Amazon wants 100,000 electric trucks. Can Rivian deliver?

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

Battery powered trucks are essential to Rivian’s business plan and survival in a highly competitive automotive industry. And it’s an important component of Amazon’s plan to reduce its carbon footprint 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 various other products.

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

“We are making some adjustments to certain teams within the company,” RJ Scaringe, founder and CEO of Rivian, said in an interview this week. He declined to reveal how many jobs could be abolished.

“These are some of the most difficult decisions one has to make as a leader, to know where we spend our money, where we spend our focus or spend our time,” he added.

Amazon said it does not expect to deliver 100,000 trucks until the end of the decade. in Presentation of stock for the month of NovemberRivian said it plans to deliver 100,000 trucks “by 2025”. Mr. Scaringi declined to say if that was the plan, saying only that he hoped the trucks would be delivered sooner than Amazon had expected.

In January, Ross Rashi, who oversees Amazon’s global fleet, said the companies expect to deploy 10,000 companies early this year. So far, Rivian has delivered several hundred, and Amazon now expects to have “thousands” by the end of the year, said Odette Madan, Amazon’s vice president of transportation.

Rivian also manufactures a pickup truck and a related sports car. This means that the company is trying to condense two assembly lines simultaneously – which is difficult for any automaker, especially a relative novice.

The emerging market for electric delivery vans is becoming more and more competitive. Ford Motor Company, a major shareholder in Rivian, started selling an electric version of its popular Transit Van several months ago and has delivered about 3,000 so far. Ford sold some of its shares in the company in recent months.

Rivian’s production problems are symptomatic of the difficulties young electric car manufacturers are facing 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 because 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 to gain a significant market share. But this company does not manufacture or sell trucks yet.

Canoo, which has announced its plans to introduce a spacious electric truck this year, warned in May It may lack criticism. “Management has identified significant doubts about our ability to continue as a going concern,” Kanu said in a regulatory filing. The company’s prospects improved this month when Walmart It said it would buy 4,500 Canoo cars for online order delivery.

Amazon doesn’t just rely on Rivian for zero-emissions vehicles. It also plans to order electric trucks from Stellantis and other manufacturers, albeit in smaller numbers.

Amazon is investing heavily to build its own network of delivery contractors and has already done so Much more than 100,000 trucksMost of them run on diesel. It delivered about six billion packages in the US last year, surpassing UPS, according to Bank of America estimates.

With a design that has been compared to the friendly blue whale, Rivian trucks come with large touchscreens and technology not available from traditional truck makers, who are just beginning to sell electric delivery vehicles. By replacing petrol or diesel trucks with electric ones, Amazon will help contain an alarming increase in Emissions from growth in delivery cars.

During a joint interview, Mr. Skarenge and Mr. Madan portrayed the Rivian as a product of careful joint development that would be more comfortable for under-supplied drivers. Mr Skaringi said companies are obsessed with door handles and other details, and vehicles will have seats with heating and cooling. The doors are designed to make it easier for drivers to get on and off trucks.

Amazon, known for using software to widely automate and simplify warehouses and other processes, has sought to extend this approach to pickup trucks.

For example, Rivian’s truck navigation software automatically directs drivers to their next address and displays information about customers. “Things they should normally react to will happen automatically,” Madan said.

Delivery vehicles themselves are good for battery power because they tend to travel fairly short distances, compared, for example, to semitrucks, which Amazon also uses. Mr. Madan said Rivian vehicles have enough range to make all-day deliveries and overnight shipments. Amazon said it has added thousands of charging stations in its delivery warehouses for pickup trucks.

Electric cars consume less energy driving in the city than on the highway – unlike internal combustion vehicles – because their regenerative brakes can recover some of the energy used to drive them. Unlike motors, electric motors use minimal power when stopped at traffic lights.

Rivian was seen as one of the most promising electric car makers until recently. Its debut pickup was named, the R1T motor directionTruck of the Year 2022. Other critics also liked the pickup truck.

But the company’s production problems have alarmed investors — Rivian’s share price has plunged to less than $35, from about $170 soon after the company’s initial public offering.

The competition is fierce, too. This spring, Ford began selling an electric version of the popular F-150 pickup, the Lightning, which was an instant hit and rivaled the R1T. Next year, General Motors will begin selling a Chevrolet Silverado electric pickup truck.

All automakers suffered from a shortage of semiconductors and other important parts. But as a smaller, newer player, Rivian probably has far less leverage with suppliers than Ford or GM Rivian said in May that, since March, it has lost a quarter of its planned production time due to supply chain issues.

Mr Skaringi said he expects the semiconductor shortage to continue for the rest of the year, but “I think that will be relatively short-lived”.

He said a slowdown in the economy or recession could help alleviate the shortage but would pose problems of its own. “We are looking at the next six months that will inevitably be very dynamic from a supply chain standpoint, from an interest rate standpoint, from an inflation standpoint,” Mr. Skarenge said.