A (3:04)

Know, so when you're like talking to.

C (3:05)

Your friend next to you in the math class, that is actually what our brains are for.

B (3:10)

This week on Explain it to Me from vox. Our crisis of stupid and how to get our brains back. New episodes Sundays, wherever you get your podcasts.

A (3:22)

I'm Esteed Herndon, and this week on Today Explained, I traveled to Minneapolis to speak with Attorney General Keith Ellison, who is suing the Trump administration over ICE descending on his state. It would mean that we had federal active duty troops patrolling our streets, which is concerning because the way ICE does its business has been proven over and over again to be deeply problematic. New episodes of Today Explained drop every day of the week, wherever you get your podcasts. And you can now watch our Saturday interviews@YouTube.com Vox it is on RJ.

B (3:57)

Thanks for coming on.

A (3:59)

On. Well, thanks for having me. It's great to be here.

B (4:01)

So let's get started right now. Rivian makes an SUV and a pickup truck. And on the commercial side, you have a work van. Some baseline models cost a little more than $70,000. Most are north of 80k. Talk about the price point on the consumer side. You're obviously in the luxury market, so talk about who your customer is, who you're making vehicles for, and which models are driving the most revenue.

A (4:27)

Yeah, so we launched our first products at the end of 2021. It was our R1, what we call our R1T and our R1S. It's a sibling pair of vehicles. And these are flagship products. So they're intended to be, you know, premium products. As you said, the price points are high. So the average selling price on an R1 is around $90,000. And you know, that was our handshake with the world. It was how we introduced Rivian as a brand to consumers. And we're now about to launch, we're like months away from launching what we call R2, which is a much lower priced vehicle, starts at $45,000 and it's really our first true mass market vehicle. Whereas the R1 being a flagship product, you know, it sells extremely well. It's the best selling premium electric SUV in the United States by a significant degree. But, but just the nature of the price point limits the, you know, how accessible the product is. And so R2 for us represents such an important inflection point for the business.

B (5:29)

So who is the customer? Who is it for? Because, you know, as for the truck, it's not really a work truck. How are people using it?

A (5:37)

Yeah, I mean that gets into like the deeper question of what's the brand's purpose? And there's, I think often when you think about products like this, like a vehicle, it's easy to sort of immediately jump to what are the specs, like what's it 0 to 60 or what's its, yeah, what's its cargo capacity? But there's a little bit more, I think there's a deeper meaning to what's the sum of the parts? What is it? What is it? What's the feeling it's trying to evoke? And so for us as a brand, we've long talked about the desire to not only enable people to go do the kinds of things you want to have memories of for years and years, or the kinds of things you'd want to take a photograph of, but also to inspire those things. And so to inspire this adventurous lifestyle or to inspire a life of saying yes to new experiences. And so R2 is just an extension of that. It takes that same concept that we've delivered on in R1 of lots of little detailed design elements that all lead to this inspiration around adventure to something that's a smaller form factor but also importantly a much lower price point.

B (6:43)

So why just explain for people who don't understand why start there at those price points? Obviously you often start with wealthier people and then it trickles down in the car business, but sometimes it absolutely doesn't.

A (6:55)

In the very beginning. So four years ago when we were launching R1, we didn't have any production volume, no supply chain scale or experience, none of the leverage that comes with generating scale and generating momentum with suppliers for pricing. And so just by virtue of those constraints, it's helpful to have the first product which is going to be lower volume, be a higher priced product. And then as we build scale and capabilities, the goal of course is to introduce lower priced products. And then specifically with how we arrived at the, the price, content, performance trade off of R2. Like we could have made it lower price but not as, you know, not as high performance or lower price, but with a lot less features. Is we were trying to identify where is that sweet spot in terms of volume. The buyers that are going to be looking for this type of a product and found that to be in this, like, as I said, like this starting at $45,000, which allows it to be cross shopped with a lot of internal combustion vehicles.

B (7:57)

Right, exactly. The analogy, of course, is that iPhone, which was qu expensive when it first started, and then it's still expensive, but it's widely used. If people are looking for an affordable car, because people are very price sensitive right now, how do you convince them? I have the most boring cars. I have a Chevy Bolt and a Kia hybrid and I'm actually in the market for a car. And I'm looking at the Rivian too. I absolutely am. But what would be the selling point for someone like me?

A (8:23)

Yeah, I mean, for. Well, first your question is on pricing, you know, at the higher end, like where R1 sits. So the R1s gets, you know, it's cross shopped with Land Rovers that are Range Rovers that are much more expensive. You know, everything from Range rovers, Escalades, Porsches, BMWs, and then into, you know, Tesla Model 3, Model Y. So you have like a pretty broad range of customers coming out of a broad range of price points. But I'd say pricing parity is there with R1's competitive set. And actually the evidence to that is take California, State of Washington. The R1S isn't just the best selling premium electric SUV, it's the bestselling premium SUV in the state of California. So for SUVs priced over $70,000, R1S outsells everything. So then the question is, okay, if we move into the category of $45,000 and up, which then you're suddenly in the world of more mass market cars, the kinds of things you'd expect to see broad portions of population buying. And then it's like there's a wonderfully broad aperture through which you're attracting and potentially appealing to customers as they're making the decisions as to what do they buy. And I think one of the things that's maybe one of the most important things that's often missed around electrification is there is a surprising lack of choice. And so at the, at the call it 45 to $55,000 price point, there's a handful of choices that are compelling. And you contrast that with truly hundreds of internal combustion choices that are compelling and a wide array of form factors and design decisions that have been made by each of the companies. And so for us to see adoption grow beyond what we have today in the United States, around 8%. I really believe we need a lot more choice. And you see so much concentration of market shares today with one company with Tesla, and that's not a Reflection of a healthy market. It's a reflection of a market that's being underserved. It's a reflection of just not enough choices.

