At the plant of the electric car company Rivian in Normal, Illinois, USA, life is everything.
Auto factories around the world churn out new cars around the clock. Yet, about eight months after production began at Rivian’s electric truck plant, the company’s executives marked a very important milestone: The company’s factory opened for the first time. operating at full capacity during a 10-hour shift.
MANUFACTURING HELL
Rivian, which investors once referred to as the “Tesla of electric trucks,” has 10,000 pre-orders for the product. The company has rolled out three new models in a row at the acquired plant – a commitment that even seasoned car company executives shake their heads to say is DARD.
First, the company had to master production – a task they had been grappling with so far. Struggling supply chains coupled with rising commodity costs including key vehicle battery materials such as nickel and lithium are also significant challenges.
During Rivian’s IPO in November, the company raised more money than any US company since 2014, about $12 billion. At that time, they delivered 156 cars in the first 2 months of operation of the plant.
The company’s shares were IPOed at $78 per share and at one point rose to $179 per share. That milestone has catapulted the company into one of the world’s most valuable automakers, with a market capitalization of $160 billion.
But the company’s stock has plummeted in recent months after a production failure – amid the auto industry’s toughest operating environment ever.
In March, company leaders lowered their production forecast for this year to 25,000 vehicles, blaming a lack of semiconductors and other supply chain problems. Rivian further angered customers with a price hike that same month. The lack of experience as well as the complexity of launching a car line has also affected production activities, tormenting employees for many hours.
Rivian reported a net loss of $1.6 billion for the first quarter on revenue of $95 million. The company says it expects supply chain problems to go away by the end of the year. Rivian’s market capitalization is currently only $ 27 billion, the share price is $ 30 / share.
The company’s 39-year-old leader, RJ Scaringe, who founded Rivian in 2009 says some of the problems the company faces are inevitable, complicating things. “It would be self-deception to say that everything is easy. We know this is difficult.”
Rivian is one of the most promising companies in the EV market, which has attracted investors over the past two years. All expect this to become the next Tesla.
Some of the IPOs were buzzing with huge revenue predictions and pledges to disrupt the traditional auto industry even though they’d never made or sold any cars.
In recent months, things have gotten worse. Lucid, which focuses on high-end electric vehicles, in February cut its output forecast for 2022 by 40%, citing difficulties in components and materials. Electric vehicle maker Lordstown has also delayed its latest model and recently said it needed to raise more capital to survive. Startup Canoo said in May that it had significant doubts about continuing to raise capital for its operation.
Unlike many others, Rivian owns a sizable pile of cash, reaching $17 billion by the end of March. At current levels of spending, that should be enough to wait for the next fundraising effort until. year 2025.
The company currently sells two models, the R1T for $67,500 and the R1S for $72,500. They also have a contract to deliver 100,000 pickup trucks to Amazon.
To some extent, Rivian’s manufacturing mandate is more complex than Tesla’s attempt years ago to scale output — what Elon Musk once called “manufacturing hell.”
Scaringe, who lives with his wife and three sons near a factory in Illinois, says he ultimately aims to sell 10 million cars a year around the world, on par with Toyota today. In December, the company revealed plans to build a second factory, a $5 billion factory complex in Georgia and open in 2024 with an assembly line for a smaller, more affordable electric SUV.
Rivian produced 2,500 cars in the first three months of this year. To meet the year’s target, they will have to produce nearly 10 times that number of vehicles in the last three quarters of the year, in an old assembly line acquired from Mitsubishi.
A central issue is the efficient management of transporting thousands of parts from the nearest warehouse to the assembly line in the right quantities, at the right time.
Delays for some components and slower-than-expected assembly jobs will congest other parts of the plant, disrupt storage, and lead to inventory management challenges. warehouse. The shortage of aluminum used to wrap the battery packs created particular bottlenecks because those had to be installed early in the assembly process.
“Initially, Rivian had a hard time convincing a few suppliers to deliver the parts they needed,” said Rod Copes, the company’s CEO before leaving in December. “I think Rivian are now becoming more reliable with the supply chain because they’ve really sped up.”
At the end of the assembly line, Rivian has only one machine to test the car’s water resistance. Earlier this year, this machine had a problem that prevented the fully assembled cars from leaving the factory.
Scaringe says output is improving. The plant is currently operating with a 10-hour or 3-day-a-week shift. Sometime around the second half of the year, he aims to run 2 shifts a day and 5 days a week.
Managing the transportation and relocation of components inside the factory is also problematic but this is improving as they increase training for the workforce.
“If you’re sitting by the line and waiting for a part to arrive, you have to stand there from 11 a.m. to 1 p.m. It’s a tiring day. It’s also not very cost-effective for them. I”.
He said issues with waterproof testing and the lack of key battery components are also being addressed.
“There are a lot of challenges. But right now, the biggest challenge is components.”
Investors are looking to see if Rivian can solve the problems and ramp up production to 10,000 vehicles like Tesla did with the Model 3 in 2018.
“It would be self-deception to say that everything is easy. We know it’s difficult,” CEO Rivian
Unlike Tesla at the time, Rivian had an additional supply chain challenge. Their R1T truck line also faces major competition from Ford Motor and GM, the two companies that launched their first electric vehicles.
Ford built more than 4,000 F-150 trucks, more than Rivian did in the entire first quarter.
Starting the production of a new car line is inevitable, even for established manufacturers. Ford and GM have also talked about quality or parts shortages over the past two years, including the introduction of Ford’s Bronco SUV and GM’s Corvette.
In December, Rivian pushed back on plans to deliver a model that could last longer on a single charge, at least 400 miles by 2023. In May, it recalled 500 trucks, saying they had detected airbags. The front seat may not work in the accident by fault.
Rivian stock has plunged since Scaringe and his team rang the Nasdaq bell on its December IPO. Shares hit a low of $19.25 in May after Ford, a major investor. into Rivian sold 8 million shares of this company. Ford then this week went on to sell another 7 million shares.
New companies also have a major disadvantage compared to traditional manufacturers, according to Jeff Schuster, president of research firm LMC Automotive. When the supply chain is at risk, it is difficult for young companies to find an alternative with backup suppliers.
“If you’re a startup that doesn’t have any real scale, managing the supply chain in this environment is extremely challenging,” Schuster said.
Musk also spoke about the challenge of going from prototype to mass production, describing the obstacles as impossible to ignore.
“The overwhelming problem with cars is manufacturing. It’s 99% of the trouble,” Musk said.
HOPES
Consumers and the buzz about Rivian still support them. In early May, Rivian had about 90,000 orders for the R1 series.
In addition to overseeing the factory, Scaringe says he also oversees other matters such as sourcing lithium for batteries, or even headed the software department when Rivian lost its chief technology officer.
In recent months, Scaringe has brought in a veteran leader to the company. Rivian recruited Tim Fallon – who used to run Nissan. He also set up assistant Frank Klein. One of his biggest tasks was to convince suppliers, especially semiconductor companies, to achieve Rivian’s manufacturing ambitions.
“The pie has always been a fixed size and we’re fighting to get the biggest piece of the pie we can,” Scaringe said.
Source: WSJ
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