By Edward Ludlow and Kyle Stock | Bloomberg
Irvine-based Rivian Automotive’s “launch mode” is impressive — at least on its trucks.
While the battery-powered pickup trucks go from 0 to 60 miles per hour in 3.3 seconds, the 3.3 million square foot factory they emerge from is experiencing an extended start. Assembly lines are perfectly capable of cruising speed; they just need more computer chips.
That was CEO RJ Scaringe’s message last week as he took Bloomberg on a tour of the Normal, Illinois plant, two hours southwest of Chicago. The cavernous facility was packed with people â 5,200 in all, spread over various shifts. Industrial tools punched metal into door frames and dozens of robotic arms welded body panels, smashed windshields and sprayed paint.
The parking lot behind the factory is filled with hundreds of battery-electric pickup trucks called R1T, Rivian’s first consumer product. Parked next to the “Prime Blue” brand were dozens of plug-in commercial delivery vans for Amazon.com, a key customer and investor. All the machines are waiting to be shipped off to their new owners, a sleepy cavalcade ready to roll out in the next EV wars.
However, for the whole activity, the factory limps compared to the competing installations. Rivian expects it to operate at just 50% capacity this year as a shortage of critical parts limits production. The assembly line was static in places, and some workers were diligently organizing parts bins and rechecking machines. Sometimes the first shift of the day ends around 3 p.m., Scaringe said in an interview, simply because they don’t have enough to do.
“I would love to be in a position where we’re running two shifts, but two shifts wouldn’t pay us anything right now,” Scaringe said. “We need parts.”
Rivian is no exception in the automotive industry; it’s only different because it’s new. A few months ago, Rivian launched the first battery-powered electric pickup in the US market, beating Tesla Inc, Ford Motor Co. and General Motors Co. in the process. The company counts Jeff Bezos and Amazon among its biggest investors (and customers) and its initial public offering in 2021 was the sixth largest in US history. But from the start, stocks have sagged and analysts have reduced projections and hopes for the stock.
Rivian has managed to speed up the flow of certain products, in part by sending employees to supplier factories to increase the pressure. Computer chips, however, remain a challenge. There is a fixed supply and usually chipmakers allocate them based on historical production, which is a huge disadvantage for a newcomer like Rivian. Scaringe says he spends a lot of his time calling chip executives and assuring them that his plant is running smoothly. Inviting a group of journalists for a tour highlights this missive.
âThe allocation is based on whether they think we’re using the chips or not,â Scaringe said. “But that’s a self-fulfilling prophecy, because if Intel thinks we’re not going to produce more than the next number, then that’s the number we’re going to produce.”
Scaringe reiterated his promise that his plant will roll out 25,000 vehicles this year, including 10,000 pickup trucks that Amazon expects, with the first installment of an order for 100,000 units to be completed by the end of this decade. That’s about half of what the plant would be capable of if it had a constant flow of parts.
The company has invested billions of dollars in upgrading a former Mitsubishi plant it acquired in 2017 for $16.5 million. Since then, the facility has grown by 700,000 square feet. It is now full of tools and machines that take months to map out and install.
One of Rivian’s biggest expenses to date, a state-of-the-art paint shop buzzes like a wing from the Star Wars Death Star. Two assembly lines â one for the commercial van, the other for the company pickup and SUV â wrap around each other in a carefully choreographed industrial ballet. At one end of the plant, battery cells are grouped into modules and paired with electric motors to form the “skateboards” that are bolted under all Rivian vehicles before they are driven from the facility to the outdoor car park.
Rivian currently produces vehicles in batches: when enough parts accumulate, managers launch the conveyor belts and workers make a few dozen trucks. âWe’re hoarding enough parts to build as fast as the factory can build,â Scaringe said, âbut we can’t run like this for a week; we go through the rooms so fast. Eventually, Rivian expects the plant to phase out 200,000 machines a year by 2023. But so far, the plant’s limitations don’t appear to have had an effect on demand. Orders are coming in at an increasing rate, Scaringe said, as more trucks head to neighborhoods and parking lots. The high-profile IPO didn’t hurt either.
This, however, presents its own set of challenges. With a waiting list of more than 85,000, Rivian is selling hardware that customers won’t receive for nearly two years. Given this widening window, Rivian is set to change the way it takes orders, essentially decoupling reservations from itemized pricing. New customers will still be able to choose a truck, post a deposit and claim a place in the queue, but they won’t be able to choose options – or configure their vehicle – and lock in a specific price until they approach an agreed delivery. Date.
“It’s a conversation we need to have,” Scaringe said. âThe content will evolve, the pricing will evolve; this allows these evolutions to occur without having to predict what they will be precisely.
The change will help Rivian account for inflation and rapidly fluctuating commodity and part prices. In early March, the company reversed an announced price increase for people with standing orders when a surge of such customers canceled their reservations (although it kept the list price higher for new buyers). Additionally, said Scaringe, Rivian vehicles will change dramatically over the next two years. They may look the same, but he says they’ll be more efficient, with improved charging speed and driving dynamics.
In short, the R&D team is working frantically, even as line workers wait around 10 parts out of 2,000 â each the size of a fingernail â delaying the process. “On top of that there’s the question,” Scaringe said, “Is the plant not actually running and using the shortage of semiconductors as an excuse?” It’s really complex and it’s really frustrating.