DuoRivians
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https://www.forbes.com/sites/alanoh...ge-is-driving-rivian-into-the-ev-mass-market/
![Rivian R1T R1S [Updated w/ Video] RJ Scaringe discusses R2 & Rivian in Forbes article (2/20/24) 0x0 (1)](data:image/svg+xml;charset=utf-8,%3Csvg xmlns%3D'http%3A%2F%2Fwww.w3.org%2F2000%2Fsvg' width='1200' height='1575' viewBox%3D'0 0 1200 1575'%2F%3E)
A storm is brewing on a chilly, gray winter day in Palo Alto, California. Still, RJ Scaringe is in a great mood as he power walks through Rivian’s leafy Silicon Valley campus, with one “let me show you this — it’ll just take 30 seconds” after another.
The 41-year-old CEO and founder of the most-promising of the baby Teslas (including Lucid, Fisker and Nikola) established the company in 2009 soon after getting a Ph.D. in engineering from MIT. Rivian had a rocky start when it launched production in late 2021, a historically tough time to start an auto company. Elon Musk predicted in 2022 that Rivian (and Lucid) would go bankrupt. It didn’t.
Right now he’s eager to show off a high-powered new computing system for future Rivians and the latest refinements to their automated highway driving tech. What he doesn’t show off is the company’s next big bet: the R2, a lower-priced SUV scheduled to be revealed at a March 7 event in Laguna Beach, California. That vehicle — smaller than the R1 S but with “the essence of what makes a Rivian a Rivian,” according to Scaringe — will go up against Tesla’s top-selling Model Y when it arrives by 2026.
Rivian’s first two consumer models, the R1T pickup and R1S SUV, are priced in the premium range, averaging about $80,000. The company sold about 44,000 combined last year and Scaringe said they were the best-selling vehicles in the U.S. at that price range. But that’s not mass market, and mass market is the goal.
“The average transaction price of a vehicle, any vehicle in the United States, is around $48,000,” Scaringe explained. “We think that’s a really important sweet spot, to be in that range, to create a viable option for customers that are coming out of combustion-powered vehicles getting into something very different.”
Being more competitive on price is essential as the EV market evolves. Recent weeks have seen big cost-cutting moves, including Tesla’s $1,000 reduction for the Model Y and cheaper lease offers from Rivian as well as new “Standard” versions of R1T and R1S starting at just under $70,000 and $75,000 respectively. And Ford CEO Jim Farley recently announced plans for new EVs priced below its Mustang Mach-E crossover and F-150 Lightning pickup. Industry researcher Kelley Blue Book estimates the average price of a new battery-powered vehicle has dropped 11% this year to $55,353. But that’s still higher than an industry average of $47,401, which includes both gasoline-powered and electric models.
photograph by cody pickens for forbes
Sales of EVs slowed in the final months of 2023, triggering concerns that consumer demand for them might be flagging. The jump in interest rates and higher prices relative to gasoline-engine autos didn’t help. Still, Cox Automotive predicts EVs will grab 10% of new auto sales this year, up from 8%, and hit about 1.6 million units, topping last year’s record of 1.2 million. But it will take some effort. As Cox explained in a recent report, the industry needs to sell average consumers on the benefits of electric vehicles. That means offering a wider array of options, more incentives, more discounts, and more advertising.
A wider selection of models is also necessary, Scaringe said. “Products available in the market today cover a very small subset of the segments, both in terms of form factor and in terms of price that customers want. I look at any sort of view of demand being soft for EVs as more a reflection of a lack of product choice.”
He declined to provide details about Rivian’s R2, beyond being smaller and lower-priced than the three-row R1 S and that it will meet the battery requirements needed to ensure customers can receive a $7,500 federal EV tax credit. (The lowest-priced R1 models qualify for only a $3,750 incentive.)
“The launch of the R2 is happening at a good time because we’re rapidly approaching that inflection point of EVs being relevant to mainstream consumers,” said Ed Kim, president of industry consultant AutoPacific. “Everyone now knows what a Rivian is: it's a high-image vehicle, a high-end brand. And right at the time EVs are becoming more relevant to mainstream consumers, here comes this much more mainstream-priced R2 that’s a lot more attainable and affordable.”
