Inside Rivian’s EV plant and CEO RJ Scaringe’s strategy for growth, lower-priced EVs and competing with Tesla
Rivian CEO RJ Scaringe on April 11, 2022 inside the company’s plant in Normal, Ill.
Michael Wayland / CNBC
NORMAL, Ill. – Rivian Automotive CEO Robert Scaringe hops out of one the automaker’s R1T electric pickups outside of the company’s plant in central Illinois as a man chants, “RJ, RJ!”
Scaringe, who goes by those initials, turns to the male employee who thanks him for the job at Rivian’s massive plant. The company’s 39-year-old founder reciprocates the appreciation and offers a handshake before heading into a meeting with suppliers.
The acknowledgement was one of many from employees that included fist-bumps, waves and other cordialities during a recent half-day visit to the plant with media and Scaringe, whose daily office is inside the former Mitsubishi Motors facility.
They’re pleasantries, but also signs of confidence in the CEO in the face of daunting challenges for the electric vehicle maker.
Wall Street has likewise applauded Scaringe, who founded the company in 2009 and brought it public through a blockbuster IPO in November. Most notably, Morgan Stanley lead auto analyst Adam Jonas dubbed Rivian as “the one” to be able to compete against EV industry leader Tesla.
Production of electric Rivian R1T pickup trucks on April 11, 2022 at the company’s plant in Normal, Ill.
Michael Wayland / CNBC
But Rivian, like the rest of the automotive industry, is facing massive supply disruptions and has internally experienced expected, but still problematic, production snags that caused it to miss its production expectations last year.
The company’s stock price is off by more than 60% this year, as investors look for safer ground than an EV start-up amid recession fears.
Scaringe is aware of such problems but, like he has for more than a decade, remains focused on the mission at hand: to prove the company’s worth by actually producing vehicles, an ironic differentiator for the industry that separates Rivian from an influx of new EV start-ups in recent years. Rivian is currently producing the electric R1T pickups as well as Amazon delivery vans and some R1S SUVS.
Here’s what Scaringe had to say on the company’s production, parts shortages and more.
Production and supplier disruptions
Scaringe said Rivian remains “really confident” it can produce 25,000 vehicles, including van and R1 models, in 2022. That estimate is down from initial expectations of about 50,000 vehicles, slashed by supplier disruptions.
Scarcity in semiconductor chips, a shortage the auto industry has been battling for more than a year now, and wire harnesses, which act as the nerves of a vehicle, poses the biggest hurdles for the company. Both are critical components in vehicles.
Production of electric Rivian R1T pickup trucks on April 11, 2022 at the company’s plant in Normal, Ill.
Michael Wayland / CNBC
“The vast majority of our vehicle is not having supply chain constraints. It’s just a small percentage,” Scaringe said. “It doesn’t take more than one part to stop the production.”
Scaringe doesn’t expect semiconductor supplies to normalize until next year. He, along with every other executive in the automotive industry, is regularly in contact with suppliers attempting to source, produce and ship as many parts as possible.
For Rivian, that includes having some of its employees on-site at the facilities of their suppliers in an attempt to assist production.
“We don’t have a demand challenge at all. We have a ‘can we create enough vehicles’ challenge?” he told CNBC following a tour of the vehicle plant. “We have a supply chain problem. It’s frustrating, but we’re going to get through that.”
Amazon delivery vans
Rivian declined to disclose how many Amazon delivery vans the company has built, but dozens were waiting outside of the facility, ready to be delivered, and plenty more were being assembled inside.
The electric vans are expected to be a crucial part of Rivian’s growth. The first vans go to Amazon, Rivian’s largest shareholder with a 20% stake, followed eventually by deliveries to other companies.
Production of electric Amazon delivery vans on April 11, 2022 at Rivian’s plant in Normal, Ill.
Michael Wayland / CNBC
Rivian says the vans can be produced faster than the consumer R1T and R1S vehicles because they have fewer features. They also go through fewer processes at the plant. For example, the painting of the vans – a tedious and long process – takes two hours less than paint jobs for the other vehicles.
Victor Taylor, senior director of stamping, body & plastic for the company, also noted there’s less complexity and time needed for the vans in the body shop.
