Rivian CEO frets about supply chain amid critical R2 launch
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Rivian CEO RJ Scaringe. Photo: Kimberly White/Getty Images for Rivian
Rivian CEO RJ Scaringe must have a dreaded sense of deja vu: His company's most important product to date — the mass-market R2 — is launching amid yet another supply squeeze, this time for critical memory chips.
- Four years ago, a global chip shortage threatened the launch of Rivian's first electric truck, the R1.
Why it matters: There's tons of demand for the $50,000 R2, which is getting rave reviews from automotive journalists. But if Rivian can't build a lot of them, the company will face an existential crisis.
- "If R2 doesn't go well, the whole company is not designed properly," Scaringe told Axios' Amy Harder at last weekend's Aspen Ideas Festival.
- "Make or break sounds negative, but it's actually the plan," Scaringe said. Rivian intentionally scaled itself to build and sell large numbers of mass-market EVs.
Driving the news: Rivian just began deliveries of the first R2s rolling out of its sprawling factory in Illinois.
- Scaringe says he's excited by the consumer demand, but is worried about things he can't control.
- "I think the biggest risk for R2 is actually on the supply side, and there's a lot of unknowns here," he said.
- "The whole semiconductor space is gonna be quite constrained. So, by far my biggest worry about ramping R2 isn't demand. It's, you know, can we get enough parts to build cars?" he said. "We're quite nervous about global supply."
Flashback: In 2022, Rivian was launching R1 as the whole industry was grappling with pandemic-related supply chain bottlenecks.
- Back then, Scaringe lamented that Rivian's inexperience hurt its efforts to secure precious semiconductors.
- He spent hours on the phone with suppliers, trying to convince them to ship parts to the unproven EV startup.
Now, Rivian is more mature, and while it has experienced its share of headaches, the company isn't the newbie it once was.
What we're watching: Even if Rivian can secure the memory chips it needs to enable autonomous driving, over-the-air updates and other advanced features, prices are skyrocketing due to AI demand.
- Apple, Microsoft and other big tech companies have imposed huge price hikes on iPhones, tablets and other devices, blaming AI.
- Carmakers so far have been eating the higher commodity costs, but probably won't forever.
Rivian isn't raising its prices, in part because the company has dramatically cut fixed costs on the R2 to ensure it can build it profitably.
- But Scaringe says every company that makes products with memory chips has to be worried about rising costs.
- "I think it is helpful for the world to see even somebody as big and capable as Apple" had to raise prices to match its higher costs. "I mean, these are not like rounding error costs."
What's next: Rivian is expected to report second-quarter production and deliveries on July 2. Financial results for the quarter are expected Aug. 4.
