How Rivian Became the Anti-Tesla

How Rivian Became the Anti-Tesla

The startup persuaded Elon-phobic car buyers to drop $70,000 on its EVs. Now it just needs to make money.

Like a lot of people, Chris Hilbert has complicated feelings about his Tesla Model S. Hilbert, who is 44 and lives outside Indianapolis, loves his car’s instant torque and neck-snapping acceleration, but there are other aspects of Tesla ownership he finds less appealing. For instance, he doesn’t credit the company’s claims that his car is a few software updates away from being able to operate autonomously, and he wouldn’t particularly care about such a capability, even if it existed. “I like to drive my vehicles,” he says. He’s also put off by the rabid fandom culture that’s come to surround everything related to Tesla Inc. and its chief executive officer, Elon Musk.

Recently, when Hilbert complained on social media that his car’s “Full Self-Driving” system seemed to consistently fail to stop for school buses, he was greeted with a mixture of denial (“Fake news as usual”) and ridicule (“You suck”). “The big problem is, there’s Tesla and there’s TSLA,” Hilbert says, referring to the two species of Tesla fan. The first group cares about the cars and is basically like Hilbert. The second is mostly interested in pumping up the stock ticker and attacking anyone who isn’t doing the same. “The stockholders are the toxic bit of it,” he says.

Hilbert, who works at a financial-services company, is a lot more enthusiastic when talking about his family’s other car, a Rivian R1S. Last year he and his wife bought the three-row SUV, which starts at around $76,000, by trading in their old Tesla Model X, a luxury crossover vehicle that seats six and features the distinctive “falcon wing” doors resembling those of a Bugatti Type 64 or a DeLorean. The R1S had a seventh seat, making it big enough for his five kids. (He considered a plug-in hybrid minivan, the Chrysler Pacifica, but couldn’t face the idea of actually having to fill up a gas tank.)

Hilbert didn’t necessarily expect to be blown away by his new Rivian—he’d bought it essentially as a child hauler—but he’s been pleasantly surprised. The electric truck lacks fancy doors, the horn can’t make a fart sound, and it doesn’t promise to one day transform itself into a “robotaxi.” But it can go from zero to 60 in three seconds, it handles surprisingly well for its size, and it never, ever needs gas. Hilbert didn’t initially love the Rivian’s look. Its oval headlights make its front end resemble, depending on whom you ask, the Canadian characters on South Park, or the goofy robot in the Walt Disney Co.’s Big Hero 6, or a Dyson fan. But the unmistakable design has grown on him. Rivians “are just fun,” Hilbert says. “They’re the kind of big, boxy vehicles that Americans like.” Reviewers have generally agreed. Car and Driver described the Rivian R1T as “one hell of a little truck,” and the YouTube-famous reviewer Marques Brownlee suggested the R1S was “the best SUV ever.”

Today, Hilbert is one of the unofficial leaders of a small but passionate community of Rivian enthusiasts, constantly posting about the brand on social media. Many of these Rivian stans are ambivalent Tesla owners, put out by either Musk’s trolling social media persona or his politics, or some combination of the two. “I bought this before we knew Elon was crazy,” an increasingly common Tesla bumper sticker reads.

Unlike the aspiring meme lords who back Musk, Rivian fans tend to be earnest, maybe even a little boring. They trade tips about the best off-road tires and lust over accessories such as the $2,800 rooftop tent the company offers as an add-on. They have little to say about the “woke mind virus” or any of Musk’s other politically charged obsessions, but they can get extremely exercised by topics such as the question of whether there should be a Rivian version of the hand signal that Jeep owners greet each other with on the road. (Should you flick the headlights when you see a Rivian driver? Or maybe flash a “hang loose” gesture? The Rivian community has thoughts!) “It’s really positive,” says Hilbert, a regular waver. “That’s what Tesla was, but it feels like it isn’t that anymore.”

You might assume this kind of quiet enthusiasm would be rewarded by investors in Rivian Automotive Inc., especially amid Musk’s seemingly indefatigable effort to alienate the upper-middle-class suburbanites who were once his customer base (and are also Rivian’s). But you’d be wrong. Even as Musk’s social media antics have seemed to undermine his own company at almost every turn—amplifying antisemitism and posting wild conspiracy theories, while overseeing a nearly 40% drop in his company’s stock price since November 2021—Rivian has done even worse, at least by the judgment of the stock market. Since reaching a high in the days after its initial public offering that same month, the company’s market value has fallen by more than 90%. Rivian has conducted layoffs every year for the last three, most recently parting ways with 10% of its staff in February.

