Rivian’s CEO created buzzy, outdoorsy EVs. Now big automakers are coming after it

CNN, CNN BUSINESS

By Peter Valdes-Dapena, CNN Business

Rivian CEO Robert Joseph Scaringe, better known as RJ, is living his lifelong dream. Getting here though has required dedication to a vision that once seemed nearly impossible. Even now, as the company’s assembly lines have started churning out its electric vehicles, success still isn’t assured.

Rivian’s off-road-capable trucks and SUVs have won awards and customers adore them. And production is ramping up — albeit more slowly than investors might like — with a second shift recently added at Rivian’s Illinois factory.

But Rivian is also burning through money, recording a net loss of $1.4 billion in the most recent quarter. With a new factory planned in Georgia along with a planned expansion of its Illinois plant, even Rivian’s nearly $14 billion in cash reserves can’t last forever. And just last summer, the company laid off 6% of its then 14,000-strong workforce, citing rising costs for supplies and climbing interest rates.

Meanwhile, Rivian’s early advantage in the EV space is shrinking, with competition from the likes of GM and Ford growing fiercer by the day.

Yet despite all the strains, it’s clear this is exactly where Scaringe wants to be. The 39-year-old is running the car company he founded, building electric vehicles he helped engineer and design.

Ever since he was a child growing up in Melbourne, Florida, Scaringe wanted to start his own car company. He had developed a reputation as an automotive savant and tinkered on cars in his spare time, even keeping parts in his bedroom.

At the time, the idea of starting a car company seemed very farfetched. The last successful American automotive “startup” before Tesla was Chrysler, which was founded in 1925. Even then, though, Walter Chrysler took over the assets of a faltering automaker, he didn’t start from scratch. Also, Chrysler had long worked in the industry, running General Motors’ Buick division before striking out on his own. Scaringe, on the other hand, started cold, with no experience working in the industry.

Scaringe doesn’t seem like the sort of person given to rash leaps into the unknown. Clean shaven, he wears square, dark-rimmed glasses and his hair is trimmed in a conservative Clark Kent style. He has, no doubt, had a few sleepless nights pushing Rivian through its infancy, but he almost never appears in public looking anything but rested and groomed.

His approach to starting Rivian has also been careful and deliberate. After high school, Scaringe went to Rensselaer Polytechnic Institute in New York — his father’s alma mater — earning a bachelor’s degree in mechanical engineering. After that, he went to the Massachusetts Institute of Technology to get his master’s degree and then a Ph.D. at MIT’s Sloan Automotive Lab, both in mechanical engineering.

After earning his Ph.D., Scaringe didn’t take his hard-learned knowledge to any of the established automakers. Instead, he sought investors for his own company.

“As part of my graduate work, and a lot of things I was doing, I realized the likelihood of me learning the appropriate skills working at a car company was not super high,” Scaringe told CNN Business.

For him, engineering vehicles for another company that weren’t the ones he envisioned, would have been the definition of failure. As he saw it, joining a big automaker would have reduced his chances of success to zero.

“It’s also a question of time,” Scaringe said. “If you’re going to spend five years doing something, the utility of those five years would be best served by working on the problems of starting a company and learning the things that are… You know, all the hard mistakes.”

Starting from scratch

In 2009, Scaringe went back home to Florida and started making those hard mistakes.

Initially named Mainstream Motors, his new company had a number of small investors, including his father, who mortgaged his home to help get it off the ground. Scaringe also mortgaged a house he had bought with money he’d earned working various jobs while in high school.

Scaringe renamed the company Avera briefly; then renamed it again, in 2011, as Rivian. He found investors, hired engineers out of college and burned through lots of ideas, he said. (The company’s headquarters have also moved twice since then and are now based in Irvine, California.)

During those early years, Scaringe puzzled over exactly what sort of vehicles his company should build. He had long been aware that automobiles, the machines that fascinated him, caused a lot of environmental damage, something that, he said, “bummed me out a lot.”

He wanted a world in which automobiles weren’t wrecking the planet.

“What’s the right thing to help shift consumer mindset, help shift the industry’s understanding of the space?” he said. “So the ideas were really broad. Everything from different powertrains, to the size of the vehicle, type of vehicles, number of wheels on the vehicle, all those kinds of things.”