B (10:28)

You were the first automakers you noted to bring a fully electric truck to the market. You beat out Ford, GM and Tesla and began delivering the R1T in the fall of 2021. As you said, this is last couple of years has been tough on all carmakers and especially EV makers. You've had to deal with pandemic supply chain issues, chip shortages, inflation, now tariffs while building your brand, and also consumer disinclination, which is still, I believe that will change. I think that's a shifting kind of thing, but it's still there. A lot of these carmakers have pulled back, obviously. Talk about the time now and about delivering the R2 in the next few months. A lot of people, including the publication Inside EVs, describe the RT as a make or break product for you. So talk a little bit about about that because as, as most people know, Rivian isn't profitable yet. Huge losses. I mean, nothing compared to AI. So don't worry about it, but go ahead.

A (11:24)

Yeah, I mean, R2s. R2 is, you know, you could call many things. It's a make or break product. It's the product that's really going to be an inflection point for us as a business. You know, there's nothing that's not at all surprising to us. In fact, that was the plan. You know, certainly many things have gone differently than we expected, but the plan was to establish the brand with a flagship product that by virtue of its price would be more limiting in its scale, but invest in a whole host of vertically integrated capabilities from our technology. So that's electronics, software, autonomy, AI all the way through to our distribution channels. We're building sales channels, service channels, we're building a charging network. So essentially be investing at a very heavy level. So, you know, with this level of vertical integration, so lots of fixed costs both on the building of these teams to do that, but also just in terms of running the enterprise that in the beginning, when it's just R1 isn't enough to offset the cost to run all those big systems. But, but Rivian isn't being designed as just just for R1. So like if the goal was to build a company that's only going to make 50,000 cars a year, it would look very different as a business. But we've really invested in the business contemplating and planning for Rivian to be a much larger company. And so because of that, R2 does need to be successful to support the rate of capital consumption of the business because of how much tech we're developing and how much infrastructure we're building. And so because of that, we've also really wanted to make sure R2 is dialed. And so there's been a lot of iteration in the product, a lot of learning from the R1. I just drove one of the early manufacturing validation builds off the line last week. And I mean, the car is just incredible. So we're quite bullish on it. But we also recognize, you know, it needs to get into the market, and we're very hopeful that it will resonate in the same way that the R1 products have resonated.

B (13:29)

Meaning although it has to cannot just merely match sales of your R1s. Correct?

A (13:34)

No, but if. If. Yeah, correct. On a gross basis. But what I'm saying is on a market share basis. So if I were to take. Take the R1 relative to, let's say, a Model X, we significantly outsell the Model X. They're priced about the same, very different in terms of how they've been interpreted from a design aesthetic, design decision, or engineering decision point of view, but covering a very similar ground. If we could even have a fraction of the market share we have on R1.

B (14:03)

So taking it from them, presumably taking.

A (14:05)

It, or I think more likely some of that will inherently happen, but more likely creating an option for folks that haven't been able to jump from an ICE into an EV yet, because the choice wasn't there for them. If you look at it through the lens of a customer, if I want a midsize SUV today, and I want one that's very robust technology, but I don't like the way a Tesla Model Y looks, or I'm not attracted to the brand, I'm really without the choice.

B (14:34)

Donny. I've once told me that Tesla's looks like the inside of an egg, and I tend to agree with him. It was eviscerating in such a elegant way. But go ahead.

A (14:46)

That's funny.

B (14:47)

So this has to sell, right? The company's future rests on this car, correct?

A (14:52)

Yeah, yeah. If it doesn't sell, we've got to rethink some things about the business.

B (14:56)

Yeah, absolutely. So just in addition to the R2, Rivian is set to release a smaller crossover, the R3. You have a joint venture with Volkswagen to develop software and electronics, and the investment is about $6 billion. VW will use the technology across its brands, including Porsche and Audi. A bit of A struggling company, too, but they're trying to rejigger themselves. Talk about being the software and electronics company that works with legacy automakers. Not a bad business.

A (15:23)

Yeah. Volkswagen Group, this is the second largest car company in the world by volume, did a $5.8 billion deal with us, a software licensing deal, as you said, for us to take our electronics and our software and deploy them across their portfolio of brands and products. And that's really exciting to us because it's so deeply aligned to the mission. But it answers this question we talked about a moment ago, which is the lack of choice and the need for more choices, and highly compelling choices at that. But one of the things about automotive that is, I think, often maybe overlooked is just the nature of how car companies and the skill sets embedded within car companies evolved over the last, call it 60, 70 years. And of course, cars, if you go back, were very analog. And so prior to the 1960s, there was not a single computer in a car. There wasn't a single line of code.

B (16:25)

I was there. I so miss rolling up my window.

A (16:30)

Yeah. So all the electronics that have entered into the vehicle actually were born out of, very ironically, fuel injection systems. It was the first computer in the car, was to control fuel injectors. And car companies at that time, this was in the 1990s, 1960s, made the decision to push the electronics for the fuel injection systems to third parties, to suppliers, and not necessarily planned. And you could do a whole study on this. But over the course of the subsequent 60 years, anything that started to enter the vehicle that was electrically controlled or controlled through software had a little computer come with it, what we now call ecus. And, you know, over the fullness of time, cars went from having no computers to today having 100, maybe 150 little ECUs that have their own little island of software that's written by a supplier to control the function or the domain that it's associated with. And it's almost the exact opposite of how you design a software architecture and a network architecture, if you're going to do it from scratch today, where you'd say, I want to have a very small number of computers that have a very broad function set that are located geographically within the vehicle or in a zone of the vehicle to control everything in that zone. And so if you're starting with a clean sheet, you'd very quickly arrive at this idea of centralized compute, more of a zonal architecture. And so Tesla, of course, has an architecture that looks like that, and Rivian has that. And we're the only two companies today that have this, you know, very unique.

