Rivian’s CEO on growth, Amazon pickups, the SPAC bubble and low-cost electric vehicles

NORMAL, Ill. – Rivian Automotive CEO Robert Scaringe jumps out of one of the automaker’s R1T electric pickups outside the company’s plant in central Illinois as a man chants “RJ , RJ!”

Scaringe, who uses those initials, turns to the male employee who thanks him for the work at Rivian’s massive factory. The 39-year-old company founder returns the favor and offers a handshake before heading to a meeting with suppliers.

The acknowledgment was one of many from employees who included thumbs ups, waves and other cordialities during a recent half-day visit to the factory with the media and Scaringe , whose day-to-day office is inside the former Mitsubishi Motors factory.

These are jokes, but also signs of confidence in the CEO in the face of the daunting challenges for the electric vehicle manufacturer.

Wall Street also applauded Scaringe, who founded the company in 2009 and took it public with a successful IPO in November. Most notably, Morgan Stanley chief automotive analyst Adam Jonas dubbed Rivian as “the one” who can compete with electric vehicle industry leader Tesla.

Production of Rivian R1T electric pickup trucks on April 11, 2022 at the company’s plant in Normal, Ill.

Michael Wayland/CNBC

But Rivian, like the rest of the auto industry, is facing massive supply disruptions and has experienced expected, but still problematic, production issues internally that caused it to miss its production expectations last year.

The company’s share price has fallen more than 60% this year as investors seek safer ground than an electric vehicle start-up amid recession fears.

Scaringe is aware of these issues but, as he has for more than a decade, remains focused on the mission at hand: proving the company’s worth by actually producing vehicles, an ironic differentiator for the industry that separates Rivian an influx of new electric vehicles. startups in recent years. Rivian currently produces the R1T electric vans as well as Amazon delivery vans and some R1S SUVs.

Here’s what Scaringe had to say about the company’s production, parts shortages and more.

Disruptions to production and suppliers

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 around 50,000 vehicles, reduced by supplier disruptions.

The scarcity of semiconductor chips, a shortage the auto industry has been battling for more than a year now, and wiring harnesses, which act like a vehicle’s nerves, are the company’s biggest hurdles. . Both are critical components in vehicles.

Production of Rivian R1T electric pickup trucks on April 11, 2022 at the company’s plant in Normal, Ill.

Michael Wayland/CNBC

“The vast majority of our vehicle has no supply chain constraints. It’s just a small percentage,” Scaringe said. “It doesn’t take more than one piece to stop production.”

Scaringe doesn’t expect semiconductor supplies to normalize until next year. Along with all the other auto industry executives, he is in regular contact with suppliers trying to source, produce and ship as many parts as possible.

For Rivian, that means having some of its employees on-site at their suppliers’ facilities to try to help with production.

“We don’t have a demand challenge at all. We have a ‘can we create enough vehicles’ challenge?” he told CNBC after a tour of the vehicle factory. “We have a supply chain issue. It’s frustrating, but we’ll get through this.”

Amazon delivery vans

Rivian declined to disclose how many Amazon delivery vans the company has built, but dozens were waiting outside the facility ready to be delivered, and many more were being assembled inside. inside.

Electric pickups are expected to play a crucial role in Rivian’s growth. The first vans go to Amazon, Rivian’s largest shareholder with a 20% stake, eventually followed by deliveries to other companies.

Production of Amazon electric delivery vans on April 11, 2022 at the Rivian plant in Normal, Illinois.

Michael Wayland/CNBC

Rivian says the vans can be produced faster than the mainstream R1T and R1S vehicles because they have fewer features. They also go through fewer processes at the factory. For example, painting vans – a tedious and time-consuming process – takes two hours less than painting jobs for other vehicles.

Victor Taylor, senior manager of stamping, body and plastics for the company, also noted that there was less complexity and time needed for vans in the body shop.

Cheaper electric vehicles

Rivian, much to the dismay of reservation holders, raised prices for its vehicles last month due to rising commodity costs. The company quickly reversed increases for its roughly 70,000 existing booking holders, but said it would stick to updated prices for new bookings made from March 1.