At the company’s headquarters in Irvine, California, the sense of whiplash has been intense. Founder and CEO RJ Scaringe was briefly a Wall Street darling, the architect of the biggest American IPO since Facebook and “Elon’s New Nemesis,” as a Forbes cover line described him. Lately he’s been more likely to be compared to the CEOs of other flailing Tesla wannabes, such as Lucid Group Inc. (which has been able to continue operating thanks to the largesse of Saudi Arabia’s Public Investment Fund) and Fisker Inc. (which recently declared bankruptcy). In February, Musk paid Scaringe a back-handed compliment—“Their product design is not bad,” he said—but only after predicting Rivian would go bankrupt.

Scaringe has also fielded complaints from politicians who suggested he was squandering taxpayer funds, from union leaders who charged that the company has underpaid its staff and from analysts who pointed out that until very recently, Rivian’s market value was roughly equivalent to the amount of cash it had on hand. The dire implication of the last point: The stock market was assigning a value of zero to the actual car company.

Scaringe winces at the suggestion that his company might not survive but says he finds the criticism understandable. “What makes that hard is if you look at our burn rate per quarter and assume it stays the same, you’re going to run out of cash,” says Scaringe, who has the physique of a compulsive exerciser and the cautious consultantspeak vocabulary of someone who’s spent the previous decade raising money. “And of course that assumes we make no progress.” In fact, as he explains while sitting in a conference room just off the company’s design studio in Irvine, he’s been engaged in a struggle to keep the company above water—dramatic cost cutting, frantic product development and sensitive negotiations with federal and state officials.

The turnaround effort culminated in late June, when Rivian announced a deal with Volkswagen Group, which will license Rivian’s hardware designs and software while providing the startup with as much as $5 billion. The money gives Rivian the cash to transform the kind of low-key loyalty that Hilbert feels into a mass-market phenomenon, while convincing anyone turned off by Musk that electric cars are indeed the future.

Rivian is “doing things better than Tesla in a lot of ways,” says Mike Ramsey, who covers the car industry for the research company Gartner Inc. “But Tesla benefited from the fact that they had the market to themselves for years.” Whereas Tesla was able to target early adopters, Rivian is courting a customer base that has so far remained reluctant to make the kinds of compromises that owning an electric vehicle requires—including higher prices, limited range and the need to spend 45 minutes in a Panera parking lot while your car charges. To win over these skeptics, Rivian will need to make a much cheaper car and to bring it to market at a time when General Motors Co., Hyundai Motor Co. and other big automakers are trying to pull off the same trick. As Ramsey puts it, “They just don’t have much wiggle room to screw up.”

The Rivian factory in central Illinois seems to bloom, almost miraculously, from a landscape of soybean fields and wind turbines. The 3.3-million-square-foot plant, in the town of Normal, was originally built by Mitsubishi Motors Corp., in the late 1980s. It closed in 2015, after the Japanese carmaker’s US division had struggled for more than a decade, and sat vacant for the next two years, as state and local officials tried to find another carmaker to take it over.

By that point, Scaringe had worked his way through a series of failed business plans and mostly unsuccessful pitches. He’d gotten the idea of starting an EV company a decade earlier while earning a doctorate in mechanical engineering at the Massachusetts Institute of Technology and started Rivian in 2009. One of his earliest investors was a Saudi conglomerate best known for operating Toyota dealerships. (The CEO had gone to MIT and was introduced to Scaringe by a mutual friend.) The startup struggled for years. “I was talking with suppliers, and they were laughing me out of the room,” Scaringe recalls. “Like, ‘You think people are going to want an electric SUV. What if it gets wet?’ And I’d have to explain that an electric vehicle can get wet.”

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Things started to change in 2017, when Scaringe bought the Mitsubishi plant, which came with five enormous Komatsu stamping presses. Rivian got the property for a song—$16 million. The next year, Scaringe unveiled a prototype electric pickup at the Los Angeles Auto Show, earning some favorable press coverage, partly because of that distinctive front end but also because Rihanna, who was dating the son of the Saudi car dealer, showed up for the launch.

Scaringe got another lucky break around the same time: To create a video for the event, he hired a production company that in turn hired Jeff Bezos’ girlfriend, Lauren Sánchez, to shoot aerial photography. Several months after the Los Angeles event, Inc. led a $700 million investment in Rivian. Later that year, Amazon became the company’s first major customer, agreeing to purchase 100,000 electric delivery vans. The retailer would join several more investment rounds over the next two years that would eventually total more than $10 billion in capital.