B (18:05)

But could you see a situation where it becomes just a software and electronics only company that works with legacy automaker?

A (18:11)

I don't. It's certainly not the plan. We would.

B (18:14)

We want a car.

A (18:15)

Yeah, we would do both. And the, the business of like we're quite bullish on the, the nature of the business meaning if you have once you make these investments in these core technologies and provided you're building a brand that has a level of desirability and excitement around it, there's really an enormous opportunity to capture customers and market share and in the margin structure we think particularly with the introduction of more technology in the form of artificial intelligence and self driving only further grows what we think is the business.

B (18:46)

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C (20:20)

Right now, in the world of AI, two things are happening simultaneously. One, the technology is getting better fast. People are finding new uses for it. It's more popular than ever. And two, every company that makes AI is absolutely hemorrhaging cash. On the Vergecast this week we're talking about what OpenAI and other companies are doing to try to finally figure out how to make some money off of this technology. Spoiler alert. It's mostly ads and we're talking about whether any of it's actually going to work. All that plus some stories about the Chinese company that appears to be beating Tesla on the Vergecast Wherever you get podcasts.

D (20:59)

This week on Net Worth and Chill, I'm revealing the exact playbook rich people use to set their kids up for financial success and how you can do it too, even if you're not a trust fund baby. From adding your newborn as an authorized user on your credit card to give them a near perfect credit sc by the age of 18 to opening a 529 account that saves you thousands in taxes on everything from books to college tuition. Plus I'm answering your questions about whether your debt transfers to your kids, tax credits worth thousands that new parents are missing out on, and how to give your children money completely tax free. Whether you're expecting, already have kids, or just want to understand how generational wealth transfer actually works, this episode will show you how to break the cycle and build a legacy. Get ready to give your kids the financial head start you wish you had. Listen wherever you get your podcasts or watch on YouTube.com.

B (21:48)

So let's talk a little bit about some of the obstacles you're facing though, because let's talk about consumers, because that's really where the I hate to make metaphors, but rubber meets the road. The big one right now is that EV sales in the US took a no side at the end of last year. Rivian's fourth quarter sales were down more than 30% compared to the same period. Now that's not unique to Rivian, by the way. Ford stopped making F150 Lightning, which I tried out. Terrific car. GM paused production of its electric Hummers, which I also tried out. Cool car and Cadillac Escalade. Same thing. Beautiful car. Actually the Escalade was stunning. Stellantis canceled plans for an all electric Ram pickup truck. Now I get that because when I wrote a column six years ago and said someday you're not gonna own a car, most of the letters I got were from truck people who were like in the Midwest, we want our cars. I'm like fine. I think it was like having a horse, something like that. And I said, fine, have your fucking horse. I don't care. But this is where it's going. Like, it's like the people who like a phone in their house. I don't think EVs are going there. I'm quite bullish on them too. But what do you do to deal with the obviously the drop in demand you've had to cut 600 employees. Many carmakers are doing this. Tesla's fallen off a cliff. Really, Even though the stock keeps growing. That's a whole different meme situation. But one of the reasons for the drop in sales is because Trump administration and congressional Republicans ended federal tax credits for people buying EVs, which has been around for a long time. Trump has three more years in his term. So how do you navigate those years, given if the federal government is working against efforts to push more people and companies towards EVs?

A (23:20)

Yeah, well, the way we think about it is ultimately our job, and that is, I think this is true for any company that's making products, is to develop products that are highly compelling. And in order to truly drive electrification adoption, the products need to be, be not like slightly better or as good as they need to be a wildly more compelling choice than an ICE alternative. And so that was the philosophy that drove me to start Rivian was before any of these policies existed. This philosophy still drives us today as we think about R2. And so when we look at it, it's the performance. It's like zero to 60. The driving dynamics seem to be exceptional. Best in class. The storage and functionality and features that allow you to fit your gear, your pets, your stuff need to be really thoughtful. The design needs to be something that's compelling and then range in the time to charge the vehicle. Need to be really nice. And you know, this is perhaps the one that's maybe most difficult to explain until you experience it, which is once you try an EV and eliminate the need to go to a gas station. And if you have charging at your home, which most, most folks do in the United States, of course there's challenges in, in highly urban environments, but in.

B (24:43)

Most of the United States, not that hard anymore.

A (24:45)

Yeah, it's not that hard.

B (24:45)

It isn't just.

A (24:46)

And it's, it's really nice. Your cars, you don't have to think about, did I put fuel in it? You charge it at night. And there's like all the benefits, the intrinsic, sort of hard to measure benefits of. It's quiet, it's smooth. And so we do think that with the existence of more choice, that demand will naturally come up. And there's something here that in speaking to the consumer I think is really maybe unexpected. If you were to just listen to all the, the rhetoric and all the noise, which is we look at our customers today, our R1 customers, and if you were to just extract out some of the tone you hear on these topics, you would expect 95% of our customers to be Democrat and a small fraction of your Republican. And, and the truth is actually it's about 5050 and I think that's great news. And what it tells me is customers are going to choose something that appeals to them and regardless of maybe political tone.

B (25:44)

There's only one political car that exists. It's a cybertruck. But go ahead. There's zero others really.