Lower-priced EVs
Rivian, to the dismay of reservation holders, increased prices for its vehicles last month due to higher commodity costs. The company quickly rolled back the increases for its 70,000-some existing reservation holders but said it would hold to the new pricing for new reservations made as of March 1.
The increases make the starting prices of the vehicles $67,500 for the R1T and $72,500 for the R1S. At those prices, both are considered luxury vehicles rather than mainstream models.
Production of electric Amazon delivery vans on April 11, 2022 at Rivian’s plant in Normal, Ill.
Michael Wayland / CNBC
Scaringe said the company plans to produce lower-priced vehicles on its next-generation EV platform. Those vehicles will be produced at a planned $5 billion plant in Georgia, which is expected to come online in 2024.
Much like other automakers, Rivian also plans to maximize profits and increase performance of current models, according to Scaringe.
End of gas-powered vehicles
It’s the beginning of the end of fossil fuel-powered consumer vehicles — as far as Scaringe is concerned. The 39-year-old believes production and sales of such vehicles will come to an end in his lifetime, sooner rather than later.
Without putting an exact date on it, Scaringe said the end of that era is likely closer to 20 years from now rather than 50 years, with companies forced to move way from fossil fuels out of necessity as well as potential pressures from Wall Street and regulators.
“Most countries around the world will stop selling gas engine-powered cars. The scale of the shift is hard to fully appreciate,” he said. “The challenge is whether it’s driven by policy or not. The businesses that are going to survive are the ones that recognize that the end state for combustion is zero.”
Rivian CEO RJ Scaringe inside the company’s customer experience center outside of its plant on Aptil 11, 2022 in Normal, Ill.
Michael Wayland / CNBC
SPACs
Rivian is among a flurry of EV start-ups to have gone public in recent years, but the company’s competitors have done so through deals with special purpose acquisition companies, or SPACs. Rivian held a traditional and more direct initial public offering.
Many companies that went the SPAC route have faced financial problems or received inquiries by the U.S. Securities and Exchange Commission into their deals to go public or other business matters.
Scaringe believes some of those companies won’t be competitors Rivian needs to worry about for much longer.
“As the financial markets shifted from a growth orientation to more sort of a value orientation, I think a lot of those really underfinanced SPACs and companies like that are going to slowly start disappearing,” he said. “They’re going to run out of capital.”
Production of electric Rivian R1T pickup trucks on April 11, 2022 at the company’s plant in Normal, Ill.
Michael Wayland / CNBC
Purpose-built autonomous vehicles?
Rivian has not announced plans for similar vehicle, and Scaringe wouldn’t comment on a counterpart directly. But he said the company will “offer lots of different products in the future.”
Scaringe, who moved from Southern California to nearby the 3.3 million-square-foot plant, is known as a driven, level-headed planner who typically lets his actions speak louder than his words (or tweets). It’s a different style from Musk, though both are considered extremely detail-oriented and ambitious leaders.
EV pickups
Rivian became the first automaker to begin mass production of an all-electric pickup truck last year, beating to market Tesla and longtime segment leaders General Motors and Ford Motor, which holds a roughly 12% stake in Rivian.
GM started shipping its GMC Hummer EV pickup in December, months after Rivian launched the R1T. Ford is expected to soon begin shipping an electric version of its F-150 pickup, called the F-150 Lightning, followed by Tesla’s long-delayed Cybertruck, which is planned to go into production next year.
Production of electric Rivian R1T pickup trucks on April 11, 2022 at the company’s plant in Normal, Ill.
Michael Wayland / CNBC
While there have been many comparisons of the Rivian R1T to the other electric pickups, Scaringe isn’t bothered by the competition. He actually welcomes it, for now. He believes there’s currently more than enough demand to fulfill EV pickup production in the near-term.
“Humans have an infatuation with winners and losers, like everything in life has to be a zero-sum game,” he said. “I really just don’t see it that way. … I look at it as I hope Hummer’s wildly successful. I truly do. I hope Lightning’s wildly successful, and I hope we’re wildly successful. And I think all three of those can happen from an intellectual honesty point of view.”
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