Scaringe says that if, several years ago, he’d been told “we will end up with the bestselling EV in its price category, I’d be like, that’s a home run”

Rivian’s trucks didn’t start rolling off the line until 2021, a year later than Scaringe had planned. Even so, the timing looked ideal. Spiking gas prices and Covid-era travel patterns were making electric cars seem more attractive than they had been in years, and a supply chain crunch had made traditional cars temporarily more expensive and harder to come by. At a time when Toyota Camrys were selling for $40,000 or more and interest rates were close to zero, the idea of dropping $70,000 on an oversize EV didn’t seem entirely crazy. Moreover, Rivian had already taken 50,000 preorders from prospective owners, on top of the Amazon deal.

“Can’t wait to get these into the hands of our customers,” Scaringe tweeted that September, posting a photo of himself driving the first Rivian pickup off the factory line. Two months later he rang the Nasdaq bell from a podium set up at the end of the assembly line in Normal, and for a brief period, Rivian was worth more than $150 billion, making it the second-largest US automaker by market value.

In retrospect, the moment coincided with what now looks like the very top of a pandemic bubble. Rivian’s stock price started falling almost as soon as trading began and dropped by more than 80% during 2022 alone. Semiconductors, which go into EV motors and many other crucial parts, were in short supply, causing Rivian to dramatically slow down its production plans. A plant Rivian had touted as being capable of making 150,000 trucks a year made only 24,000 trucks in 2022.

Turning a profit based on sales that low would’ve been challenging, if not impossible, because car companies almost always lose money until their factories are close to reaching full production capacity. But Scaringe had arguably made things even harder for himself. Convinced that a successful EV would need to seem far superior to a gas alternative, he spared no expense in the design, insisting on a heavy-duty frame that initially had to be welded together by hand. He incorporated high-end features such as a complex variable suspension system as well as dozens of smaller flourishes—a custom-designed flashlight nested inside the driver-side door and a Bluetooth speaker that slid out of the center console.

Not only did Rivian make the car too complicated, but it also overpaid for almost everything in it. “We had to pay a massive risk premium,” is how Scaringe puts it, euphemistically. “A vast majority of our bill of materials was negotiated in 2018 and 2019, when our leverage was really weak. We hadn’t launched. The brand wasn’t known.” The result of all this was epic losses: In 2022, Rivian lost $6.8 billion—on top of the $5.7 billion the company had lost the two prior years.

There were other signs of upheaval, including a 2021 lawsuit that was eventually settled in which a former vice president alleged that Rivian’s chief growth officer, Jiten Behl, excluded her from meetings and fired her after she complained about the company’s “toxic ‘bro culture.’ ” In 2022 a dozen employees filed complaints with the Occupational Safety and Health Administration accusing the company of safety violations at the plant, and, more recently, the National Labor Relations Board investigated allegations of anti-union tactics. The company denies wrongdoing and says it worked with OSHA to resolve the safety complaints. Scaringe has also reshuffled his executive ranks, parting ways with Behl last year and replacing the company’s chief product development officer, Nick Kalayjian, with himself. Kalayjian says that he gave up the job for personal reasons and that he and Scaringe worked together on the transition. Behl declined to comment.

There were signs of progress. Rivian produced 57,000 vehicles in 2023, and the R1S sold better in the US than other expensive EVs, such as the Tesla Model X, according to Kelley Blue Book data. Scaringe says that if, several years ago, he’d been told “we will end up with the bestselling EV in its price category, I’d be like, that’s a home run.”

Unfortunately, that category isn’t as big as Scaringe anticipated, as rising interest rates have made high-end EVs much more expensive for consumers. As Scaringe puts it, “the number of people that are buying the vehicle over $70,000 is constrained.” The result was Rivian was paying for far more manufacturing capacity than it was able to use while still incurring huge losses. As MotorTrend put it, the company was losing a Honda Civic’s worth of cash for every R1 it sold.

Rivian Texas

Worse, Scaringe was already on the hook to build a second, even larger factory, outside Atlanta. The deal was struck during the heady days after the IPO and called for Rivian to spend $5 billion more to build a smaller SUV, the R2, which was supposed to come out in 2026 and cost around $50,000. Georgia promised to kick in $1.5 billion, as long as Rivian employed at least 6,000 workers by 2030.