The increases result in starting vehicle prices of $67,500 for the R1T and $72,500 for the R1S. At these prices, both are considered luxury vehicles rather than mainstream models.

Production of Amazon electric delivery vans on April 11, 2022 at the Rivian plant in Normal, Illinois.

Michael Wayland/CNBC

Scaringe said the company plans to produce low-cost vehicles on its next-generation electric vehicle platform. These vehicles will be manufactured at a planned $5 billion plant in Georgia, which is expected to be commissioned in 2024.

Like other automakers, Rivian also plans to maximize profits and increase the performance of current models, according to Scaringe.

End of gasoline vehicles

It’s the beginning of the end for mainstream fossil fuel vehicles – as far as Scaringe is concerned. The 39-year-old believes that the production and sale of these vehicles will end in his lifetime, as soon as possible.

Without giving an exact date, Scaringe said the end of this era is likely closer to 20 years than 50, as companies are forced to move away from fossil fuels out of necessity as well as potential pressure from Wall Street and regulators. .

“Most countries in the world will stop selling gasoline-powered cars. The magnitude of the change is difficult to fully appreciate,” he said. “The challenge is whether this is driven by politics or not. The companies that are going to survive are those that recognize that the end state of combustion is zero.”

Rivian CEO RJ Scaringe inside the company’s Customer Experience Center outside of its factory on April 11, 2022 in Normal, Ill.

Michael Wayland/CNBC

PSPC

Rivian is among a wave of electric vehicle start-ups to go public in recent years, but the company’s competitors have done so through deals with special-purpose acquisition companies, or SPAC. Rivian held a traditional and more direct initial public offering.

Many companies that have taken the SPAC route have faced financial problems or received inquiries from the United States Securities and Exchange Commission about their transactions to go public or other business matters.

Scaringe thinks some of these companies won’t be competitors that Rivian will have to worry about any longer.

“As the financial markets have shifted from a growth orientation to kind of a value orientation, I think a lot of these really underfunded SPACs and companies like this are going to slowly start to die out,” he said. -he declares. “They’re going to run out of capital.”

Production of Rivian R1T electric pickup trucks on April 11, 2022 at the company’s plant in Normal, Ill.

Michael Wayland/CNBC

Purpose-built autonomous vehicles?

Tesla CEO Elon Musk recently said the automaker would make a “dedicated robotaxis.” He didn’t offer a timeline or additional details beyond saying it would “look futuristic” and be fully self-contained, which the company didn’t realize despite the name of its help desk feature. Full Self-Driving (FSD). .

Rivian has not announced plans for a similar vehicle, and Scaringe would not comment directly on a counterpart. But he added that the company “will offer many different products in the future.”

Scaringe, who moved from nearby Southern California to the 3.3 million square foot factory, 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, although both are seen as extremely thorough and ambitious leaders.

EV Pickups

Rivian became the first automaker to begin mass production of an all-electric pickup truck last year, edging out Tesla and longtime segment leaders General Motors and Ford Motor, which has a roughly 12% stake in Rivian.

GM began shipping its GMC Hummer EV pickup in December, months after Rivian launched the R1T. Ford is expected to start shipping an electric version of its F-150 pickup soon, called the F-150 Lightning, followed by Tesla’s long-delayed Cybertruck, which is expected to enter production next year.

Production of Rivian R1T electric pickup trucks on April 11, 2022 at the company’s plant in Normal, Ill.

Michael Wayland/CNBC

Although there have been many comparisons between the Rivian R1T and other electric mics, Scaringe isn’t bothered by the competition. In fact, he’s happy about it, for now. He thinks there is currently more than enough demand to meet the production of electric vans in the short term.

“Humans have an infatuation with winners and losers, as if everything in life should be a zero-sum game,” he said. “I really don’t see it that way. … I see it as I hope Hummer has a huge success. I really mean it. I hope Lightning has a huge success, and I hope we have a huge success. And I think all three of those can happen from an intellectual honesty standpoint.”

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