Can Rivian avoid the EV speed bumps? with founder and CEO RJ Scaringe

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1:23This episode is part of a special series in partnership with Stripe, empowering businesses to make progress. We're at this like inflection point where the cars of the historical past and the cars of the future in terms of architecture, I'd put ourselves, I'd put Tesla in that category. They coexist, but the platforms are totally different. So where they end up in, let's say, five to 10 years is very, very different places.

2:04That's RJ Skaringe, founder and CEO of EV automaker Rivian. It's been a strange period for electric vehicles with consumer demand ebbing and Elon Musk of Tesla deep in the new Trump administration. I wanted to talk to RJ about how he's adapting Rivian's business in the face of all these shifts. Rivian made a mark in the luxury SUV space. Now, as the company moves from its initial platform called R1 to lower-cost R2 vehicles, it faces a raft of new challenges and new opportunities. RJ and I discuss Rivian's recent$5.8 billion partnership with Volkswagen, the company's ongoing risk assessment for self-driving features, and how Rivian's AI-enabled technology plumbing can accelerate the brand beyond incumbent manufacturers.

2:53You don't have to be a car enthusiast to glean insights from RJ about preparing for the future, so let's get to it. I'm Bob Safian, and this is Rapid Response.

3:13I'm Bob Safian, and I'm here with RJ Skaring, founder and CEO of electric vehicle manufacturer Rivian. RJ, thanks for joining us. Yeah, thanks for having me. I'm excited to be on. So I have to start with the elephant in the room, who is Elon Musk. Tesla, biggest player in electric vehicles. Musk, on the cover of Time, is Trump's ally. Do you have a relationship with Elon? Are you excited about what he's doing in D.C.? Dismayed? Confused? Yeah, well, you know, at the end of the day, what Elon and Tesla have done has been incredible for electric vehicles. And, you know, I think there's a lot of noise.

3:52But it's important to remember that as a business leader, he's, of course, going to continue to be driving towards things that help electrification in the long term. And I think there may be lots of different perspectives on what are important things to do in the short term. But I think net net, I think it's good to have an important leader and innovator in the electric vehicle space that has a very close access to the administration. Obviously, Rivian and Tesla are competitors. Like, is him being focused on this government stuff, is that sort of, is that allow, like, oh, maybe he's distracted a little bit from Tesla's business?

4:29Or is it like Tesla gets extra attention, you know, maybe special treatment? Like, do you worry about either end of those things? You know, there's so many things that we could get distracted by or pay attention to in terms of external factors, things that are outside our control. we're focused on developing amazing products uh making sure that those amazing products you know come together in a really cohesive and thoughtful way and right now we're hyper focused on the launch for our next product which which we call r2 which is a much lower priced vehicle for us and really will represent a step change in volume and therefore a step change in revenue for us as a business but you know the there's definitely a lot of noise in the system these days.

5:12And I think at the end of the day, it's most important just to stay really focused on the things that we can control. It's hard because there's all these external factors like the tariffs, which everyone's talking about what it's going to do for automakers or how difficult it might be. Although you guys, I guess, are a little less exposed than some of the other automakers. Like when those kind of executive orders come out against Mexico and Canada River, like, Like, what do you think? Are you prepared for it? You know, leading up to the election and then following the election, we've done tabletop exercises where we look at what would we do under these different scenarios and planned out different tariff scenarios, different trade relationships and trade scenarios.

5:58But as you pointed out, today we have all of our products being produced in a single plant in Illinois. We're building a second plant in Georgia. So our footprint is, in terms of vehicle assembly, very U.S.-centric. And then even our supply chains are also very U.S.-centric. So we're more protected, if you will, than some of the other very large manufacturers that, in a large part because of NAFTA, because of the trade relationships that have existed between the United States and Mexico and Canada for decades, have built significant industrial footprint in those countries. And it's going to be extremely challenging for them if the tariff environment is as aggressive as has been discussed.

6:39It feels like the EV market goes through these sort of waves, you know, of enthusiasm and then dips, you know, in consumer excitement and government support. It feels like we're in a little bit of a down moment when you see, you know, GM and Ford pulling back on their electrical vehicles. How much do you think about what others are doing as like a signal for yourself to kind of, well, if they're going to pull back, I got to pull back? Or is this like, this is the moment. This is a great opportunity to make up some ground. Yeah. The element of noise that's probably least talked about is the extreme, almost hyper-focus on the short term, I'd say across a lot of industries, but in particular, transportation, electrification.

