Amazon wants 100,000 electric vans. Can Rivian deliver?

Nearly three years ago, Amazon announced it would buy 100,000 custom-built delivery vehicles from Rivian, a young electric vehicle maker. On Thursday, after some delays, the companies said hundreds of vans were finally on the road.

Battery-powered trucks are essential to Rivian’s business plan and to its survival in a highly competitive automotive industry. And they’re an important part of Amazon’s plan to curb 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, about 18% of which is owned by Amazon, can fulfill the retail giant’s order. The automaker, which started producing vehicles in small numbers last year, is struggling to expand amid shortages of semiconductors and other components. And last week, Rivian warned employees to expect layoffs and other cost-cutting measures.

“We’re making some adjustments to some teams within the company,” RJ Scaringe, founder and chief executive of Rivian, said in an interview this week. He declined to say how many jobs might be cut.

“These are some of the hardest decisions one has to make as a leader, to recognize where we are spending our money, where we are focusing or spending our time,” he added.

Amazon said it doesn’t expect all 100,000 trucks to be delivered before the end of the decade. In a November title filing, Rivian said it plans to deliver all 100,000 trucks “by 2025.” Mr Scaringe declined to say whether that was still the plan, saying only that he hoped to deliver the vans sooner than Amazon expected them.

In January, Ross Rachey, who oversees Amazon’s global fleet, said the companies planned to deploy 10,000 as early as this year. So far, Rivian has shipped several hundred, and Amazon now expects to have “thousands” by the end of the year, said Udit Madan, vice president of transportation at Amazon.

Rivian also manufactures a pickup truck and related sport utility vehicle. This means that the company is trying to set up two assembly lines at once – a difficult task for any automaker, especially for a relative newbie.

The nascent market for electric delivery 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 around 3,000 so far. Ford has sold some of its shares in the company in recent months.

Rivian’s production issues are symptomatic of the difficulties young EV makers face as they attempt to challenge traditional automakers. Many are discovering how difficult and expensive it is to mass-produce vehicles, and time is not on their side as established companies are also rapidly moving towards electrification.

So far, Tesla, which sells more electric cars than any other automaker, is the only electric vehicle maker to gain significant market share. But this company does not yet manufacture or sell trucks.

Canoo, which announced plans to offer a spacious electric van this year, warned in May that it could run out of cash. Management “has identified substantial doubt about our ability to continue our business,” Canoo said in a regulatory filing. The company’s outlook improved this month when Walmart announced it would buy 4,500 Canoo vehicles to make deliveries for online orders.

Amazon isn’t solely dependent on Rivian for zero-emissions vehicles. It also plans to order electric vans from Stellantis and other manufacturers, although in smaller numbers.

Amazon has invested heavily to build its own network of delivery contractors 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, surpassing UPS, according to Bank of America estimates.

With a design that has been compared to a friendly blue whale, Rivian vans feature large touchscreens and technology not available from traditional truck manufacturers, which are just starting to sell electric delivery vehicles. By replacing gasoline or diesel trucks with electric vans, Amazon would help contain an alarming increase in emissions due to the growth of delivery vehicles.

In a joint interview, Mr. Scaringe and Mr. Madan portrayed the Rivian van as the product of painstaking joint development that would be much more comfortable for drivers, who themselves were in short supply. Companies are obsessed with door handles and other details, Mr Scaringe said, and vehicles will have seats with built-in heating and cooling. The doors are designed to make it easier for drivers to enter and exit trucks.

Amazon, known for using software to largely automate and streamline warehouses and other operations, has sought to extend this approach to pickup trucks.

For example, Rivian truck navigation software automatically directs drivers to their next address and displays customer information. “Things they would normally react to will happen automatically,” Madan said.

Delivery vehicles lend themselves to battery power because they tend to travel fairly short distances, compared to, say, tractor-trailers, which Amazon also uses. Rivian vehicles have enough range to make deliveries all day and charge overnight, Madan said. Amazon said it has added thousands of charging stations to its delivery depots for pickup trucks.

Electric vehicles use less energy in cities than on highways, unlike internal combustion vehicles, because their regenerative brakes can recover some of the energy used to propel them. Unlike motors, electric motors consume little energy when stopped at traffic lights.

Until recently, Rivian was considered one of the most promising electric car manufacturers. Its first pickup, the R1T, was named Motor Trend’s Truck of the Year for 2022. Other reviewers also praised the pickup.

But the company’s production issues have baffled investors – Rivian’s stock price fell to less than $35 from around $170 shortly after the company went public.

Competition is also intensifying. This spring, Ford began selling an electric version of its popular F-150 pickup, the Lightning, which was an instant hit and a rival to the R1T. Next year, General Motors will begin selling a Chevrolet Silverado electric pickup truck.

All automakers suffered from shortages of semiconductors and other critical parts. But as a smaller, newer player, Rivian likely has far less influence with suppliers than either Ford or GM Rivian said in May that since March it had lost a quarter of its scheduled production time due to supply chain issues.

Mr Scaringe said he expected the semiconductor shortage to last for the rest of the year, but “I think it will be relatively short-term”.

He said a slowing economy or recession could help alleviate shortages, but would pose its own problems. “We’re looking at what will inevitably be a very dynamic half-year from a supply chain perspective, from an interest rate perspective, from an inflation perspective,” Scaringe said.

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