A (25:50)

So when we see that it's encouraging and we try really hard as a company to not politicized the idea of electrification, it's strangely become political in ways that I wouldn't have expected and are somewhat.

B (26:05)

Elon is the problem for you, for all of you, honestly, in that regard?

A (26:08)

Yeah. Well, nonetheless, so we just have said let's focus on making the best cars. And so in doing that there are externalities that have happened in the last six months.

B (26:19)

What is the greatest consumer sentiment against them? Obviously I think most people are intrigued. There's no question everybody now knows about them. And when I started pushing electric cars many, many years ago, most people didn't or wouldn't consider it. Obviously range anxiety is one of the issues. But from your perspective, what has shifted?

A (26:37)

Yeah, I sort of bucket it maybe into three categories. I think there are people who are open to it and looking for the right car. So they want an ev. Maybe they own one or maybe they don't. In many cases they don't because they just haven't had the form factor, what they need for function coupled with price coupled with something that they emotionally connect to. And so we believe there's a lot of folks there and we have like, we see this firsthand with customers or Most of our R1 customers are first time EV buyers. And they were in that category that the product they were looking for hadn't arrived yet. The second category are people that are curious but have those concerns. Range anxiety. You know, My folks live 600 miles away. I want to be able to drive to their house at Christmas and not have to worry about charging along the way, those kinds of things. And then the third category, which is the. Is by far the smallest, but I do think the most vocal are folks that for some reason have identified electric vehicles as being bad or wanting to be against them. And I do think this is a very small percentage, but it's quite, it can generate noise. And I've reflected a lot as to what's the psychology driving that. And I don't know, I'm certainly not a psychologist, but if I had to project a guess, I would say it's some version of, I think folks that feel like a solution's being pushed onto them or forced onto them are inclined to naturally reject that.

B (28:03)

Well, the haters include the President of the United States. Clearly he talks about them quite negatively. How do you navigate that next period, especially if they continue to be hostile? And on top of axing the federal tax credit, Trump's also slapped tariffs. That may change, but it'll take a while. So talk a little bit about the Trump impact here on your business.

A (28:24)

Well into that last category. So, folks that are, let's say, against electric vehicles, I think the first thing we do from a consumer point of view is we make it very clear that we're not like, we want there to be choice. And I think the existence of choice helps eliminate some of those tensions. And to say, look, if you don't want to buy an electric car, you don't need to buy an electric car. But we're making these vehicles to be really compelling. And hopefully you drive it and you experience it and it's sways you or draws you in. I think as it pertains to policy and working with the administration, what we've really focused on, which is an important point, is the indisputable view that over time, and we can debate how long that is, but in the fullness of time, high technology vehicles, where there's lots of software, lots of electronics, they're deeply integrated together, the vehicles increasingly drive themselves. The skill sets necessary around power, electronics and battery systems, those are things that the US should continue to maintain a leadership position in. And so in order for that to happen, it's necessary that companies like Rivian, not just Rivian, but Rivian and many other companies like Rivian need to exist to be active participants in the future technology development that we're going to see play out over the next few decades. And we found that's a really. I think it resonates extremely well on all sides of the aisle. It's also really helpful to look at it through that lens of skills.

B (30:04)

Is Trump undermining that idea?

A (30:07)

I don't think he's.

B (30:09)

You're being careful.

A (30:09)

I think there's, I think there's a lot.

B (30:11)

Yes, but go ahead. You answer any way you want.

A (30:15)

I think there's a lot of what we try really hard to do is there's a lot of noise. The signal to noise ratio right now is, if you're looking at this as a signal processing problem, it's the noisiest the signal has ever been. And so we're Trying really hard to ignore or avoid riding up and down some of the peaks of the noise and look for the signal.

B (30:41)

But credits did matter. So do tariffs.

A (30:43)

Oh, yeah, yeah, credits. Credits, like created it. Like to be clear. I mean, you Talked about the Q4 drop off relative to Q3. There's no doubt. Yeah, the credits going away impacted everyone, but I don't think that's going to change the end state. It's like a speed bump. It's a bump along the way, but something that we all have to navigate.

B (31:03)

Right. Which could take your entire chassis off compared to other carmakers with more money. And this is a very. For people who don't understand car making is so expensive compared to other. I mean, I joke about AI, but it's really is a high level of. It's a very difficult jump for everybody. So it's actually quite astonishing how we make cars in a lot of ways. Now, Canada has agreed to slash its 100% tariffs on Chinese EVs, which is not good news for you all. You argue that customers need more choice in the EV market and that's not a zero sum game, but wow. It's a real problem for you from the global market point of view because you can't compete with these Chinese companies because of the price and innovation. Really.

A (31:47)

Yeah. I mean, I think first, just to frame the overall Chinese market, it's very, very, very different than what we have in the United States. There's a couple of ways that it's very different. The first is there are many choices there, like an overwhelming number of choices. So there's an excess of 100 different companies making electric vehicles in China. And actually a vast majority of them are not particularly compelling in terms of technology or innovation. But a subset of those are both affordable and impressive technology companies like Xiaomi or byd, very much technically demonstrating a lot of leadership. And then from a price point of view, quite competitive. And there are two things to take away from that. The first, which is, which I think is often overlooked, is for a lot of the same reasons Rivian or Tesla have vertically integrated technology stacks that are distinctly different than legacy car companies. Is we had the benefit of starting with a clean sheet in a world where software and electronics existed. And so we, like Rivian, was built as a software and electronics company first. And we make cars. And so we have more software engineers than we do mechanical engineers. And that same dynamic exists for a number of the newer Chinese car companies where they approached it as a technology first business.

B (33:07)

Sure did.

