Rivian CEO on Growth, Amazon Vans, SPAC Bubble, and Low Price Electric Cars

Normal, Illinois – Rivian Automotive CEO Robert Scaringi jumps out of one of his R1T electric trucks outside the company’s plant in central Illinois as a man chants, “RJ, RJ!”

Scaringe, using his initials, turns to a male employee who thanks him for working at the massive Rivian factory. The company’s 39-year-old founder reciprocates and offers a handshake before heading to a meeting with suppliers.

This acknowledgment was one of several employees who included fist bumps, waves and other friendliness during a recent half-day visit to the plant with Media and Scaringe, whose day office is located inside the former Mitsubishi Motors facility.

They are compliments, but they are also signs of confidence in the CEO in the face of the daunting challenges facing the electric car maker.

Similarly, Wall Street paid tribute to Scaringe, who founded the company in 2009 and announced it with a massive initial public offering in November. Notably, Morgan Stanley’s lead auto analyst Adam Jonas called Rivian “the one” to be able to rival electric car leader Tesla.

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

Michael Wayland/CNBC

But Rivian, like the rest of the automakers, is facing major supply disruptions and internally struggled with expected but still problematic production hurdles that caused it to miss out on production forecasts last year.

The company’s stock price is down more than 60% this year, as investors search for a safer ground from electric vehicle startups amid recession fears.

Scaringe is aware that such problems exist, but, as he has done for more than a decade, remains focused on the task at hand: to prove the company’s value by actually producing vehicles, an ironic industry differentiating factor that separates Rivian from the influx of new electric vehicle start-ups in recent years. Rivian currently produces R1T electric pickup trucks as well as Amazon delivery trucks and some R1S SUVs.

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

Disruption of production and suppliers

Scaringe said Rivian is still “really confident” it can produce 25,000 vehicles, including Van and R1 models, in 2022. That estimate is lower than the initial forecast of about 50,000 vehicles, which was said by supplier unrest.

The scarcity of semiconductor chips, shortages in the auto industry that has been struggling for more than a year now, and wire harnesses, which act as the car’s nerves, are the company’s biggest hurdles. Both are important components in compounds.

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

Michael Wayland/CNBC

“The vast majority of our cars don’t have supply chain constraints,” Scaringi said. “It’s just a small percentage.” “It takes no more than one part to stop production.”

Scaringe doesn’t expect semiconductor supply to return to normal until next year. He, along with every other auto industry executive, is in regular contact with suppliers who try to source, produce and ship as many parts as possible.

For Rivian, that includes having some of its employees on site at its suppliers’ facilities in an effort to help with production.

“We don’t have a demand challenge at all. We have a challenge ‘Can we build enough vehicles?'” “We have a supply chain problem,” he told CNBC after touring the car factory. It’s frustrating, but we’ll get through it.”

amazon delivery vans

Rivian declined to reveal how many Amazon delivery trucks the company had built, but dozens were waiting outside the facility, ready for delivery, and plenty being assembled inside.

Electric trucks are expected to be an important part of Rivian’s growth. The first trucks go to Amazon, Rivian’s largest shareholder with a 20% stake, eventually followed by deliveries to other companies.

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

Michael Wayland/CNBC

Rivian says the trucks can be produced faster than R1T and R1S consumer vehicles because they have fewer features. They also undergo fewer factory operations. For example, painting pickup trucks – a laborious and lengthy process – takes two hours less than painting other vehicles.

Victor Taylor, the company’s senior director of sealing, body and plastics, also points out that there is less complexity and time required for pickup trucks in the body shop.

Low Price Electric Vehicles

Rivian, to the chagrin of bookers, raised the prices of its cars last month due to rising costs for goods. The company quickly rolled back increases to its existing 70,000 bookings, but said it would stick to updated rates for new bookings made as of March 1.

The increases make vehicle starting prices $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’s electric delivery trucks on April 11, 2022 at the Rivian plant in Normal, Illinois.

Michael Wayland/CNBC

Scaringe said the company plans to produce lower-priced vehicles on a next-generation EV platform. These vehicles will be manufactured at a $5 billion plant in Georgia, which is expected to start operating in 2024.

Much like other automakers, Rivian also plans to maximize profits and increase the performance of existing models, according to Scaringe.

The end of gas-powered vehicles

It’s the beginning of the end of consumer vehicles powered by fossil fuels – for Scaringe. The 39-year-old believes that production and sales of these vehicles will end in his life, sooner rather than later.

Without giving a specific date, Scaringe said the end of that era is likely closer to 20 years from now instead of 50, with companies 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 gas-engine cars. It is difficult to estimate the full scale of the transition,” he said. “The challenge is whether or not it is driven by politics. The companies that will survive are the ones who realize that the end state of combustion is zero.”

Rivian CEO RJ Scaringe inside the company’s Customer Experience Center outside its plant at Aptil 11, 2022 in Normal, Ill.

Michael Wayland/CNBC

Spax

Rivian is among a handful of electric vehicle startups that 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 more traditional and direct public presentation.

Many companies that have gone the SPAC route have had financial problems or received inquiries from the SEC about their deals to raise public or other business matters.

Scaringe thinks that some of these companies won’t be competing, Rivian should worry about for much longer.

“With the financial markets shifting from a growth oriented to a value oriented kind of thing, I think a lot of those companies that are really underfunded, and similar companies will start to slowly disappear,” he said. “Capital will run out.”

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

Michael Wayland/CNBC

Self-driving vehicles designed for a specific purpose?

Tesla CEO Elon Musk recently said that the auto company will be making a “custom robot.” He didn’t provide a time frame or any additional details other than to say it would “look futuristic” and be fully self-driving, something the company hasn’t achieved despite the name of its “full autonomous driving” (FSD) driver assistance feature. .

Rivian has not announced plans for a similar vehicle, and Scaringe will not comment on his counterpart directly. But he said the company “will offer a lot of different products in the future.”

Scaringe, who moved from Southern California to near the 3.3-million-square-foot factory, is known for being an animated, level-headed scheme that typically allows his actions to speak louder than his words (or tweets). It’s a different style than Musk, although both are considered very ambitious and detail-oriented 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 sector leaders General Motors and Ford Motor Co., which owns a roughly 12% stake in Rivian.

General Motors began shipping its GMC Hummer EV pickup in December, months after the launch of the Rivian R1T. Ford is expected to soon begin shipping an electric version of its F-150 pickup truck, called the F-150 Lightning, followed by the much-anticipated Tesla Cybertruck, which is set to go into production next year.

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

Michael Wayland/CNBC

Although there are many comparisons to be made between the Rivian R1T and other electric trucks, the Scaringe is unfazed by the competition. He actually welcomes it, for now. He thinks there is currently more than enough demand to meet EV pickup production in the near term.

“Humans have a fascination with winners and losers, like everything in life should be a zero-sum game,” he said. “I really don’t see it that way. …I look at it like I hope Hammer can be hugely successful. I really do. I hope Lightning is hugely successful, and I hope we do massively. And I think all three can happen from those one point of view” The view of intellectual honesty.”