Pod Insights Big Technology Podcast Rivian's CEO on Elon's Influence, Affordable EVs, and The Grid's Risky Future — With RJ Scaringe About this episode RJ Scaringe is the CEO of Rivian. He joins Big Technology Podcast for a deep discussion about the state of electric vehicles and where Rivian goes from here. We go into depth about Elon Musk's role in the coming Trump administration and what Scaringe would do if he was the "first buddy." Then we talk about Rivian's affordability, its partnership with VW, its road to profitability, and more. Stay tuned for the second half where we discuss energy and the grid — and Scaringe shares a passionate stance on plug-in hybrids.
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Transcript 10,076 words · 5 speakers
Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:00 Alex Kantrowitz? Let's talk with the CEO of electric carmaker Rivian about the state of EVs, the challenge of competing with Elon Musk, and whether the globe can compete with China's electric vehicle boom. That's coming up right after this. This episode is brought to you by Genesis. What does it actually take to put a Gentic AI to work across an entire enterprise? I recently spoke with Genesis chairman and CEO Tony Bates about why orchestration is emerging as a competitive advantage in customer experience and what companies need to get right in the AI era. Then I sat down with Adam Mitchell, head of enterprise business solutions at Voya Financial, to go inside a large scale agentic CX transformation, including the business decisions, trade offs, and lessons along the way.
0:45 Alex Kantrowitz? You can watch both conversations now on my YouTube channel today. It's never been more challenging to get frontier compute. How do you know where to look, who to trust, or how much to pay? Akash is an open cloud that provides easy access, flexibility, and peace of mind. That's how companies like Razor were able to cut their inference cost by 15 times. Visit akash.network/alex for a free consultation. That's akash.network/alex for a free consultation. Welcome to Big Technology Podcast, a show for cool-headed, nuanced conversation of the tech world and beyond. Today, we have one of my favorite CEOs in the tech world. Rivian CEO RJ Scaringe is joining us here to talk everything EVs,
1:30 Alex Kantrowitz? including what's going on with his company, his joint venture with VW, some Elon Musk, and then also China's electric vehicle boom. RJ, great to see you. Welcome to the show.
1:41 Speaker 01 Thanks, Alex. Good to be on with you.
1:43 Alex Kantrowitz? So last time we spoke, I was interviewing you for a profile for GQ. And since then, here's a quick recap of what's happened in history. Elon Musk has endorsed Donald Trump. He's, of course, the Tesla CEO and Rivian competitor, Musk is. He's been intimately involved in the transition, and he's being called the first buddy. And since he's joined the transition, or since Trump's election, Tesla stock has gone up 40%. I just want to ask you, just on a personal level, is that a bit surreal to you?
2:14 Speaker 01 Oh, geez. I mean, I think the broader state of just how politicized
2:23 Speaker 01 Electric vehicles have become is a bit surprising. I think Tesla and Elon having a relationship with President Trump is actually helpful to electrification. It's certainly going to provide the perspective of the importance of EVs. So I look at that as a positive. And we, as you've heard me say before, we're big fans of Tesla and big fans of what Elon and the team there have built, the products, the technology, certainly how they've helped really create momentum around the movement towards electrification.
2:56 Alex Kantrowitz? But you never look at the relationship between Elon and Trump and be like, can't really believe that that's happening.
3:02 Speaker 01 I wouldn't have expected that. On the list of things I would have predicted a year ago, this wouldn't have been one of them. But electrification, the drive towards sustainable energy, unfortunately, this is a political issue. It should not be. This is a human issue. And having folks that are pro EVs on both sides of the aisle is a really important thing. And so Elon taking that role certainly, I think, could be helpful.
3:23 Alex Kantrowitz? Yeah, and you mentioned it could be good for EVs. And it's weird Tesla's stock went up 40% since the election. Rivian's stock is kind of flat. But just talk about what Elon might be doing there. I wouldn't ask you to speak for him, but let me just ask you, if you were the first buddy, what would be some EV-friendly policy that you'd want to put forth? Anything about tariffs? Anything about electric vehicle credits? What would you want?