A (33:08)

They made architectural decisions that are advantages relative to legacy manufacturers. And if you were to take those cars apart and compare them to a Rivian, you'd see there's technically, there's actually a lot of similarity, zonal architectures, really heavy focus on in vehicle inference and compute for enabling AI features at scale over time. You know, like removal of a lot of the Tier 1 supply base and bringing a lot of that in house. A lot of consistency. And then you say, well, why are the cost structures so different? And here I do think too often we look at this as if it's like some like black art. It's like magic happening, but it's not magic. You can build it in a spreadsheet. And it's a combination of things. The first is the cost of capital in China. So the cost to build the plant and invest in the products is very low, near zero. Because in many cases the plant, the. And the. And the equipment is paid for by the government. So whereas we have to raise capital with, with equity or, or some debt in China, you get sort of given the capital to go build capacity.

B (34:15)

Yes, they have decided this is an area they want to dominate.

A (34:17)

And so, so it's like it's very much a decision by the Chinese government to say we're going to be leaders in a space. And so they've heavily subsidized the capital necessary to build these businesses, number one. The second is that's not just happening at the OEMs, that's happening across the tiered supply. And so when you take the cost of capital to close to zero, the whole supply base suddenly becomes cheaper because your amortization of your fixed cost becomes a lot less. Then you have a labor cost that's much, much lower and labor policies that are very different. So you have people that go and work and live at a plant working 50 to 60 hours a week and making, you know, somewhere between 1/5 and 1/7 of what someone in the United States would make. And there's no way with that difference in labor cost to really have and the cost of capital to have a. Like for like one to one.

B (35:13)

I get all that. They're also very innovative. I think one of the.

A (35:16)

Well, there's my point first. That's why I wanted to call out like, I think sometimes we just say, oh, it's low cost. There's a handful of companies that are very, very strong in terms of technology and they have these advantaged cost structures.

B (35:28)

So here you have Trump slashing the credits, putting on the tariffs, which makes it very difficult for all kinds of companies. And Canada agreed to slash this. It might have been favorable to you had we had a pleasant relationship. Now it's toxic and largely due to the Trump administration. In fact, completely due to Trump. Why am I being n about it? So how do you compete if this is the case, especially this Canadian thing was. It's a big deal.

A (35:58)

Well, yeah.

B (35:59)

So we have 100% tariff for people don't know on Chinese EVs.

A (36:02)

Yeah, yeah. That's important point to note.

B (36:04)

Yeah.

A (36:05)

I think first, as I called out, there's two vectors here to consider. So first is we have to compete on technology. And you made that point a couple of times. I couldn't more fully agree with you. And it's for that reason, you know, Rivian has many of the, of the cars we just described. We own them, we study them, we take them apart, just like the Chinese have our cars and take them apart and study them. And so we need to continue to be on the tip of the spear in terms of technology and leading there. Number one, on cost. There's not a way to be competitive where labor cost is so much lower and our cost of capital is so much lower. And so I think what will happen in the United States, and I can't speak for other countries, I think it's very, very, very likely that the tariffs the United States have put in place will remain. And for the Chinese to really participate in this market, they'll need to locally produce. And if they decide to locally produce, those advantages I just talked about, both in terms of cost of capital, but also in terms of labor costs just go away. And there's not. They're not building the cars differently. You were to take a Chinese car apart and compare it to a Reagan like, they're stamping and castings. It's all, all very similar processes. Again, there's no, like, there's no like, magic happening. It's. It's just, you know, there's two big factors. And so I think in the United States, which is by far the second largest car market in the world, the first being China, this is maybe the one topic that the right and the left are very aligned on, which is a pro US Policy. Now, I think Europe's a big open question, as you've already called out. The interesting thing there is they have a large domestic auto industry to protect as well. But a lot of the. The countries that don't have domestic auto industry are likely to be more open or fully open to Chinese vehicles. I do think it's going to see A lot of market share shift to those brands. Now what's also happening, which is we haven't touched on yet, but is an important point, is just the nature of how cars are produced is going to change over the next 10 years. And this is an area where we're going to start to see industrial automation and high dexterity robotics.

B (38:14)

Sure.

A (38:15)

Come in that this is truly the only way the United States can compete with low labor cost countries for manufacturing is by. By developing robotics to essentially operate manufacturing plants with far fewer people. And so I do think that's something.

B (38:34)

That is going to happen, which of course takes time.

A (38:36)

And to that point, I started a robotics company recently called Mind Robotics that's specifically focused on industrial automation, industrial robotics.

B (38:46)

Separately from your company.

A (38:48)

Rivian's a shareholder in it, but it's a separate entity.

B (38:52)

Yeah, I've been talking a lot about everyone's focus on AI. I'm like, you need to focus on robotics is what you actually need to focus on.

A (38:59)

I couldn't agree more.

B (39:00)

I keep saying it and everyone's like. I was like, stop with the AI will be a critical part of robotics, but it's robotics in terms of lots of things will matter a great deal. We'll be back in a minute. Every episode we get a question from an outside expert, by the way, and yours comes from Chris Urmson, the co founder, chairman and CEO of Aurora. I rode in one of my first cars of his and I tried to run him over, as he knows, with the electric car in Google parking lot. This was almost 20 years ago. So let's, let's listen.

A (39:42)

I'm a big fan of Chris.

B (39:43)

Yeah, me too.

E (39:44)

Hey, this is Chris Urmson. My question for RJ is this. I've been a Rivian truck owner for many years now. I love it, it looks great, it has awesome performance. The one area that could really be improved is the media experience. Can you talk a little bit about the strategy behind why you haven't leaned into the CarPlay ecosystem and why you think that leads to a better experience for customers, particularly given for new car buyers. Somewhere between a third and a half of them aren't interested in buying a car if it doesn't have CarPlay. Anyway. Cheering from you from the sideline. Huge fan. Thanks for all you're doing.