But the company no longer had the cash for any of this. According to people familiar with the matter, Scaringe tried to get the federal government to cover some of the cost of the new factory through loans and grants made available by the passage of the Inflation Reduction Act. But a point of contention, according to these people, was Rivian’s relationship with the United Auto Workers. US Department of Energy officials suggested that Rivian would have to take a friendlier position to the union if it expected federal funds. Scaringe has resisted unionization efforts so far and has said that he favors a “direct relationship” with employees. The negotiation is ongoing. Rivian and the Department of Energy declined to discuss loan applications.

As Scaringe began planning for 2024, he desperately needed a car—really, cars—that large numbers of consumers would buy. To him that also meant cars that were obviously different from the most popular EV, Tesla’s Model Y. “A lot of companies have looked at the success of that product and said, ‘Let’s create our own version,’ ” he says, referring to a collection of Tesla-like crossovers including the Ford Mustang Mach-E, the Kia EV6 and the Hyundai Ioniq 5. “The seating configuration is the same,” he says. “The storage is almost the same. The look and feel are very similar.” Rivian would make outdoorsy-ish cars true to its brand. More important, they wouldn’t look or feel anything like a Tesla.

When Elon Musk began opening up his company’s first showrooms in 2008, he modeled them after Apple Stores. Tesla Stores were spare, modern spaces, often inside or adjacent to suburban shopping malls. Fifteen years later, the approach seems efficient, if dated—perhaps reflecting Musk’s ambivalence about having to sell his cars at all. In 2019 he announced that he would close all the company’s stores and sell his cars exclusively on the web. He changed his mind two weeks later, keeping most of the stores open.

By contrast, Rivian’s approach to retail reflects Scaringe’s own proclivities—contemporary styling with try-hard spendiness. Rivian’s stores (or “spaces,” as the company calls them) are mostly located in hip neighborhoods, sometimes in historic buildings, with details that seem ripped straight from a Patagonia designer’s mood board. They feature exposed brick, lightly stained plywood, maps and coffee table books—all meant to evoke the brand’s promise to take its owners on an adventure into the wild or at least on a camping trip with the kids.

The most spectacular of these new stores is located in an almost 90-year-old movie palace in Laguna Beach, just down the California coast from the company’s headquarters. Rivian bought the decrepit South Coast Theater in 2021, spending about $10 million on the purchase and then undertaking an extensive renovation. The marquee was repaired, the art deco ceiling restored and new murals commissioned to replace ones that had been destroyed. The theater reopened in December 2023 as a store and “community creative hub,” offering screenings of indie films and, of course, test drives.

A few months later, in March, Scaringe appeared at the theater before an audience that included employees, customers, reporters and social media influencers who’d been summoned to the unveiling of the R2’s design. Wearing his usual look of a neatly pressed rancher’s shirt and jeans and speaking with his usual robotic precision, Scaringe briefly recapped the company’s history—the R1 (“our handshake with the world”), the retail strategy (“a chance for us to physically manifest our brand in a very unique way”), the charging stations (“our Rivian Adventure Network”). Then he turned to the future. “We’re here to talk about how all this brings us to our next set of products,” he said, “and how do we make Rivian more accessible to a lot more people.”

A wall slid open, and the company’s design chief, Jeff Hammoud, drove out in the new car. The R2 looks like a smaller version of the R1S, with the same distinctive front end and boxy shape. It has a 300-mile range and will include a collection of sensors that Scaringe said will eventually allow the car to operate autonomously on highways. Scaringe rattled off the features and then added something unexpected: Rivian had a second new car to announce. “I am really, really excited to talk about R2’s sibling, which we call R3,” Scaringe said. It would rely on the same base design but would cost less.

As a hatchback crossover rolled out, the crowd of fanboys and employees entered into a frenzied state that felt at once rehearsed and rapturous. Several people yelled out, “What?” and someone else shouted, “Oh my God!” Scaringe smiled. “So you didn’t expect that ‘one more thing’ here,” he said, making a slightly clumsy reference to Steve Jobs’ famous line. “It was shocking,” says Hilbert, who was watching from the balcony. “With R2, they were saying, ‘Here’s what we’re going to do.’ With R3, they’re saying, ‘Here’s what we want to do.’ ”

The R3 doesn’t really exist outside Scaringe’s imagination—there was no timeline for production, no performance specs and no price. But the prototype did deflect attention from what probably should have been the bigger surprise. Just before the event ended, and almost as an aside, Scaringe mentioned that the R2 would be built not in Georgia, as planned for years, but in Illinois. This, he said, would allow Rivian to start making the cars six months ahead of schedule, in the first half of 2026. He noted that the company still intended to open a factory in Georgia but didn’t offer any specifics about when or how he’d pay for it.

