Whoever scouted out the Mitsubishi plant as a spot did one heck of a job. But more importantly, as the article mentions, Rivian has stacked itself with plenty of experienced personnel at Rivian which is invaluable for them.
With 100,000 vehicles already in its order books and $1.5 billion in investments pouring in this year from the likes of Amazon, Cox Automotive and Ford Motor Co., Rivian is making breaking into the automotive industry look easy.
It's not easy.
Most new auto manufacturers—including Rivian—are wrestling with a variety of issues. These companies can be divided into two camps: the few that have money and the many trying to raise it.
"This is not something you do for $100 million or $500 million," Rivian founder and CEO RJ Scaringe told Automotive News. "It takes truly billions of dollars. It's the nature of the business. It's very capital intensive, and it is one of the reasons why we have seen so few new companies in the space. If it only took $100 million or $500 million, you'd have more people coming in."
When Tesla broke through with its first customer deliveries 11 years ago, it inspired a new wave of startups, most focusing on electric vehicles. Some already have failed.
But those startups that successfully get a vehicle into production won't be entering a white-space segment now that Jaguar, Audi, Porsche, Mercedes and other automakers have launched or soon will launch their own electrified vehicles.
And even though the stars are aligning for Rivian in ways they rarely do for unproven new automakers, long-term financial success is not guaranteed.
Tesla, for as big and well known as it has become, has recorded just four profitable quarters and never has booked a full-year profit. Despite record sales and revenue this year, it lost $408 million in the second quarter.
Hundreds of EV startups around the world are attempting to build everything from subcompact commuter cars to full-size pickups and SUVs. They are competing for limited capital as they race to develop and launch their products. For Rivian, which appears to be on track to launch its battery-powered R1T pickup and R1S SUV next year, just about everything that could go right has — but that is a rare exception.
WHAT RIVIAN DID RIGHT
For just $16 million, Rivian purchased Mitsubishi's old factory in Normal, Ill. The 2.4-million-square-foot plant, closed in 2016, solved a huge problem, and for not a lot of money. Mitsubishi left behind much of the production equipment it used to build its vehicles; some of that machinery is being repurposed by Rivian.
Another bonus: an experienced work force that Rivian is working to rehire. Scaringe said former Mitsubishi employees are passionate about going back to work at the plant to build cutting-edge vehicles for a new company, with some even offering to help ready the facility on their own time.
Tesla was equally fortunate to obtain an old plant that Toyota Motor Corp. and General Motors jointly operated in Fremont, Calif. It also came loaded with production equipment and an experienced work force. Many other startups could be faced with spending hundreds of millions for a plant site, workers, robots, paint shops and other manufacturing infrastructure.
Scaringe has recruited a deep bench of auto industry veterans. Their decades of product development experience are helping Rivian extract maximum value out of its engineering budget. The eye-catching designs of Rivian's pickup and SUV have attracted significant media exposure and consumer interest. But underneath those shapely aluminum fenders, Rivian is not reinventing the wheel with all-new proprietary parts. The suspension system of the R1T and R1S, for example, uses many components from major suppliers that already are in production and used on other vehicles.
Ford's $500 million investment in Rivian, announced in April, came with benefits beyond working capital. "They are supporting us with some of their manufacturing capabilities," Scaringe said. "They have a company called [Troy Design & Manufacturing Co.] that we work with on some of our advanced manufacturing. They do a lot of prototype design and production tool design. It's a very good shop."
Ford also has shared with Rivian some of its manufacturing strategies. "We have had some good information exchanges in terms of how Ford runs some of its plants, and its operating philosophies, looking at how that may or may not translate to our operations," Scaringe said. "It's a really good, healthy relationship with Ford."
Still, Rivian has plenty of obstacles to overcome. Mitsubishi's former work force, for example, may be experienced at building cars and crossovers, but it will need to be trained to assemble battery packs, power electronics and electric drivetrains. The plant also never built aluminum-intensive vehicles, which Rivian's vehicles are.
Amazon's order last month for 100,000 electric delivery vans is designed to serve customers who pay a premium for fast delivery. Amazon is expected to put the first Rivian vans into service in 2021. Tesla's customers have shown they'll forgive a new company for design, manufacturing and software issues, but Rivian may have less room for error with a commercial customer counting on those vans to generate revenue.
The Amazon order, to be spread over three years, ensures steady production at Rivian's plant and likely will help the company reduce costs for batteries and raw materials. But one analyst said Rivian might eventually need more money.
"Tesla raised more than $13 billion and at times had an order book larger than Rivian's, and that's far from a slam dunk; $1.5 billion can evaporate extremely quickly, especially when you have to finish development of a vehicle and retool a factory," said Sam Abuelsamid, principal analyst at Navigant Research. "Everything I've seen from RJ Scaringe shows he's much more inclined to bring in the right people and let them do their jobs. With partners like Amazon and Ford, I think there is a much higher likelihood of success."
In the run-up to launching its consumer vehicles next year, Rivian has a lot of work to do in figuring how it will deliver its vehicles to customers and how it will provide parts and service.
Since Rivian won't have a nationwide dealer network — sales will be direct from the factory to the buyer, like Tesla — the company has to figure out how vehicles will receive service that can't be carried out with over-the-air software updates. Rivian also has to deliver repair parts in a timely manner — Amazon could help there — but it has to train technicians to repair its vehicles.
Scaringe said he recognizes the challenges and isn't worried about raising further money.
"We are very stable financially, and from a scaling point of view, we have the support of our shareholders, and we feel really good about that," he said. "We have enough cash on hand to deliver what we need to do."
As for Rivian's would-be competition, most are wrestling with a variety of issues that could bring their plans to a halt. Here's a sampling of some other EV startups that have been successful in attracting initial funding and that have built working vehicles.