B (40:19)

He gave you an easy one. But I would agree. I have to say it matters. I'm just as superficial.

A (40:25)

No, it's a great question. Chris and I have talked about that a lot in the past. We have the view that the Integration of vehicle capabilities. So vehicle status, vehicle health, vehicle, so like window position, vehicle speed, anything that has to do with how the vehicle's operating into, as context, into the media or user interface experience is going to be really important. And we want to control that whole, essentially the whole platter. And we think that becomes more important as AI enters more and more into the existence of how you run the vehicle. And so the challenge with CarPlay is of course it's an app that runs on the screen, but it sort of takes you out of the vehicle experience into a separate app that's very media centric. But it's very difficult to create consistency across all the different platforms and to create consistency with every part of the user interface. And so what's missing, what draws that question is I want to have the exact same ease of using my text or ease of using functions around my phone. And so what we've done is we've worked really hard with Apple and similarly with Google to create the same menu of options. But where Rivian is the, we're setting the table. And so for example, we have an Apple Music integration. We just did a Apple Watch integration as a key. We have Google Maps integration. Two years ago, three years ago, this was a bigger issue because we didn't have all those integrations. And some of those discussions we have with our partners at Apple and with Google took some time. But we're now in a place where we have a great working relationship with Apple, great working relationship with Google where we can serve up all those items. And now we're doing the backend work which we just demonstrated to really enable and more of an agent to agent basis, all the integration of the backends of these apps to create a more seamless experience. So you could say to the car, I want to go to dinner tomorrow. I want it to be after my meeting, you know, that meeting with Bill and I need to be home in time for this. And it's, it can collect all that information between your Google Calendar, the state of charge of the vehicle, where the vehicle is. But that integration and aggregation of all the information is really hard to do if you leave the vehicle and go into a separate app that doesn't have access to those same types of information. So that's the reason it certainly has blocked, as Chris said, some customers have said, I don't want to buy a Rivian because I want CarPlay, which is like, we recognize, like we're not blind to that. We recognize that. Right.

B (43:11)

So that gets into the final thing. I want to talk about, about AI, because AI is part of that and autonomous vehicles, which is another area I'm very bullish on. Rivian recently announced some new AI features coming to its call. As you develop a new custom chip, there are plans to roll out self driving capabilities. Obviously you've announced ambitions to enter the robo taxi space. Talk a little bit about your ambitions. Tesla's been promising customers they'll be able to turn their cars into robo taxis for years. But it's turned out to be Google and Waym and Chris Urmson was the original person there.

A (43:43)

Yeah, yeah.

B (43:43)

Talk a little bit about what you'll be able to deliver when Tesla has just not been able to do so and certainly should have been able to do so, although he has some obsession with the lack of cameras.

A (43:54)

So I think there's an important thing to note here, which is the nature of how we develop self driving has changed really dramatically in the last couple years. And if you go back to. You talked about Chris, if you go back to the beginning when Chris first started working in this area, the way self driving systems were designed is you had a perception platform which depending on the design of the overall system, it could be cameras, but more likely it was cameras plus radar plus lidar that would perceive the world, identify objects in the world, classify those objects, associate vectors with those objects, and then hand all that classified object information to a planner. And the planner was a rules based environment that was written by humans. Humans would, we're trying to codify or describe how a vehicle operates, what are the rules of the road? And those were the systems that were designed and built up through the late, call it 2020, 2021. And even Rivian's launch vehicle we first launched with in late 2021 was one of those systems. So I would call that like an AV 1.0 solution. These were not neural net based solutions, these were not systems that used things like transformer based encoding. But around 2021, 2022, the state of the art, in part informed by some of the things that had been happening in the LLM space, the large language model space started to shift to say, can we take more of a neural net based approach and build a foundation model that describes how the world works through a much more complex large parameter model. And to do that you need to control the perception platform so you can't go through third parties that process this. And you need raw signals from your cameras, your radars, and if you have them, your lidars, you need to be able to trigger interesting Events that you can then train off of, then move those interesting events offline to build this very, very large parameter model that describes how the world works. And so we made the decision at the end of 2021, beginning of 2022, to start working on that system on this neural net based approach. And to do that you need to first have the hardware and then you need to launch it. And then you need to put enough vehicles in the car park to have a data flywheel. You need data, you need lots of data. So here's where it gets interesting. So we launched that hardware platform in the middle of 2024. That was what we call our Gen 2 vehicle. And the biggest change was our autonomy stack. So in house compute platform, in house perception. And then over the course of last year started to build enough vehicles in the car park to build this really robust data flow flywheel. But we approached it in a way that is probably not fully understood. So I'm so glad I get to talk about it here, which is the sensors that are on the vehicles are not just there to drive the vehicle. They're very importantly there as part of a large scale data acquisition platform for building a model. And if I were to characterize how I think about autonomy over the next, call it three years relative to the last three or four years, the rate of progress that we will see as an industry is going to be substantially higher. And that's because of this inflection point towards neural net based approaches. And so we're, I'm like beyond bullish on this.

B (47:13)

So why do you think you'll be able to deliver on this vision? Tesla hasn't been able to. He's been trying to do that and I mean, I know he's busy making non consensual sexual material, but why has that not been able? Because they do have all those elements, right? They certainly do, yeah.

A (47:29)

So if we like look at the spread of how you build this. You need large data set, lots of vehicles deployed. You have two ends of the spectrum which are interesting to know. One is Waymo. So relatively small fleet.

