September 19, 2014

Rivian Automotive

Economic Engine?

A lot of hopes are riding on a sporty blue car that occasionally can be seen turning laps in the parking lot of an industrial complex on the Space Coast.

Mark R. Howard | 10/31/2011
Jim Thomas
The Money Man: Jim Thomas
CFO Jim Thomas has more than 30 years of experience in finance, coming from MapQuest, where he was COO/CFO and managed MapQuest's initial public offering and sale to AOL. He founded Coastal Dominion Capital, which invests in early-stage companies and serves on the board of the Florida Institute of Technology, where he earned a math degree before his MBA from the University of Virginia. Thomas was drawn to Rivian by Scaringe's technology, the car's gas mileage and the potential for job creation in the area. "The atmosphere here is very similar to the startup environment of the internet days, the culture, the can-do attitude. I said this could be something that could be a lot of fun." Thomas will say almost nothing about how much he's has raised or from whom. "I like to keep everything relatively under wraps."
[Photo: Rivian]

Aside from failed ventures like Samsung's and the near collapse of giants like GM and Chrysler, recent years have seen several major trends in the auto business. One is dictated by the big car firms' need to manufacture on an ever larger, ever more efficient scale: Major manufacturers may crank out occasional limited productions of models like the Miata, but to be competitive worldwide the companies increasingly must create a limited number of platforms and build as many vehicles as possible on them.

The Ford Focus, for example, is meant to be the same machine inside and out whether you buy it in Cologne or Chattanooga. Ford already builds nearly 350,000 units on its "core global" platforms; the company's CFO says the company aims to increase that number to 680,000 vehicles per platform within five years, according to a Deloitte report.

The countertrend to the homogenization at the big automakers is a boomlet in startup car companies marketing an array of niche vehicles, including exotic sports models and a raft of vehicles with "green" appeal ["Road Warriors"].

Rivian Automotive's coupe intends to compete in a slice of that niche market, targeting buyers looking for what Scaringe calls an "affordable premium" car that appeals to drivers who want more than appliance-like utility from a car, but also want a vehicle that's "responsible" in terms of gas consumption and efficiency. Scaringe thinks Rivian's niche will be unique but says it falls amid the market demographics eyed by the Mini Cooper and BMW 3 series.

The car is a sporty, mid-engine, 2+2 coupe (the rear seats are somewhat of a formality) that aims to provide the handling characteristics of a Porsche Cayman and deliver more than 60 miles per gallon — more fuel efficiency than a Toyota Prius. The two-door coupe — originally called the Avera until Hyundai sued, complaining that the name was too similar to its Azera — will come in up to eight colors with a choice of manual or automatic transmission. Scaringe says the car will meet five-star safety standards and sell for less than $30,000.

Ambitious goals. He'll achieve them, Scaringe says, through the way his car is engineered and how it will be manufactured.

Adrian Elliot
The Logistician: Adrian Elliott
Adrian Elliott left a stable, 17-year stint with Ford to work for Scaringe as director of manufacturing. At Ford, Elliott, a materials scientist with degrees in biochemistry and "polymer and fibre science," was part of a group that developed the Ford GT, a mid-engine two-seater sports car that Ford produced in 2005-06. Scaringe's operating plan, he says, was "well thought out and made business sense." For Elliott, it was a chance to "actually influence the direction the company went." He'll be responsible for everything from deciding on materials to where to site the company's factory to developing supplier relationships and designing the assembly process. [Photo: Jon M. Fletcher]

Essentially all carmakers, from Kia to Cadillac, he says, "build cars exactly the same way" — using giant presses to stamp 300 to 400 sheets of steel into shapes that robots then weld together and paint before assembly-line workers squeeze motor, seats, electrical and other systems into the frame.

The traditional car-building process enables the manufacturer to buy the car's individual components cheaply. The

tradeoff is the need for massive capital investment upfront for the presses, tools (the shapes), welding robots, paint shop, etc. "Just to build the basic structure" of a new model in the traditional way can require up to $500 million in equipment, Scaringe says. The traditional process also makes assembly complex.

Scaringe aims to turn that dynamic upside down by swapping some additional expense on the individual pieces of the car for big savings in capital costs and ease of manufacturing.

Rivian cars, he explains, will not consist of welded-together sheets of steel. Essential structural components will be made of aluminum that's heated and squeezed into the desired shape. Aluminum, for the moment, costs more than steel but produces weight savings — more than 1,000 pounds per vehicle — that Scaringe says will boost the vehicle's fuel economy.

The biggest departure from the traditional approach, however, is that Scaringe has engineered his car to be built in four modules. A central core module houses the passengers and engine; a front module encapsulates the front wheels and suspension; there's a similar module for the rear wheels and suspension; and then a roof module ["Nuts and Bolts"].

The modules, Scaringe says, will be completed independently and then bolted together, with the roof module not attached until after the seats, dashboard and electrical systems are inside the car. His production process is "very different from a typical structure where you build the whole structure first and plug everything in," he says. "We put things in as the structure is being built."

The car's skin — the body panels — will be constructed of a thermo plastic like that used by BMW for some of its models and mechanically attached to the frame after the rest of the car is finished. "We'll be building from the inside out," he says.

The design, he adds, means the car can be easily fitted with custom-designed body panels for sale in overseas markets with different style preferences — without having to re-engineer the basic structure of the car.

Scaringe says almost all of the parts in his car, including the engine, will be built to Rivian's specifications by outside suppliers. His factory — location in Brevard County to be announced — will require no big stamping presses and no paint shop, serving simply as an assembly site for the parts. (Already, he notes, some traditional manufacturers are having up to 50% of their parts made by outside manufacturers.)

Scaringe claims the overall approach cuts his capital costs by 90% and will enable Rivian to build its car in 10 hours, half the 20-hour average build time for a typical production car.

Rivian, Scaringe says, will build two more rounds of prototypes next year for media reviews and testing, and he expects to add significantly to the company's current 30-plus employees in the coming months.

Scaringe says he expects to be actually producing cars for sale by late 2013 or early 2014 and says he can achieve above-average margins. He'll discuss neither those margins nor exactly what his venture will cost, saying only that it will require more than $100 million in investment.


[Photo: Jon M. Fletcher]

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