Finally, Scaringe and a small group of engineers settled on designing and building a hybrid sports car. That idea propelled the company for a couple of years, he said, before it was scrapped for something entirely different. There was no sudden shift, Scaringe said, just a gradual realization that the hybrid concept wasn’t radical enough.

“One of the really incredible things about the early days of the company was the ability, because of the lack of capital, because of the lack of scale, to rapidly move around in terms of what the business strategy was or the product strategy was,” he said.

Scaringe, along with his dozen or so employees, pivoted to working on fully electric off-road vehicles. They unveiled the company’s first two models, the R1T truck and the R1S SUV, at the Los Angeles Auto Show in 2018, not long after Rivian had purchased a former Mitsubishi factory in rural Illinois to build them.

The following year, Amazon and Ford both invested hundreds of millions of dollars in the company. It would be the first of several big funding rounds. In 2021, Rivian had its initial public offering which became the biggest since Facebook’s in 2012. The stock price has dropped considerably since then.

At the time the R1T and R1S were introduced, there was hardly anything on the market like them. There were electric cars, yes, but the idea of electric pickups and off-road-capable SUVs was still relatively novel. Most electric vehicles were focused on simply trying to get a few people and, maybe, some baggage, as far as possible before needing to recharge. Most EV makers weren’t thinking about hauling gear or going camping.

Rivian’s luxurious off-road vehicles were venturing into new territory in more ways than one.

Facing new competition

The R1T and R1S are now finding homes in customers’ driveways, but things have changed since they were first unveiled. Where once Rivian had only to distinguish its electric vehicle offerings from Tesla’s, now there’s much more competition.

In 2021, Ford revealed the F-150 Lightning electric truck, which went into production this year. GM also went into production with its GMC Hummer EV this year, and unveiled two other electric trucks in addition to several electric SUVs at a range of price points. Tesla revealed the Cybertruck about a year after Rivian’s unveiling, but it still hasn’t gone into production.

Still, Rivian’s vehicles occupy fairly unique industry niches. The R1T, for example, isn’t marketed as a work truck like the Ford Lightning. Its got more of a campsite, rather than job site, vibe. The R1S’s appeal goes the other way. It’s more of a serious off-road capable SUV with an emphasis on cargo-carrying capability. Prices for both start in the $70,000 range, comfortably in luxury vehicle territory.

The R1T won MotorTrend’s Truck of the Year award last year, making Rivian the first automaker ever to win that award with its first product.

The company has delivered about 14,000 vehicles, but still has an order backlog of 114,000. Over time, though, the difference between Rivian’s products and those that could be bought more easily or cheaply from an established automaker could become lost on shoppers.

Another hurdle Scaringe is facing: More established car and truck brands have vast dealer networks and huge advertising budgets. For its part, Rivian follows Tesla’s model, selling directly to customers through its website without relying on franchised dealers as laws in many states require. It can be a challenge, even as Rivian sells a tiny fraction of the number of trucks that a company like GM or Ford sells, but Scaringe insists the direct customer relationship is too valuable to hand off to independent dealerships.

Scaringe said he’s not concerned about competition and, in fact, welcomes it, since one of his goals has been to shift the industry toward electric vehicles.

Rivian also makes the EDV, or Electric Delivery Van, for just one customer — but a vitally important one, Amazon. The online retailer, which now owns almost one-fifth of the company, has agreed to buy 100,000 electric vans.

Even with the billions of dollars in funding and thousands of orders, Rivian remains unprofitable. Cars are complex, highly regulated products that are expensive to develop and the factories that build them are costly to set up and run. “We do not expect to be profitable for the foreseeable future as we invest in our business,” the company said in its most recent quarterly financial filing.

As their names imply, the R1S and R1T are just Rivian’s first products. Others are in development. While Scaringe is keeping mum on the details, he did list a few key attributes he thinks future Rivians must have.

“The efficacy of getting a whole bike in or out of the vehicle is something that’s really important in the future for us,” he said. “The ability to put a car seat in the back, the ability to throw gear in the front trunk. These are all really important things for us as a brand because we want you to be able to take your friends, your things, your pets, your stuff to all the places you want to go in the world.”

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