Big Technology Podcast Summary: Rivian's CEO on Elon's Influence, Affordable EVs, and The Grid's Risky Future

Host: Alex Kantrowitz
Guest: RJ Scaringe, CEO of Rivian
Release Date: November 20, 2024

Introduction

In this episode of the Big Technology Podcast, host Alex Kantrowitz engages in a comprehensive discussion with RJ Scaringe, CEO of electric vehicle (EV) manufacturer Rivian. The conversation delves into the intricate dynamics of the EV market, Rivian's strategic moves, competition with industry giants like Tesla, partnerships with Volkswagen, the burgeoning Chinese EV sector, sustainability challenges, and the future of energy grids.

The Political Landscape of EVs

Elon Musk’s Influence and Political Alignments

The conversation kicks off with the surprising political endorsement of Donald Trump by Elon Musk, CEO of Tesla, and its impact on the EV market. RJ Scaringe reflects on the politicization of electric vehicles:

RJ Scaringe [01:56]: “I think the broader state of just how politicized electric vehicles have become is a bit surprising. I think Tesla and Elon having a relationship with President Trump is actually helpful to electrification. It's certainly going to provide the perspective of the importance of EVs. So I look at that as a positive.”

Scaringe emphasizes the importance of having pro-EV advocates across the political spectrum, viewing Musk's actions as beneficial for the broader acceptance and momentum of electrification.

EV Policy and Credits

Tax Credits and Zero-Emission Vehicle (ZEV) Credits

Alex probes into RJ's views on EV-friendly policies that could further the adoption of electric vehicles. Scaringe outlines the critical mechanisms that drive EV adoption:

RJ Scaringe [03:32]: “I think the broader state of just how politicized electric vehicles have become is a bit surprising... We, as consumers, need lots of different companies building highly compelling products. Those products need to give customers choice, which is ultimately what's going to drive us from sub 10% EV adoption to 100% EV adoption.”

He explains the dual approach of using both incentives ("carrots") like the $7,500 tax credit and regulatory measures ("sticks") such as fines for manufacturers not meeting greenhouse gas emission standards. Scaringe highlights how Rivian benefits economically from selling excess ZEV credits to other manufacturers, positioning the company advantageously in the evolving regulatory landscape.

Brand Identity and Customer Base

Rivian vs. Tesla Customer Profiles

The discussion transitions to the identity of Rivian owners compared to Tesla drivers. RJ Scaringe underscores Rivian’s focus on inclusivity and broad appeal beyond just environmental consciousness:

RJ Scaringe [06:59]: “We've been really intentional to try to make sure we're positioning the company in a broader way than just the capabilities of the product set... We want to invite people into electrification, we want to invite people into new technology that's from all walks of life.”

Rivian aims to attract a diverse customer base by emphasizing exploration, community, and versatility, ensuring that the brand resonates across various demographics and ideologies.

Product Line and Pricing Strategy

Current Models and Future Affordability

Rivian currently offers premium models, such as trucks and SUVs, priced around $70,000, with an average transaction price near $90,000. RJ Scaringe discusses the strategy behind these pricing tiers and future plans for more affordable models:

RJ Scaringe [09:47]: “The launch product... is actually the best selling premium electric vehicle in California. The goal of the lower priced product is to take that market share success and apply it to a much, much larger audience with a price point that with R2 starts at $45,000 and then with R3 starts considerably lower.”

Rivian plans to introduce the R2 and R3 models by 2026, targeting the $45,000 to $50,000 range, aiming to make EVs accessible to a broader audience while maintaining brand integrity and technological excellence.

Joint Venture with Volkswagen

Strategic Partnership and Technology Sharing

A significant portion of the episode is dedicated to Rivian's newly closed $5.8 billion joint venture with Volkswagen (VW). RJ Scaringe elaborates on the partnership's scope and benefits:

RJ Scaringe [13:13]: “Volkswagen as a group is the second largest vehicle manufacturer in the world... The $5.8 billion deal reflects just the scale of this. We're selling our technology, specifically our ECUs and compute platforms, to Volkswagen Group across their entire brand portfolio.”

This partnership involves Rivian providing its advanced computer architecture and software platforms to VW’s diverse brands, including Audi and Porsche. Scaringe explains that while Porsche vehicles will integrate Rivian’s systems, the brand-specific features and designs will remain distinct.