7:22And what happens over the next month, three months, six months, 12 months doesn't change the end state outcome in our view. We're extremely convicted that eventually everything will be electric. And the gating factor for that ultimately is the creation of lots of interesting products to draw customers in. And if there's a very narrow set of products, it is going to significantly delay how fast we as a society and certainly we as a country make this transition. If I'm thinking about buying an electric car and I'm willing to spend, let's say,$50 ,000, there's very few products that I would say are highly compelling.

8:01Tesla is one of those, Model 3 and Model Y are both outstanding products, outstanding EVs. And it's this lack of competition that's led to them having such significant market share. and i think in order for us to see electrification penetration you really continue to grow we're going to need to see different products and that's not to say products that are the same as a tesla in fact the opposite products that are very different products that cover different market positions uh form factors and the brand position we established with the r1 products is is very different than tesla of course the price points of let's say a model s and a model x are very similar, they couldn't be more different in terms of how the products manifest.

8:43The market's so thirsty or so hungry for different choices, but there needs to be a lot of other manufacturers doing the same. And so to your question on the pullback that we're witnessing from some of the other manufacturers, I think it's really unfortunate. That really short-term focus from investors on the quarterly results versus building a long-term sustainable business, I think is going to cause some companies to make decisions that optimize too much around the short-term and sub-optimize pretty significantly, I would say, around the long term. It's ironic, right, that sort of your competitors, in some ways, you want them to be in the business to grow the whole pie, whereas for a lot of, you know, businesses, they're happy to be able to have their competitors pull back.

9:26That's not good for you. Yeah. You know, it's funny. My oldest son asked me about this because he said, why are those so gasoline cars? Why isn't everything electric? And I said, well, there's a lot of people want different types of vehicles. So if you wanted a minivan today, there's no electric minivan you could even buy. Or if you wanted a convertible, there's no electric convertible you can buy. And he said, well, why doesn't Rivian just build everything? And I said, that's a great idea, but we have to choose the things we're going to build. And our brand position is such that we're not going to be able to go off to every segment and every form factor.

10:00So, you know, an eight-year-old had the intuition to ask the question. And I think it's a pretty obvious gap we have, which is there's not enough choice. We need more choice. And, you know, if the other manufacturers are not there, of course, in the short-term basis, you'd say it's from a competitive point of view, it is an advantage to Rivian. But I started Rivian because I want to help the world advance to this future state. So I think what's best for my kids and my kids' kids' kids is for there to be lots of choice, for there to be many highly successful companies in the EV space. And we talk about EVs as the singular difference between cars, but it really encapsulates a lot of things.

10:40I'm sort of implicitly assuming that these are software-defined vehicles. They have modern network architectures. They have features that can be updated regularly through over-the-ear updates. And electrification, by coincidence, brought those changes along with it. So you see that in our vehicles. You, of course, see that in Tesla vehicles. I think that's going to become an increasingly large gap where the vehicles that have much older technology in terms of software and electronics are going to start to feel really old relative to vehicles that have been architected around a completely software-defined experience and compute platforms within the vehicle.

11:18I live in New York City. I've gotten pressure from my kids, older than yours, but they're like, we should have an electric car. But in the city, like charging stations aren't easy to find. I don't have a house with a driveway. You know, a lot of our car trips are long. It's like, it's sort of like EVs aren't really for me yet, even if I want it, right? Good call out. And this gets back to the core question of like, what's the path to see, you know, us approach 100 % new vehicle sales being electric? It's enough product choice. It's the infrastructure to support charging. It's solving these harder infrastructure issues, which for folks that live in a highly urban environment, these are real challenges.

12:02You can't press a button and it happens overnight. It's taking time. And there's only so much of that that is under your control at an organization like Rivian. I mean, is that why when you look at Musk being closer to Trump, you think maybe he'll help him move some of those things along more? It doesn't necessarily feel that way right now. I have to imagine that in those discussions, there's going to be a point of view that's going to help guide more towards creating at least the option for customers of electrification. Yeah. So the first mainstream EVs and hybrid cars were small and light. When you debuted, it was with like an SUV and a truck.

12:44Bigger seems to be the trend. Is there a reason you went in that direction? When I first started the company, this is middle of 2009, the initial product plan was we're going to launch a sports car, use the sports car to build the brand, then take the brand and launch a whole series of other products that would be more mass market. And we worked on that for a little while. And while we're doing that, I realized that the strategy we were deploying was actually very similar to what Tesla had successfully already done. It wasn't by intention. It was more by accident. It's just a very logical way to start a car business is to say start with something that's really exciting.

