FYI: Rivian Shifts Gears as a Software Visionary with Key Partnership and Strategic Moves
Until recently, Rivian was primarily known for its sleek, high-performing electric SUVs and trucks rather than a leader in software innovation. However, this perception changed dramatically when Volkswagen acknowledged its insurmountable software issues and partnered with Rivian in a $5 billion agreement to co-develop software and electrical frameworks. This collaboration marked a turning point, positioning Rivian as a formidable player in the tech domain and providing a significant financial uplift during its critical growth phase.
Benchmarking with the Best
At the recent Morgan Stanley’s 12th Annual Laguna Conference, Rivian’s CEO RJ Scaringe revealed an intriguing development. In response to a query from analyst Adam Jonas, Scaringe confirmed that Rivian had acquired a Xiaomi SU7 for benchmarking purposes. Touted as "China’s Apple Car," the Xiaomi SU7 boasts Tesla-like specs at Chevrolet Bolt prices, offering a unique blend of performance and cost-efficiency.
Learning from China’s EV Market
China’s electric vehicle (EV) market is renowned for its cutting-edge technology, cost-effectiveness, and fierce competition. Scaringe emphasized the impressive advancements from multiple Chinese brands, particularly BYD, which has set high benchmarks in cost efficiency and technological innovation.
"In China, there’s an enormous level of competition among various brands, both emerging and established," Scaringe noted. "We’ve seen some truly remarkable vehicles from a cost and enterprise point of view. It’s no wonder numerous automakers are deconstructing these cars to learn from them."
Why the Xiaomi SU7?
The decision to study the Xiaomi SU7 is especially significant. Launched earlier this year, the SU7 represents Xiaomi’s first venture into the automotive sector. Ranking as the third-largest smartphone manufacturer globally, Xiaomi has seamlessly integrated its substantial hardware and software ecosystem into the SU7, likening it to an Apple Car. The vehicle has garnered acclaim in China for offering Tesla Model S-level performance at more affordable rates, with plans for an even more high-performing version in the pipeline.
Focused on Cost Reduction
Scaringe underscored that Rivian’s primary interest lies in understanding the cost advantages presented by Chinese EVs. "There’s no singular magic wand," he said, referring to the SU7. "It’s a cost advantage that permeates through every nut, bolt, wire, and panel in the vehicle."
He pointed out that many Chinese automakers operate at zero gross margins, driven by intense competition and a long-term focus on survival. This drive has led them to adopt obsessive cost-reduction strategies, enabling them to compete more effectively.
Strategic Insights for Rivian
While Rivian has no immediate plans to enter the Chinese market, understanding how Chinese EVs might compete in the U.S. and Europe is vital. Many Chinese automakers are gradually entering the American market through technical and battery partnerships, providing valuable insights into supply chains and cost efficiencies.
"It’s about every component being 20% to 30%, sometimes even 40% cheaper than what we’d find in the Western market," Scaringe explained.
The Path to Profitability
Scaringe’s comments shine a light on the challenges and strategies in the EV industry. For Rivian, controlling battery supplies, mastering the supply chain, and drastically reducing costs are non-negotiable for survival. Moving beyond the $90,000 to $100,000 price range with future models like the R2 and R3 is essential, mirroring Tesla’s trajectory with the Model 3 and Model Y.
"We are working tirelessly to ensure R2 becomes the dominant vehicle in our portfolio," Scaringe stated.
In conclusion, Rivian’s strategic acquisition of the Xiaomi SU7 for benchmarking signals its committed drive towards cost reduction, advanced software capabilities, and long-term profitability. By drawing lessons from China’s fiercely competitive and innovative EV market, Rivian aims to establish itself as a dominant force in the global EV landscape.
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William Kouch, Editor of Automotive.fyi
