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

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

Battery powered trucks are critical to Rivian’s business plan and survival in the highly competitive automotive industry. And they’re a big part of Amazon’s carbon footprint as the company builds its own fleet and relies less on contractors like UPS to deliver billions of orders for toothpaste, hair dryers, dog toys and other items.

But questions remain about how quickly Rivian, about 18 percent owned by Amazon, can fulfill the retail giant’s order. The automaker, which began making cars in small batches last year, is struggling to ramp up production due to a shortage of semiconductors and other components. And last week, Rivian warned employees to expect layoffs and other cost-cutting measures.

“We are making some adjustments to some of the teams within the business,” Rivian founder and CEO RJ Scaringe said in an interview this week. He declined to say how many jobs could be cut.

“These are some of the hardest decisions a leader has to make to understand where we spend our dollars, where we spend our attention or spend our time,” he added.

Amazon said it does not expect all 100,000 trucks to be delivered before the end of the decade. AT November application for securitiesRivian said it plans to deliver 100,000 trucks “by 2025”. mr. Scaringe declined to say if that was still the plan, saying only that he hopes to deliver the vans sooner than Amazon expects.

Ross Raichi, who oversees Amazon’s global fleet, said in January that companies expect to deploy 10,000 as early as this year. Rivian has delivered a few hundred so far, and Amazon expects to receive “thousands” by the end of the year, said Udit Madan, Amazon’s vice president of transportation.

Rivian also makes a pickup truck and a related SUV. This means that the company is trying to ramp up two assembly lines at once – a difficult task for any automaker, especially for a relative newcomer.

The nascent 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 a few months ago and has delivered about 3,000 vehicles so far. Ford has sold some of its shares in the company in recent months.

Rivian’s production problems are symptomatic of the difficulties young EV makers face in trying to challenge traditional automakers. Many are discovering how difficult and expensive it is to mass-produce cars, and time is not on their side because well-known companies are also moving rapidly towards electrification.

For now, Tesla, which sells more electric vehicles than any other manufacturer, is the only electric vehicle manufacturer to gain significant market share. But this company does not yet manufacture or sell trucks.

Canoo, which announced plans to offer a roomy electric van this year, warned in May that may not be enough money. Management “has identified significant doubts about our ability to continue as a going concern,” Kanu said in a statement. The company’s outlook improved this month when walmart said it would buy 4,500 Canoo vehicles to deliver online orders.

Amazon is not solely dependent on Rivian for emission-free vehicles. There are also plans to order electric vans from Stellantis and other manufacturers, albeit in smaller numbers.

Amazon is investing heavily in building its own network of delivery contractors and already has well over 100,000 vans, most of them with diesel engine. Bank of America estimates that it delivered about six billion packages to the US last year, surpassing UPS.

Rivian’s vans, with designs that have been compared to the friendly blue whale, feature large touchscreens and technology not available to traditional truck makers that are just starting to sell electric delivery vehicles. By replacing gasoline or diesel trucks with electric vans, Amazon will help curb alarming growth emissions from the growth of delivery vehicles.

During a joint interview with Mr. Scaringe and Mr. Madan presented the Rivian van as a product of painstaking co-development that would be much more convenient for drivers who are in short supply. The companies are obsessed with doorknobs and other details, Mr. Wilson said. Scaringe said the cars 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 automate and streamline warehouse and other operations extensively, has been looking to extend this approach to vans.

For example, the navigation software in Rivian trucks automatically directs drivers to their next address and displays customer information. “Things they normally have to 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, the semi-trucks that Amazon also uses. Rivian vehicles have enough range to deliver cargo all day long and charge at night. Madan said. Amazon said it has added thousands of charging stations to its van delivery warehouses.

Electric vehicles use less energy when driving in the city than on the highway – unlike internal combustion engine vehicles – because their regenerative brakes can offset some of the energy used to propel them. Unlike motors, electric motors consume a minimal amount of energy when stopped at a traffic light.

Until recently, Rivian was considered one of the most promising manufacturers of electric vehicles. His debut R1T pickup was named motor trendTruck of the Year for 2022. Other critics also rave about the pickup.

But the company’s production problems have worried investors – Rivian’s share price fell to less than $35 from about $170 shortly after the company’s initial public offering.

The competition is also heating up. This spring, Ford began selling an electric version of its popular F-150 pickup truck, the Lightning, which was an immediate hit and rivaled the R1T. General Motors will begin selling the Chevrolet Silverado electric pickup next year.

All automakers are suffering from a shortage of semiconductors and other critical components. But as a smaller, newer player, Rivian likely has far less influence over suppliers than Ford or GM Rivian, which said in May that the company has lost a quarter of scheduled production time since March due to supply chain problems.

mr. Scaringe said he expects the semiconductor shortage to last until the end of the year, but “I think it will be relatively short term.”

He said a slowdown in the economy or a recession could help reduce the deficit, but would create problems in and of itself. “We are looking at what is bound to be very dynamic over the next six months in terms of the supply chain, in terms of the interest rate, in terms of inflation,” he said. said Scaringe.