13:19And so therefore a sports car and then scale from that. And of course, I'm a really pretty heavy car enthusiast. So starting with a sports car sort of spoke to my inner child. But as we reflect on it, I realized the strategy just wasn't right. We shelved everything we'd originally started on. We arrived at this idea that the brand and the company we create should represent a lot more than just the vehicle. And we wanted to represent the idea of enabling, but importantly, also inspiring customers to do the kinds of things they want to remember for decades. And so really building a brand and a company around this idea of enabling life's memories.

14:02And so that meant, as you translate to like, what are the product requirements to do that? It's vehicles that can carry your kids, your pets, your gear, your friends, your stuff. And it led us to a sibling set of products, a truck and an SUV. It had us going up against the least efficient vehicles on the road. So large SUVs, large trucks are among the most carbon intensive vehicles in terms of emissions. And then, of course, there's going to be follow-up products and creatively named, the first of which is R2. The next after that, the sibling to R2 is R3. We've done a lot of the conceptual work of what an R4 would look like and what an R5 would look like.

14:41And I couldn't be more excited about the product portfolio that's going to be built out over the next five to six years. to create lots of really interesting choices for customers across different price points, but also with different form factors and different use cases. The subtext of what RJ is saying here is that Rivian's R2 model will put the company head-to-head against Tesla products. That's going to be an interesting battle to see play out. So how much of that battle will be about driverless features and how much will be about environmental messaging? We'll talk about that after the break.

15:19Stay with us.

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16:58So if you're scaling, make it simple with Deal. Go to deel.com slash MOS and get up to three months free. Before the break, Rivian CEO RJ Skaringe talked about Elon Musk's role in the Trump administration and the gaps in the EV marketplace. Now, RJ talks about driverless technology, environmental messaging, Rivian's$5.8 billion partnership with Volkswagen and more. Let's dive back in.

17:35I talked recently to Peter McGinnis, who runs Impossible Foods, and he argued that sort of environmental messaging has to take a backseat to other kinds of experience. Do you think that holds true for EVs also, for Rivian? I completely do. And in fact, our whole product strategy has been built around that, which is we don't believe that simply saying the vehicle is electric or has lower carbon emissions is a reason enough to drive significant demand and certainly to drive customers to make changes to their buying behavior from, let's say, a combustion-powered vehicle into an EV. But if the vehicle is so incredible, if it – like so in the case of our pickup, it accelerates zero to 60 in two and a half seconds.

18:21It does the quarter mile in 10.5 seconds. It's faster than a Porsche 911 GT3. It can drive incredible off-road. It can tow 11 ,000 pounds and you can fit five people in it. It's like, holy cow, that is a cool thing. And the fact that it's electric is secondary to the performance, the attributes, the features, all of it together as a cohesive package. So here in California, the R1S is actually the best-selling premium SUV in the state of California. Not premium electric SUV, just premium SUV. So it outsells anything over$70 ,000 in the SUV category. And it's not a political statement. And it's customers that vote Republican, vote Democrat, are both excited about the features and the attributes of what we're putting together.

19:08And what I'm so enthused about with R2 is it dramatically lowers the entry for folks to experience our products. And our average price of an R1 is over$90 ,000. On R2, it starts at about$45 ,000. And, of course, R3 brings that down further. Our 4 brings it even further down. So these are things we're really excited about. You talk about the brand and you talk about the product. When you think about what makes Rivian distinctive and will make it distinctive in the long run, like, is it one of those more than the other? One of the things we say is a brand is not a feature. So a brand is not a zero to 60 time.

19:47A brand is not a storage cubic volume. Those are features or attributes that, you know, think of almost like instruments in a large musical orchestra that have lots of instruments playing, but all of them together ultimately make up what the product feels like and therefore how the brand manifests. and brand like music like culture is in many ways it's hard to describe the single ingredient that makes something powerful or something desirable or something exciting and there's a bit of magic to it and so for us we really spent a lot of time thinking about across every single touch point of the business so our retail spaces our service locations the products themselves down to like, what's the floor mat material?

