Almost three years ago, Amazon announced it would buy 100,000 custom vans from Rivian, a fledgling electric vehicle manufacturer. On Thursday, after some delay, the companies said hundreds of vans were finally on their way.
The battery-powered trucks are critical to Rivian’s business plan and survival in a highly competitive automotive industry. And they are an important part of Amazon’s plan to reduce carbon emissions, as it builds its own fleet and relies less on contractors like UPS to deliver billions of orders of toothpaste, hair dryers, dog toys and various other products.
But questions remain about how quickly Rivian, which is about 18 percent owned by Amazon, can fulfill the retail giant’s order. The automaker, which started producing vehicles in small numbers last year, is struggling to ramp up amid shortages of semiconductors and other components. And last week, Rivian warned workers to expect layoffs and other cost-cutting measures.
“We are making some adjustments to certain teams within the company,” Rivian founder and CEO RJ Scaringe said in an interview this week. He did not say how many jobs could be cut.
“These are some of the hardest decisions you have to make as a leader, recognizing where we spend our dollars, where we spend our focus or our time,” he added.
Amazon has said it does not expect all 100,000 trucks to be delivered before the end of the decade. In a securities filing in November, Rivian said it plans to deliver the 100,000 trucks “by 2025.” Mr Scaringe declined to say if that was still the plan, saying he hoped to deliver the vans sooner than Amazon expected them to.
In January, Ross Rachey, who oversees Amazon’s global fleet, said the companies are expected to have 10,000 this year. So far, Rivian has shipped hundreds, and Amazon expects to have “thousands” by the end of the year, said Udit Madan, Amazon vice president of transportation.
Rivian also makes a pickup truck and a related SUV. That means the company is trying to ramp up two assembly lines at once — a tall order for any automaker, especially a relative newbie.
The emerging market for electric vans is becoming increasingly competitive. Ford Motor, a major shareholder of Rivian, began selling an electric version of its popular Transit van several months ago and has delivered about 3,000 of them to date. Ford has sold some of its shares in the company in recent months.
Rivian’s production problems are symptomatic of the difficulties young electric vehicle manufacturers face as they try to challenge traditional car manufacturers. Many are discovering how difficult and costly it is to mass-produce vehicles, and time is not on their side as the incumbent companies are also fast moving towards electrification.
Read more about electric vehicles
While the general car market is stagnating, the popularity of battery-powered cars is rising worldwide.
So far, Tesla, which sells more electric cars than any other manufacturer, is the only electric vehicle manufacturer to gain significant market share. But that company doesn’t make or sell trucks yet.
Canoo, which has announced plans to offer a spacious electric van this year, warned in May that the money could run out. Management “has identified substantial doubts about our ability to continue as a continuity,” Canoo said in a registration request. The company’s prospects improved this month when Walmart said it would purchase 4,500 Canoo vehicles to make deliveries for online orders.
Amazon doesn’t just depend on Rivian for zero-emission vehicles. It also plans to order electric vans from Stellantis and other manufacturers, albeit in smaller numbers.
Amazon has invested heavily to build its own delivery network and already has well over 100,000 vans, most of them diesel-powered. It delivered about six billion packages in the United States last year, more than UPS, according to Bank of America estimates.
With a design that has been compared to a friendly blue whale, the Rivian vans come with large touchscreens and technology not available from traditional truck manufacturers, who are just starting to sell electric vans. By replacing petrol or diesel trucks with electric vans, Amazon would help stem an alarming increase in emissions from the growth of vans.
In a joint interview, Mr Scaringe and Mr Madan outlined the Rivian bus as the product of painstaking joint development that would be much more comfortable for drivers, who are themselves scarce. The companies are obsessed with the door handles and other details, Mr Scaringe said, and the vehicles will have seats with built-in heating and cooling. The doors are designed to make it easier for drivers to jump in and out of the trucks.
Amazon, known for using software to extensively automate and streamline warehouses and other activities, tried to extend that approach to its vans.
For example, navigation software in the Rivian trucks automatically sends drivers to their next address and displays information about customers. “Things that they would normally have to respond to will happen automatically,” Mr Madan said.
Vans lend themselves to battery power because they generally travel fairly short distances compared to, say, semi-trucks, which Amazon also uses. Rivian’s vehicles have enough range to deliver all day and charge overnight, Madan said. Amazon said it had added thousands of charging stations to its delivery depots for the vans.
Electric vehicles use less energy in the city than on the highways – the opposite of combustion engine vehicles – because their regenerative brakes can recover some of the energy used to propel them. Unlike motors, electric motors consume minimal energy when they stop at traffic lights.
Until recently, Rivian was seen as one of the most promising electric car manufacturers. Its debut pickup, the R1T, was named Motor Trend’s Truck of the Year for 2022. Other critics were also enthusiastic about the pickup.
But the company’s manufacturing problems have made investors nervous — Rivian’s stock price has fallen below $35, from about $170 shortly after the company’s IPO.
Competition is also heating up. This spring, Ford began selling an electric version of its popular F-150 pickup, the Lightning, which was an instant hit and rival to the R1T. General Motors will start selling an electric Chevrolet Silverado pickup next year.
All automakers have suffered from a shortage of semiconductors and other critical components. But as a smaller and newer player, Rivian probably has far less influence over suppliers than Ford or GM Rivian said in May that it had lost a quarter of its planned production time since March due to supply chain problems.
Mr Scaringe said he expected the semiconductor shortage to continue for the rest of the year, but “I think that will be relatively short term.”
He said a slowing economy or recession could help reduce deficits, but it would also create problems. “We are looking at what will inevitably be very dynamic over the next six months from a supply chain point of view, from an interest rate and inflation perspective,” said Mr Scaringe.