Only a handful of Rivian employees, along with the governors of Georgia and Illinois, had known about the change in plans. Scaringe says the call to Illinois’ J.B. Pritzker was an easy one, helping Rivian land an incentive package worth $827 million for a factory expansion in Normal. But he concedes that the news went over less well in Georgia. The state’s governor, Brian Kemp, later called the delay “disappointing” but said he expected Rivian to finish the factory by 2030, as planned. Scaringe says the company’s relationship with Kemp is good and frames the shift as a painful but necessary one to “save us a couple of billion dollars” while bringing a cheaper model to market more quickly. “That doesn’t in any way whatsoever reduce our excitement for long-term scaling to come,” he says.

Analysts mostly share Scaringe’s long-term optimism about electric cars. Despite dour headlines, the category is still growing quickly worldwide, driven largely by Chinese companies such as BYD Co. and its $10,000 Seagull sedan. The picture in the US has been muddier. Sales were flat during the first quarter of 2024, but that slowdown was led mostly by Tesla, which accounts for a huge portion of domestic sales, and may say more about Musk’s failings than it does about the future of sustainable transportation.

For years, Musk had teased the possibility of a so-called Model 2, an electric car that would compete with the Toyota Corolla and other affordable sedans. More recently, he’s focused on promoting the Cybertruck, a pricey, futuristic pickup with limited appeal beyond the divorced dad demographic. Earlier this year, amid reports of the Model 2’s demise, Musk announced that his company would prioritize the development of autonomous-driving technology over new models and that Tesla should no longer be thought of as a car company at all.

That may pay off in the long run for Musk, but the failure of Tesla or anyone else to sell a cheap EV has limited their adoption in the US. Tesla’s “sales have declined, and a lot of it is because they don’t have any new products,” says Stephanie Valdez Streaty, an analyst with Cox Automotive Inc. Valdez Streaty, whose employer invested in Rivian before the IPO, says the central question for Scaringe’s company is, “Do they have a product that’s going to have a wider audience?”

Last August, Scaringe met with Oliver Blume, CEO of Volkswagen AG, at the company’s Porsche Experience Center, a museum and test track in Atlanta. The subject of the meeting was software. Blume’s predecessor, Herbert Diess, had been forced out as EV sales stagnated and customer complaints proliferated. Now, Blume was trying to figure out how to turn things around, and he seemed to have his eye on Rivian. When Scaringe asked a group of Volkswagen executives if they’d driven his company’s trucks, they responded that VW had a garage full of Rivians.

Scaringe talked up his company’s approach, which involved designing its own electronic control units, or ECUs. These are the little computers that control various systems in a car, including the transmission and the power doors. Historically, many components in a gas-powered car essentially come with their own ECUs, which means more than 50 computers in a car, each custom-designed by a different parts supplier. Following Tesla’s example, Rivian had resisted this option, designing its own computers and software. In the past, Scaringe says, “if you’re buying seats, your seats come with an ECU.” Rivian’s approach is different. “I want seats, but I want them to be dumb,” he says. “I want two wires to come out of the back, and I’m gonna bring my own computer.”

This hadn’t been easy. The first version of the R1 had 17 ECUs, still a fairly large number and one that had helped contribute to the high costs in 2021 and 2022. But Scaringe’s team was working on an update to reduce that number to seven starting in 2024. The result would be a less buggy design that would require far less wiring and cost thousands of dollars less to manufacture.

Initially, Scaringe says, he thought that maybe Rivian would be able to sell its hardware designs and software to Volkswagen, creating a modest secondary revenue stream. But Blume made clear he was open to something bigger, and over the next few months, the two began negotiating a joint venture that called for Volkswagen to essentially give up on its own software efforts and use what Scaringe had built.

In late June, Volkswagen announced it would invest up to $5 billion in Rivian over several years. Rivian’s stock price soared by as much as 50% the next day. If the deal works as intended, it will make VW a major Rivian shareholder and will allow Scaringe to open the Georgia plant. A person familiar with the agreement says there could be more money in the future. The joint venture plans to eventually license its technology to other automakers besides VW.

Scaringe declines to elaborate much on the deal, but he’s bubbling with a sense of possibility. “Far and away my favorite set of calls that happened the day after the announcement were with the major semiconductor suppliers,” he says. “They suddenly saw us as a massive customer.” Needless to say, nobody asked whether an EV could get wet.

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