Feb 20, 2024,06:30am EST
On a brisk, overcast winter day in Palo Alto, California, RJ Scaringe strides through Rivian’s verdant Silicon Valley campus, brimming with enthusiasm and eager to showcase the company’s latest innovations, one after another, with brief interjections of “let me show you this — it’ll just take 30 seconds.”
At 41, Scaringe, the CEO and founder of Rivian, stands at the helm of one of the most promising contenders in the realm of electric vehicle startups, rivaled only by the likes of Lucid, Fisker, and Nikola. He founded Rivian in 2009, hot on the heels of earning a Ph.D. in engineering from MIT. Despite facing a rocky start when production commenced in late 2021—a notoriously challenging period to launch an automotive enterprise—Rivian defied skeptics, including Elon Musk, who predicted its demise in 2022 alongside Lucid. Yet, Rivian not only survived but thrived.
Scaringe eagerly showcases Rivian’s cutting-edge computing system for future models and the latest advancements in automated highway driving technology. However, he keeps mum about the company’s next significant venture: the R2, a more affordable SUV set to debut at a March 7 event in Laguna Beach, California. Positioned as a smaller counterpart to the R1S but embodying the core essence of Rivian’s identity, the R2 will challenge Tesla’s popular Model Y when it hits the market by 2026.
Rivian’s initial offerings, the R1T pickup and R1S SUV, cater to the premium segment, boasting an average price tag of around $80,000. While these models amassed impressive sales of approximately 44,000 units combined last year and emerged as top sellers within their price category in the U.S., they remain out of reach for the mass market—a segment Rivian aims to capture.
Scaringe underscores the importance of attaining competitive pricing as the electric vehicle landscape evolves. Recent industry developments, such as Tesla’s price reduction for the Model Y and Rivian’s introduction of more affordable lease options and “Standard” versions of the R1T and R1S, underscore a broader trend toward cost reduction. Ford’s CEO, Jim Farley, has also unveiled plans for new EVs priced below the Mustang Mach-E crossover and F-150 Lightning pickup. Notably, the average price of a new battery-powered vehicle has dipped by 11% this year to $55,353, though it still surpasses the overall industry average of $47,401, encompassing both gasoline-powered and electric models, as estimated by industry analyst Kelley Blue Book.
PHOTOGRAPH BY CODY PICKENS FOR FORBES
The slowdown in EV sales towards the end of 2023 raised concerns about a potential decline in consumer demand, exacerbated by rising interest rates and comparatively higher prices compared to traditional gasoline-engine vehicles. Despite these challenges, Cox Automotive projects that EVs will capture 10% of new auto sales in the current year, up from 8%, with an estimated 1.6 million units sold, surpassing the previous year’s record of 1.2 million. However, achieving this growth requires concerted efforts.
Cox Automotive emphasized in a recent report the need for the industry to convince average consumers of the benefits of electric vehicles, advocating for a broader range of options, increased incentives, more discounts, and enhanced advertising campaigns.
RJ Scaringe, while acknowledging the importance of product diversity, highlighted the necessity for a wider selection of EV models to cater to various consumer preferences. He emphasized that the current offerings in the market are limited in both form factor and price range, which may contribute to perceived softness in demand for EVs.
Regarding Rivian’s upcoming R2 model, Scaringe refrained from divulging specific details, except to mention that it will be smaller and more affordably priced than the three-row R1S SUV and will meet the battery requirements necessary for customers to qualify for the $7,500 federal EV tax credit. (The lowest-priced R1 models are eligible for a $3,750 incentive.)
Ed Kim, president of industry consultant AutoPacific, noted the strategic timing of the R2’s launch, coinciding with the increasing relevance of EVs among mainstream consumers. He highlighted Rivian’s strong brand image and the anticipation surrounding the R2, which promises to be a more attainable and affordable option for a broader consumer base as EVs gain traction in the market.
