Amazon and Rivian say their long-delayed electric van is on the way

Almost three years ago, Amazon announced it would buy 100,000 custom delivery vehicles from Rivian, a new electric vehicle maker. On Thursday, after some delays, the companies said hundreds of vans were finally on the road.

Battery powered trucks are critical to Rivian’s business plan and survival in the highly competitive auto industry. And they are an important element of Amazon’s plan to curb carbon emissions as it builds its own fleet and relies less on contractors like UPS to deliver billions of orders of toothpaste, hair dryers, dog toys and other products.

But questions remain about how quickly Rivian, which is about 18 percent owned by Amazon, can fulfill the retail giant’s order. The automaker, which started producing cars in small numbers last year, is struggling to ramp up while there are shortages of semiconductors and other components. Rivian warned employees last week that they should expect layoffs and other cost-cutting measures.

“We’re making some adjustments to certain teams in the business,” RJ Scaringe, Rivian’s founder and CEO, said in an interview this week. He declined to say how many jobs may be cut.

“It’s one of the most difficult decisions you have to make as a leader, knowing where we spend our dollars, where we spend our focus or spend our time,” he added.

Amazon said it doesn’t expect to deliver 100,000 trucks by the end of the decade. In a November securities filing, Rivian said it plans to deliver 100,000 trucks “by 2025.” Mr. Scaringe declined to say whether that was still in the plan, saying only that he hoped to deliver the vans sooner than Amazon expected.

In January, Ross Recchi, who oversees Amazon’s global fleet, said the company expected to deploy 10,000 as early as this year. So far, Rivian has shipped several hundred, and Amazon now expects “thousands” to arrive by the end of the year, said Udit Madan, Amazon’s vice president of shipping.

Rivian also makes a pickup truck and a related sport utility vehicle. That means the company is trying to power two assembly lines at once — a tall order for any automaker, especially a relative upstart.

The new market for electric delivery vans is becoming more competitive. Ford Motor, Rivian’s major shareholder, started selling an electric version of its popular Transit van a few months ago and has delivered around 3,000 so far. Ford has sold some of the company’s shares in recent months.

Rivian’s production woes typify the difficulties young electric car makers face as they try to challenge traditional automakers. Many are discovering how difficult and expensive it is to mass-produce cars, and time is not on their side as established companies are also rapidly moving towards electrification.

So far, Tesla, which sells more electric cars than any other manufacturer, is the only electric car maker that has gained significant market share. But this company does not yet manufacture and sell trucks.

Canoo, which announced plans to offer a spacious electric van this year, warned in May that it might run out of cash. Management “has identified substantial doubt about our ability to continue as a going concern,” Kanou said in a regulatory filing. The company’s prospects improved this month when Walmart said it would buy 4,500 Canoo vehicles to deliver online orders.

Amazon isn’t just depending on Rivian for emission-free cars. It also plans to order electric vans from Stellantis and other manufacturers, albeit in smaller numbers.

Amazon is investing heavily in building its own network of delivery contractors and already has more than 100,000 vans, most of them diesel-powered. Bank of America estimates it delivered about six billion packages in the United States last year, surpassing UPS.

With a design that has been compared to a friendly blue whale, Rivian vans feature large touchscreens and technology not available from traditional truck manufacturers that are just beginning to sell electric delivery vehicles. By replacing gasoline or diesel trucks with electric vans, Amazon will contribute to the alarming increase in emissions resulting from the growth of delivery vehicles.

During a joint interview, Mr. Scaringe and Mr. Madan presented the Rivian van as a product of joint detailed development that would be much more comfortable for drivers who are themselves deficient. Companies are obsessing over door handles and other details, Mr. Scaringe said, and cars will have seats with built-in heating and cooling. The doors are designed to make it easier for the driver to get in and out of the trucks.

Amazon, known for using software to widely automate and streamline warehouses and other operations, has been trying to extend that approach to vans.

For example, Rivian’s truck navigation software automatically guides drivers to the next address and displays customer information. “What they would normally have to react to will happen automatically,” Mr Madan said.

Delivery vehicles run on battery power because they travel relatively short distances compared to, for example, the semi-trucks that Amazon also uses. Rivian’s vehicles have enough range to make deliveries throughout the day and recharge at night, Mr. Madan said. Amazon said it has added thousands of charging stations to its delivery vans.

Electric cars use less energy in city driving than on highways – the opposite of internal combustion cars – because their regenerative brakes can recapture some of the energy used to propel them. Unlike engines, electric motors consume minimal energy when stopped at traffic lights.

Rivian was considered as one of the most promising manufacturers of electric cars until recently. Its debut pickup, the R1T, was named Motor Trend’s Truck of the Year for 2022. Other critics also raved about the pickup.

But the company’s production woes unnerved investors, with Rivian’s share price falling to $35 from about $170 shortly after the company’s initial public offering.

Competition is also heating up. This spring, Ford began selling an electric version of its popular F-150 pickup, the Lightning, which was an instant hit and competitor to the R1T. Next year, General Motors will start selling the electric Chevrolet Silverado pickup truck.

All automakers were experiencing shortages of semiconductors and other critical components. But as a smaller and newer player, Rivian probably has far less leverage with suppliers than Ford or GM Rivian said in May that it had lost a quarter of its planned production time since March due to supply chain problems.

Mr Scaringe said he expected the semiconductor shortage to continue for the rest of the year, but “I think it will be relatively short-term”.

A slowing economy or recession could help ease the deficit, he said, but would create problems on its own. “We’re looking at what will certainly be a very dynamic next six months from a supply chain perspective, from an interest rate perspective, from an inflation perspective,” Mr Scaringe said.

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