Sales Growth
Rivian debuted as the best-funded auto startup in U.S. history, raising more than $11 billion from private investors before an IPO in 2021 that netted an additional $13 billion. But it’s still working to live up to high expectations, and struggling to prove it can challenge the EV market dominance of Tesla. It’s grown much faster than Musk’s auto company, delivering over 50,000 vehicles in its second full year of production, a feat that took Tesla seven years. But early investors expected more, and Rivian’s shares have been hammered since its IPO, plunging about 90% since Nov. 8, 2021 to about $16 currently.
Rivian will update shareholders on its outlook for 2024 on Feb. 21, when it posts its fourth-quarter and full-year financial results for 2023. Because of a scheduled plant shutdown, analysts like Ben Kallo at Baird Equity Research expect a slower growth pace this year, with deliveries of about 66,000 vehicles. That compares to the 2 million or so EVs Tesla is expected to sell.
“Everything feels like, effectively, one brain made those decisions when in fact 1000s of brains were making decisions in parallel," Scaringe says of the brand.
Cody Pickens for Forbes
But Rivian will soon break ground on a $5 billion EV plant in Georgia that it says will eventually be able to produce 400,000 vehicles annually, more than double its 150,000-unit capacity in Illinois. It’s likely to be the main production site for the R2 and the R3 — and an even more affordable Rivian Scaringe is planning for later this decade.
After launching three models at essentially the same time, the company wants to take a more considered approach to future releases.
“If we were to do this differently, like wind the clock back, we would have created more space between R1 T, R1 S” and the delivery van, Scaringe said. “One vehicle launch is hard. Three vehicle launches in parallel are very hard. And three vehicle launches when the operating challenges of running a team amid the first global pandemic in modern society, that's really hard.”
Global supply chain problems added another layer of difficulty. “It made for a perfect storm of operational challenges,” he said. It also may have contributed to some quality problems.
Consumer Reports said some R1T pickup owners have griped about “issues with the drive system, specifically the axles. Other complaints involved vehicle charging and the climate system, said James McQueen, a spokesman for the magazine. It expects both R1T and R1S to be well below average for reliability relative to other new cars. “It's not just Rivian,” he said. The entire EV category has been struggling with reliability.”
(For an early look at Rivian, see Elon Musk’s New Nemesis: Rivian Founder R.J. Scaringe Has A $3 Billion War Chest And Tesla In His Headlights)
Rivian is particularly aware of these issues as it deploys mobile service trucks to fix its vehicles. And Scaringe said it’s working to solve them.
“We started strong but our objective is to be building the highest quality vehicles in the world,” he said. “That's a continuing journey: better and better quality day over day, month over month, quarter over quarter. That translates not just to R1 but into the R2 platform.”
Brand Appeal
While both Consumer Reports and JD Power have dinged Rivian for quality issues, the brand is proving to be surprisingly popular. It recently topped Consumer Reports’ annual list of most-loved auto brands.
The company’s website showcases Rivians in action taking its drivers camping, surfing, biking and hiking. The feeling is Subaru-esque.
It’s not a coincidence. These are things that Scaringe — a lean, 6’ 1” vegan who looks a bit like Clark Kent if Superman’s alter ego wore hiking shirts, jeans and sneakers — also enjoys. Neither is Rivian’s design whose rounded edges and distinctive concave headlights create a sort of friendly face, reminiscent of Japanese animecharacters. In the case of the R1T pickup, the look is a far cry from the military assault vehicle aesthetic of the Tesla Cybertruck.
“R1 T was the first electric pickup, launching before Ford’s Lightning, and in terms of imagery it was very different from the traditional pickup norm, which is it’s got to be super rugged and it's got to look aggressive,” AutoPacific’s Kim told Forbes. “By comparison, Cybertruck has a kind of neo-fascist look.”
Though Scaringe, like Musk, is Rivian’s driving force, he’s quick to praise the company’s product design team and engineers for creating vehicles that feel distinctive and consistent, from the exterior design to the seats and components. “Everything feels like, effectively, one brain made those decisions when in fact 1000s of brains were making decisions in parallel.”
The R1s introduced Rivian to the world “but from a price point of view limit the number of customers that can access it,” he said.” R2 greatly expands the relevance of Rivian to a much broader set of consumers. I've never been as excited as I am about a product as I feel for R2.”
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