Sales Growth
Rivian emerged onto the scene as the most well-funded auto startup in U.S. history, amassing over $11 billion from private investors before its IPO in 2021, which garnered an additional $13 billion. Despite its impressive financial backing, the company is grappling with the pressure to meet lofty expectations and establish itself as a formidable competitor in the EV market, challenging Tesla’s dominance. While Rivian has experienced rapid growth, surpassing Tesla’s pace by delivering over 50,000 vehicles in its second full year of production, it has fallen short of early investors’ expectations.
Since its IPO, Rivian’s shares have tumbled approximately 90% since November 8, 2021, currently hovering around $16. The company faces mounting pressure to demonstrate its ability to sustainably compete in the EV sector. Rivian is set to provide shareholders with an update on its 2024 outlook during its fourth-quarter and full-year financial results announcement on February 21. Analysts, such as Ben Kallo from Baird Equity Research, anticipate a slower growth trajectory for Rivian this year, projecting deliveries of around 66,000 vehicles. In comparison, Tesla is expected to sell approximately 2 million EVs in the same period.
“Everything feels like, effectively, one brain made those decisions when in fact 1000s of brains were making decisions in parallel," Scaringe says of the brand.CODY PICKENS FOR FORBES
Rivian is on the brink of commencing construction on a $5 billion EV plant in Georgia, which the company asserts will eventually have the capacity to manufacture 400,000 vehicles annually, more than doubling its current 150,000-unit capability in Illinois. This facility is poised to become the primary production site for the R2 and R3 models, as well as a more budget-friendly Rivian variant that Scaringe plans to introduce later in the decade.
Following the simultaneous launch of three models, Rivian intends to adopt a more deliberate approach to future releases. RJ Scaringe, the company’s CEO, reflected on the challenges posed by concurrent vehicle launches, particularly amid the operational complexities brought about by the first global pandemic in modern society. He emphasized the formidable nature of managing multiple vehicle launches amidst such circumstances.
Global supply chain disruptions further compounded operational challenges, leading to some quality issues. Consumer Reports highlighted complaints from R1T pickup owners regarding drive system issues, including axles, vehicle charging, and climate systems. James McQueen, a spokesman for the magazine, noted that both the R1T and R1S are expected to have reliability ratings well below the industry average for new cars. Scaringe acknowledged these concerns and emphasized Rivian’s commitment to resolving them.
While Rivian commenced operations strongly, Scaringe emphasized the company’s ongoing pursuit of building vehicles of the highest quality. He underscored the continuous improvement process aimed at enhancing quality standards across Rivian’s vehicle lineup, extending from the R1 series to the forthcoming R2 platform.
Brand Appeal
While Rivian has faced criticism from both Consumer Reports and JD Power for quality issues, the brand has surprisingly gained popularity, recently topping Consumer Reports’ annual list of most-loved auto brands.
Rivian’s website showcases its vehicles in action, depicting drivers engaged in camping, surfing, biking, and hiking activities—a vibe reminiscent of Subaru. This alignment is not accidental, reflecting the personal interests of RJ Scaringe, Rivian’s lean, 6’1″ vegan CEO, whose attire evokes a Clark Kent aura, adorned in hiking shirts, jeans, and sneakers. Rivian’s design, characterized by rounded edges and distinctive concave headlights, exudes a friendly demeanor akin to Japanese anime characters, diverging from the rugged aesthetic of the Tesla Cybertruck.
“R1T was the first electric pickup, launching before Ford’s Lightning, and its imagery deviated significantly from the traditional pickup norm, which typically emphasizes ruggedness and aggression,” noted AutoPacific’s Kim. “In contrast, Cybertruck embodies a neo-fascist aesthetic.”
Although Scaringe is Rivian’s driving force, he credits the company’s product design team and engineers for crafting vehicles with distinctive and consistent features, from exterior design to interior components. He emphasizes the collaborative effort behind Rivian’s product development, which seamlessly integrates the contributions of numerous individuals into a unified vision.
While the R1 series introduced Rivian to the world, Scaringe acknowledges its limited accessibility due to pricing constraints. The upcoming R2 model, however, promises to broaden Rivian’s appeal to a wider consumer base. Scaringe expresses unparalleled excitement for the R2, anticipating its potential to resonate with a diverse audience like never before.