20:36All these little decisions need to all level up into this broader idea. And for us, the broader idea is creating a highly inviting product experience that invites people to go have the fullest version of their life. And so the kinds of emails I get from customers I love the most are not, I get all kinds of like, hey, the car's really fun to drive. That's, I enjoy those. I also get lots of emails like, hey, I wish this was different or this was wrong. but of the good emails the ones that are the most exciting is some version of i don't know how it's happened but rivian has inspired me to start skiing again and i haven't skied in 10 years or i don't i had one the other day i took my i bought a telescope and i went out to an open field big dark field and looked at the stars i've never done that before i don't know why your brand inspired me to do this and we love that because it's the the magic of what we'd hoped to inspire somehow has come through with these different customers.

21:38I want to ask you about AI because everyone asks about AI. We're all focused on it, how it's going to impact the car experience. What are you doing at Rivian? How far are we from a driverless car world? Should we have a driverless car world? I think it's incredibly important. And in fact, it becomes, you could argue, the most important part of the business, which is the ability for the vehicle to drive itself. And really the reason for that is consumers start to get their time back. Even if you enjoy driving the vehicle, the ability to hop on the highway or to leave your house and have the vehicle take you to the office or take you to wherever you're going and have the freedom and flexibility to be on your phone, to read a book, to do whatever you like is a really nice feature.

22:19This has been a big area of focus for us. And when we launched our first products, we had a limited capability for what we call a highway assist feature, which is you can go hands on wheel, eyes on the road, but the vehicle drives itself in certain domains, so in our case, highway. But on our Gen 2 vehicle, which we started working on, we designed an entire camera set. We have 55 megapixels of cameras, so more cameras in terms of the number of megapixels than any other vehicle sold in the United States today. We have five radars, including a front imaging radar, and we control that entire stack.

22:55And we can use sort of recently emerging technologies to train the platform. So if you think of how self-driving was developed prior to, let's say, 2021, it was really heavily rules-based. But now we're able to take from the cameras all the way through the controls and use an end-to-end training where we can train using a lot of the much more modern techniques that we've seen emerge with large language models, but using a lot of the techniques we've seen with transformers to completely change how we're developing self-driving. And the speed at which it's going to develop is much higher. We announced, I guess, a little while ago, we're going to have a hands-free feature where you can, the vehicle drive itself, in this case on highways, but with your hands off the wheel that's coming here very soon.

23:40And you can imagine after that, we're going to expand it to other roads. And after that, we're going to go to hands-free, eyes off. So there's a lot of really exciting features that are coming. And I want to make sure I really understand this. So the car essentially has the capability to be driven without you doing anything, but you're not confident enough yet. It's not safe enough yet for you to actually turn it over to the car in all situations. But as that gets better, you'll be able to update the software to allow it to do that in a safe way, even without having to change the vehicle. When we release or enable our self-driving features to work, we're starting in domains for which The confidence is extremely high.

24:26It's a bit of the Wild West because there's no legal body that arbitrates how, at what level we're able to expose these features. So it's your judgment about what you feel confident in and what risk you're willing to take? As a brand, yeah. So every brand takes this decision differently. And so we've taken the view of really erring on hyper-focus on safety, making sure that before we expand the operating windows to, let's say, neighborhood roads or school zones, we want to really be robust in the solution. We're talking now about autonomy, which is one slice of AI in the vehicle. We're going to see other elements of AI.

25:11I think artificial intelligence will impact almost every single part of the business. But as it pertains to the product, we're going to start to see a very different relationship emerge between the users of the product and the vehicle itself and beyond self-driving. But think something as simple as navigating. Imagine if you don't even know where you want to go. You get in the car and say, I'm hungry. And the car says, well, what do you feel like? And you say, I don't know. And it says, well, yesterday you had an Italian. How about what do you feel about burritos today? And so just the ability to be conversational and contextual and to really start to become more of a partner in decisioning around where you go, how you get there, what's the path.

25:56You think about just route planning and the ability to be thoughtful around things like traffic. It's just going to really change. And it'll be one of those kinds of changes, I think, where it'll happen. We won't even fully realize it's happening. And then we'll look back and be like, how did we used to live? And when you think about these applications of AI that are beyond self-driving, how important is it for you for Rivian to be at the forefront of those versus following along? There are a lot of habits and things that Rivian is a part of trying to or in the process of changing. How much of it do you take on?

26:40Well, early on, we realized that software was going to be really important. And we had a really deep conviction around the necessity of controlling the software stack in the vehicle. A traditional car today will have 75 to maybe 100 plus little ECUs, little computers in the vehicle, all of which come from a labyrinth of suppliers. and all those little computers have to talk. And that is what's made over their updates so difficult for traditional vehicles and what has made their software and a lot of their technology stacks feel so rigid relative or so wooden, if you will, relative to what you see in consumer electronics.