Autonomy and Advanced Technology

Rivian’s Path to Autonomous Driving

Rivian is advancing its autonomy program, focusing on full-stack integration and robust data pipelines for machine learning:

RJ Scaringe [16:32]: “What we have today is if you get into a Rivian, you put it on the highway, it will drive itself on the highway, it can change lanes on the highway, but it doesn't leave. When you leave the highway, you retake control.”

He highlights the technological advancements in Rivian’s vehicles, including high-resolution cameras and radars, emphasizing the importance of data-driven training for continuous improvement in autonomous capabilities.

Financial Health and Profitability

Addressing Losses and Path to Positive Cash Flow

Rivian has faced substantial financial losses, with RJ Scaringe addressing concerns about sustainability and profitability:

RJ Scaringe [23:19]: “There’s a level of R and D expense and G&A opex that are necessary to build a business like what we’re building... to launch, we have to take a heavy investment in technology and infrastructure which consumes cash in the short term but positions us for long-term profitability.”

Scaringe outlines cost-reduction strategies, including supply chain optimizations and renegotiating bill of materials, projecting that these measures will lead Rivian to positive free cash flow by the launch of the R2 model in 2026.

Sustainability and Grid Challenges

Balancing EV Growth with Energy Grid Capacity

The conversation shifts to the sustainability of EV growth amidst existing grid limitations. RJ Scaringe provides a candid assessment of current energy infrastructure:

RJ Scaringe [36:47]: “We have a grid that’s archaic and doesn’t have any of the supply-demand mapping that we should be thinking about. There’s a lot to build... It’s a once in a planet activity.”

He emphasizes the urgent need to transition to renewable energy sources and enhance grid infrastructure to support the surge in EV adoption, highlighting the critical role of technological innovation and policy reforms in achieving sustainability goals.

Chinese EV Market Dynamics

Affordability and Production Efficiency in China

Alex probes into China's ability to produce affordable EVs priced around $10,000. RJ Scaringe attributes this success to several factors:

RJ Scaringe [43:02]: “You need a lot of heavy cost focus at the design level, robust and efficient supply chains, lower labor costs, and significant government incentives.”

He acknowledges the structural advantages China holds, such as streamlined supply chains and government support, which enable the production of cost-effective EVs. Scaringe believes that while replicating this model globally presents challenges, focusing on design efficiency and supply chain optimization can help bridge the affordability gap in other markets.

Stance on Plug-in Hybrids

Rejection of Hybrid Models

Addressing the rising popularity of plug-in hybrids (PHEVs) in the U.S., RJ Scaringe clearly states Rivian’s position against them:

RJ Scaringe [50:29]: “Rivian would never consider building a plug-in hybrid. I think it's a pure throwaway technology.”

He criticizes PHEVs as a temporary and distracting technology that diverts resources from developing fully electric solutions. Scaringe emphasizes Rivian’s commitment to pure electrification, likening the transition to the obsolescence of outdated technologies like mini disc players in the face of modern alternatives.

Conclusion

The episode concludes with RJ Scaringe expressing optimism about Rivian’s future, the impact of strategic partnerships, and the collective efforts required to navigate the challenges of electrification and sustainability. Alex Kantrowitz wraps up by highlighting the anticipation for Rivian’s upcoming models and further technological integrations within the automotive industry.

Notable Quotes with Timestamps

• RJ Scaringe [01:56]: “I look at that as a positive.”
• RJ Scaringe [03:32]: “We have multiple companies building highly compelling products... drive us from sub 10% EV adoption to 100% EV adoption.”
• RJ Scaringe [06:59]: “We want to invite people into electrification, we want to invite people into new technology that's from all walks of life.”
• RJ Scaringe [09:47]: “The R1s is actually the best selling premium electric vehicle in California.”
• RJ Scaringe [13:13]: “Volkswagen as a group is the second largest vehicle manufacturer in the world.”
• RJ Scaringe [16:32]: “If you leave the highway, you retake control.”
• RJ Scaringe [23:19]: “We have a pathway before the launch of R2 to start to demonstrate the profitability of the business.”
• RJ Scaringe [36:47]: “We have a once in a planet activity.”
• RJ Scaringe [43:02]: “Lower labor costs and significant government incentives.”
• RJ Scaringe [50:29]: “Rivian would never consider building a plug-in hybrid.”

This detailed summary encapsulates the key discussions and insights from the episode, providing listeners and readers with a comprehensive understanding of Rivian's strategic positioning, challenges, and vision for the future of electric vehicles and sustainable energy.