B (47:41)

Right.

A (47:42)

But with a very huge robust sensor set, right?

B (47:45)

Absolutely.

A (47:46)

Lots of megapixels, lots of data. And then the other end of the spectrum you have Tesla with a very constrained sensor set. So you know the cameras are, they're call them, they're okay, but they're dynamic range, you know, low light performance, bright light performance isn't great. So it's like very limited sensor set. We took the approach of saying we're going to have A much bigger fleet than Waymo, a smaller fleet than Tesla. But we need our vehicles to learn faster. And so every One of our R2 vehicles when we launch the LiDAR variant will have a LiDAR. And so the LIDAR is an important thing because it gives us a. It protects a lot of corner cases, particularly like very long range corner cases. But it also is a great platform for turning the entire fleet into ground truth. And so that's our goals. Radar, lidar plus camera.

B (48:34)

I always note to people when one car learns, they all do. As opposed to a human being.

A (48:38)

Yes.

B (48:39)

So last a couple of questions. You were just on the podcast Access and you said you think within the next three to five years autonomy is going to be, quote, as critical as having tires on a vehicle and that not buying AV capable car would be like buying a cell phone without wi fi. Now, as I noted back in 2019, I wrote a column about how owning a car would be like owning a horse down the line. Why even own a car when you have an insurer maintain pay tens of thousands of dollars for not to mention deal with legal fallout if it gets in an accident. And also humans suck at driving at the very base level. Talk about that. You have visions of robo taxis now again, and the only people who have delivered consistently has been Waymo and Zoox to a lesser extent. There's stuff happening obviously in China that's very quite robust actually. Talk about why you think that's a critical part. You don't have to comment on not owning a car. I just don't think people are going to own cars. But that's just me.

A (49:34)

Yeah. Well, to your last point, I think that the business model, the customer model, on how you let's call it purchase mobility, purchase transportation, I think could change a lot. But putting that aside, because recognizing regardless of whether you own the car, you're purchasing a ride, you're purchasing a subscription, all the different ways you could conceivably consume transportation. The level four, the ability for the vehicle to operate itself and importantly operate itself empty, is the enabler. And so our view is that that's going to go from a very, very small subset of vehicles today, as you said, the only deployed at scale variant of that is Waymo to becoming something that if you're buying a vehicle, having what we call personal level four is going to become very important. And of course, if you want a different mobility model, it's a necessity to enable that mobility model. And so I think this is going to represent the biggest shaking of the Nature of the auto industry, mobility of just the whole thing, like market shares can shift dramatically with this. And so we've decided, and this has been a long effort for us, that's the most important investment area for the business. So it's by far where we invest our most capital. As we think of like our R and D budget, it shifted from a lot of the traditional vehicle level innovations, which are now fairly stable, electronics platform, so on, and moving those dollars to autonomy. To autonomy.

B (51:04)

And what will be the critical thing for your company to do?

A (51:07)

So we need a robust data flywheel, we need a lot of GPUs to train the model. And we took the decision, this is a decision we took, geez, almost four years ago to bring inference to bring silicon in house. And the reason for that, there's so much focus on the sensors, but the compute is actually the really expensive part.

B (51:28)

Correct.

A (51:28)

So we said, look, we need to bring compute in house versus a dependency on Nvidia to allow us to put very high levels of compute into every car. And so we want every car to have a really capable brain. But lidars are no longer $1,000 things.

B (51:46)

No, they're nothing.

A (51:47)

It's low hundreds of dollars. Radars are low tens of dollars. Cameras are low tens of dollars. So the perception platform, as much as that gets, because it's visual, you see it, as much as it gets a lot of attention, it's the little silicon wafer that's the most expensive part of the car or most expensive part of the stack. And so we brought that in house so that we could deploy everywhere as part of this overall philosophy on building.

B (52:10)

A data flywheel in that environment which you're talking about, which is, I agree with you, this is where cars are going. How do you, you still have to run a car company, you still have to sell cars, you still need money. Does that require you get purchased by a larger like an Apple or something else? Or can you do this on your own because you also have to make money. As I said, you can't just have this. And to get this valley you need to go through is quite long and difficult. And then the second one is what then happens to a competitor like Tesla? I have not asked you one elon question because I'm so tired, sick and tired of him. But he's still critical. And you can see him talking about it, even though it's in this sort of strange way when he's talking about robotics. I understand what he's saying. Why wouldn't a Tesla be able to do this better eventually if he ever focused on it versus you. What will it take to do that? You don't have the benefit of a meme stock that doesn't represent your business.

A (53:09)

Yeah, so we said it before. R2 is really important for us. It demonstrates a, like a path to the automotive side of our business being profitable and the revenue associated with that vehicle covering our fixed costs. That's, that's really important. But I think you maybe at the, maybe in a more philosophical way the deeper part of the question is how many companies ultimately can be successful. So you know, if we look historically, automotive is a very big, it's a huge market. You know, the TAM is enormous, but it's not one in which there's a single dominant player very different than tech. So if you look at tech in each segment, there's one, two, maybe three companies that occupy the vast majority of market share in automotive on a global basis. The largest manufacturer represents around 10%. And so the question is, does that continue or does it consolidate down to like one or two companies in my view has, continues to evolve on this. Maybe without saying exactly how many companies I think there will be in the.

B (54:16)

End, I think how many?

