Editorial: The Perfect Storm is Creating a Promising Future for Rivian
While I’ve been reporting on Rivian ever since it crept out of secrecy and purchased the 2.6M sq. ft. manufacturing facility in Normal, little has been said about the company’s viability once they are in production. I now believe that the perfect storm of conditions is creating a promising market for the new automaker. As gas prices rise, trade wars erupt, electric vehicle popularity picks up and consumer trends shift, Rivian is prepared to benefit on all levels.
Rising Gas Prices
With gas prices more than 25% higher than this time last year, owning a gasoline or diesel-powered vehicle is getting increasingly expensive. OPEC is boosting production to record levels to curb increasing prices, but experts say there may be a limit to how much control they hold. With Rivian developing a range of electric vehicles, the company is poised to benefit from high oil prices. As with all electric vehicles, the perceived value of the vehicles only rises when gas prices soar, creating more demand.
While it’s not clear that Rivian could benefit from the current trade wars, it can be certain that they have the ability to avoid sticky situations. The company is entering their tooling process very soon and long-term supplier relationships are in full swing, so carefully evaluating suppliers based on potential tariffs, puts the company in a position of power. Additionally, with a U.S. manufacturing facility and a presumably large portion of their target market residing in the U.S. (see below for the U.S.’s love for large trucks and SUVs), Rivian has the ability to focus on domestic sales during difficult trading periods.
Electric Vehicle Popularity
Luxury California-based automaker Tesla, has laid the groundwork around the global for wide-spread EV adoption. With nearly 5,000 Model 3’s, Tesla’s lower-cost vehicle, now being produced every week, the company is putting more EVs on the streets than any other automaker. While Rivian is positioning their brand as more approachable than Tesla, the sheer prevalence of more EVs on the streets lifts visibility for the sector.
In addition to simply manufacturing electric vehicles, Tesla has tackled fast-charging solutions for the vehicles. Tesla’s supercharging network reaches coast-to-coast and all enables easy road tripping globally. Tesla’s superchargers are currently only available for Tesla vehicles, but Tesla CEO Elon Musk has said in the past that he would be open to allowing other vehicles use them, provided they pay their fair share for the growing network. Tesla has 1,280 stations around the globe.
Side-note: We received our Tesla Model 3 in mid-May and have since put 3,700 miles on the car through road trips. Charging times last roughly 30 minutes every 3-4 hours (surprisingly faster than most pit stops). Uptown has eight Tesla Superchargers that Tesla installed and expanded. Tesla pays for the installation and all of the electricity needed for charging vehicles.
When Rivian rolls their first electric truck out of the Normal facility, it will be greeted by hundreds of thousands of electric vehicles and chargers. That certainly makes the idea of buying an electric vehicle a little easier.
The shifts happening in consumer trends is perhaps Rivian’s largest advantage. SUVs and trucks are becoming increasingly popular, with two of three new vehicle sales consisting of SUVs and trucks. The trend shows no sign of slowing down as automakers shift investments in the segment.
Following overall automotive trends, luxury vehicle sales are being cannibalized by high-end trucks. General Motors’ GMC trucks and Ford’s F-150 trucks are luring typical luxury vehicle owners into larger, more capable vehicles. Driven by the sale of their high-end SUVs and trucks, GM and Ford now grab 35% of all automotive sales over $60,000.
The move to large trucks and SUVs, specifically high-end variants, will be incredibly beneficial to Rivian. With their truck’s sale price targeted between $50,000 - $90,000 (depending on options), the company is hitting the sweet spot of the hottest market.
While we are still waiting for production to spool up at the end of next year, Rivian is making incredible progress. The company’s VP of Design Jeff Hammoud, formerly Chief of Design at Jeep, is working around the clock to lock-in design before tooling is ordered in the next few months. Rivian’s Executive Director of Engineering Mark Vinnels, formerly Executive Director of Product Development at McLaren Automotive, was in Normal two weeks ago working in the factory preparing for production.
While Rivian’s vehicles aren’t in production yet, the company is still ramping up hiring at all of their offices. Rivian employed 225 people at the end of 2017, the company now has upwards of 410 employees, including roughly 50 in Normal. Production is scheduled to begin in 2020.
Go Further: More Luxury Buyers Ditch the Imports and Pick Up a Truck (New York Times)