Luxury car manufacturer, Aston Martin, has made a significant commercial move by ending its agreement with Mercedes-Benz to procure electric car batteries.
Instead, Aston Martin has struck a deal with California-based start-up Lucid, known for its cutting-edge electric vehicle technologies. Lucid will not only provide batteries and driving units for Aston Martin's new electric cars but will also acquire a 3.7% stake in the company, receiving a substantial sum of cash and shares.
Meanwhile, Mercedes-Benz will retain its shareholding in Aston Martin and continue its strategic partnership, albeit without expanding its stake as previously planned under an agreement signed in 2020.
On seeing the news, Kevin Manship, our senior commercial solicitor commented:
A key factor in the deal would have been Aston Martin’s ability to pivot from its existing supply agreement with Mercedes-Benz to the new arrangements with Lucid Motors. If the cost of exiting the Mercedes-Benz agreement had been too high, Aston Martin probably wouldn’t have changed supplier, but it seems that Aston Martin was able to manage this to an acceptable level, either through the contractual mechanisms included in the supply agreement or by negotiating an acceptable exit with Mercedes-Benz. This enabled Aston Martin to take advantage of what it must perceive to be a better arrangement with Lucid. The importance of the deal to both parties will strongly incentivise both of them to try to make a success of it.
"On a general note, this deal illustrates the potential for agile start-ups to have greater flexibility to offer more innovative solutions to win key contracts which they can use to enhance their reputation in the market and generate more contracts. It also shows the importance of good contract negotiation and management to enable a business to change suppliers without too much pain where alternative suppliers can reduce costs and/or upgrade service offerings.
To find out more about the effective use and management of your commercial contracts, take a look at our FAQ guide to contract lifecycle management.