, when it went public at $78 a share. Rivian’s stock quickly rallied following the offering, briefly pushing its valuation to more than $160 billion—surpassing the market caps of both Ford and General Motors Co.

The company’s stock was trading at about $25 a share Monday morning, down 6.5%, following the disclosure of Ford’s stock sale.

In the lawsuit, Rivian said the supplier had originally agreed to sell its seat packages for a price of $775 per unit, but in February, Commercial Vehicle Group informed it that the units would cost twice that amount. Rivian said it tried to negotiate a resolution, but to no avail, and the supplier stopped providing seats.

Rivian filed the lawsuit three weeks later, saying it had a dwindling supply of seats left and that production could be halted within days unless Commercial Vehicle Group was ordered to supply more, the court records show.

Commercial Vehicle Group has countered that Rivian can keep building vans without the seats and then install them later, saying it hasn’t provided “any evidence to support the claimed shutdown.”