A (54:19)

Well, I think it's helpful to think about what are the ingredients necessary to be a car company at scale. And I do think there'll be more than one, but I think there's probably going to be less than there are today. But the ingredients that are I think like a must have is the vehicle to be a successful at scale vehicle manufacturer. Putting aside like very niche, call it like you know, almost like horse like vehicles. Vehicles that are just like anachronisms of the past. But to be at scale, the vehicle must be software defined which allows for robust new features to be deployed. Which to do that, well, it means breaking from the Network Architecture and ECU Topology of 100 to 150 different companies Writing little islands of software that then gets integrated on a canvas architecture. I think that's. There's absolutely no way a company can be at scale in 5 to 10 years and still have that architecture. And now that statement sounds subtle, but that's a big statement because there's only two companies in the western world that have a software defined architecture, Tesla and Rivian. Of course the deal we did with Volkswagen unlocks this for them. But that means every car company, if you believe what I just said, will have to find a path path to moving to a very different software and electronics architecture than what they've had historically. Number one, the second Thing which requires the first thing to really do. The second thing well is the vehicles will need very high levels of both AI integration and autonomy. And I think that if you miss autonomy as a car company when if you're a customer and you have a choice of I can buy a car for 35, $40,000 and it can can, you know, drop me at the airport, it can go to the grocery store to pick up stuff for me, it can drop a friend at a house, it can do all those things or a car that doesn't do that, it's going to be very binary. I think there'll be very few people that will self select to say I don't want those features. Even folks who are not comfortable with the idea of self driving, once you experience it one or two times, it does.

B (56:22)

I try to say that to everybody.

A (56:24)

It's so sticky because you get your time back suddenly you can be reading a book on your phone, it's just so sticky.

B (56:29)

My one way of convincing one person who likes to party, I'm like, you can text and drink. I don't know what to say. There's my, that's my sale for you, but go ahead.

A (56:39)

Sorry, but, but I do think this just represents like a big like it's like taking all the different companies that are market shares and shaking them up and saying this is going to be a different looking outcome. And here's the part that I don't know the answer to and is, you know, it's provocative just to think about it, which is if market shares of some of these larger incumbent companies drops by even a small percent. These are very, very high fixed cost businesses and they're big machines, so not easy to reduce costs. And we have an example of what happens when market, you know, the revenue drops by 20 to 30, 35% and that's 2008, 2009. And so that's the part that's hard to predict is if, if some of these changes I talked about the combination of being a software defined architecture and having very high levels of AI integration are not. If you're not front of the curve and you start to lose 20, 30% of your volume, you, you just have the risk of being clobbered, like just completely clobbered by your fixed cost and that could lead to this slowly, slowly, slowly suddenly changes in the dynamics within the space.

B (57:52)

You know, interestingly and I'll let you have the Westward. It's like Netflix circa when they got off of discs and I remember talking to media companies, they said you're finished what they're doing, you don't understand what they're doing here. And so it's like that. And of course, here they are poised to buy up one of the greatest brands, the former greatest brands, if they make it through. So if that comes to pass, can Rivian be one of those things or just a junk heap on the.

A (58:20)

Yeah, well, you're asking a highly biased perspective here. But of course, like our view is, and that's what we're working towards, is to be one of the companies in the end, that's both creating products for consumers that are just incredible. And obviously software defined, obviously very high levels of autonomy and AI. But the second part is we do believe, and part of the strategy with our Volkswagen deal, we do believe there's an opportunity to help some of the existing legacy companies that weren't born the way that Rivian was born and don't have this deep technology backbone to come up on the learning curve.

B (58:55)

But does that mean you might need an even bigger partner, like an Apple or someone else?

A (59:01)

No, I more meant like the existence proof that Rivian technology can be deployed into an existing oem. If you were to think of like, what's the ultimate existence proof, you'd probably say, let's pick one of the largest, most complex OEMs in terms of brand proliferation and market participation. And if you're looking for that, that would be Volkswagen Group. It's, it's a very large group, it's got lots of different brands. And so our ability to demonstrate that we can deploy in a productized way our software and electronics, and this is not yet even talking about autonomy, just software and electronics, is the existence proof or it is the demonstration that should show other manufacturers, hey, one, Rivian can be a great partner. We've demonstrated this now with Volkswagen. We've of course demonstrated this with another very, very large company, Amazon. And so I do think the opportunity for us to not only have our own products, but to emerge as a very capable technology partner and provider that has both the ability to work with and the humility to work with very large existing companies is something we hope to demonstrate.

B (60:16)

So, very last question, 20, 30 years, that puts you and Tesla at a complete competition. Presumably, if he can get his attention back to this, what is Rivian in 20 years? Say it survives this. What does it look like? Last question. I know you don't think in those.

A (60:34)

Time frames, but I mean, you have to think about it somewhat. I mean, the way we make investments in technology, the goal is to be one of the most impactful and important businesses in transportation technology. And like, I do think we're at an inflection point, aside from businesses, like, from a societal point of view around how our vehicles are powered, what's going to happen as AI enters the physical world. And a huge motivator for me is to help be part of writing that story and to do it in a way that's to the benefit of society.

B (61:08)

Great. All right, rj, thank you so much for your time.

A (61:11)

Thank you.

B (61:16)

Today's show was produced by Christian Castor Roselle, Michelle Aloy, Megan Burney and Kalyn Lynch. Nishat Kurwa is Vox Media's executive producer of podcasts. Special thanks to Katherine Barner. Our engineers are Fernando Arruda and Rick Kwan, and our theme music is by Trackademics. If you're already following the show, you get to drive autonomously with me in San Francisco. That's all I do when I'm in that city. If not, you get a hold. Go wherever you listen to podcasts, search for on with Kara Swisher and hit follow. Thanks for listening to on with Kara Swisher from Podium Media, New York Magazine, the Vox Media Podcast Network, and us. We'll be back on Monday with more.

F (61:56)

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A (62:24)

Experian.