3:50 Speaker 01 I think I'd answer it from the perspective of what's best for the world. And what I truly and deeply believe is best for the world is we need to have multiple choices as a consumer. That means lots of different companies building highly compelling products. Those products need to give customers choice, which is ultimately what's going to drive us from sub 10% EV adoption to 100% EV adoption.
4:14 Speaker 01 And so the mechanisms mechanisms to help drive that are are both the carrots and the sticks. The carrots, you know, typically are consumer facing and we had I've had a 7,500 dollar tax credit that's consumer facing. The sticks or are sort of forcing mechanisms are the the fines that manufacturers have to pay if they're not building vehicles that are, you know, hit certain greenhouse gas emissions standards or hit certain levels of electrification zero emission vehicle credits. And the credits are helpful in that they don't cost the government anything. So we actually sell our excess credits to other manufacturers. So it becomes a cost to manufacturers and a source of income for for those that
4:57 Speaker 01 are building more efficient vehicles. And you have Tesla, of course, is the biggest player in the credit space, just by virtue of them being the largest builder of electric vehicles. Yeah, and it's all margin for them. It was a big part of their big earnings report recently. We sell credits and it's it's great. It's it's all margin. We sell the credits to other manufacturers. So I think the credits is actually a really helpful way to to help direct investment within the manufacturers and ensure that, you know, in 2030 rolls around or 2035 rolls around that that there's multiple companies that have made the investments and made the commitment to electrification. So I think any rollback there is actually it may in the short term help car companies, but in the long term, you know, car companies
5:41 Speaker 01 that back off their electrification strategies are going to find them find themselves in a really challenged position as it gets out to 2030 and beyond where the pure play folks like us or Tesla have have had no other choice but to become cost effective at building really compelling products. So, you know, if I had to predict what's going to happen, I think we're going to probably see changes in both those categories. It's hard to say exactly what. Right. But I do think mechanisms that help drive towards the future state are important.
6:14 Alex Kantrowitz? And not until you mentioned that, did I think that, oh, it's going to be very interesting in the White House, where one of the White House's core constituencies is always the automakers in Detroit, but now he's got like the chief EV cheerleader out there saying, hey, how about us? So that is going to be a very interesting thing to watch as this all gets going. So I won't spend the whole conversation speaking with you about Elon, but let me ask you this. It seems like the identity of a Tesla owner is a little bit in flux, right? Maybe you support environmentalism. Maybe you're just pro Elon and you want to be on board with the MAGA train. So we're not really sure what driving a Tesla says
6:56 Alex Kantrowitz? about about you right now. What does driving a Rivian say about you? I would think, you know, and when you just came out with like the pickup truck or the big SUV, it would be like, I am a someone who wants to drive a big truck, but also be environmentally conscious. But you're also expanding into a bunch of different new models. So what is the identity of a Rivian owner?
7:17 Speaker 01 I love that question. So when you think about a product and then the brand that comes out of a product, I think it's easy sometimes to get caught up in an attribute. So it's to confuse an attribute of the product, let's say acceleration or off-road capability with the emotional representation of what the brand stands for. And so we've, we've been really intentional to try to make sure we're positioning the company in a broader way than just the capabilities of the product set. And so you, you've probably felt this or seen it in the way that we, we manifest across every, every touch point, whether it's a vehicle or a charging station, a service location. And one of the key words
7:59 Speaker 01 we think about is inviting. And inviting in the sense that this is, as a brand, as a company, we want to invite people into electrification. We want to invite people into new technology. That's from all walks of life. So that's not something where we're trying to invite just one side of the political spectrum or another side, but trying to make it such that it's equally appealing. Part of that you've seen emerge in our communities. So our communities are very active. We have one of the most active user bases where our customers engage with each other. They go on trips, they explore, they see things together, they see new parts of the world together
8:41 Speaker 01 in a way that we dreamed about back in 2020, 21. I remember we would have presentations and we'd say, boy, if we do this really well and we created a product and a brand that invite people to explore, invite people to go do the kinds of things they want to take photographs of, that's, that's going to span age demographics, it's going to span political beliefs, it's going to span religious beliefs and we've, we're witnessing it.
9:07 Alex Kantrowitz? What I'm hearing from you is basically like you're just not going to take this moment and say we're going to, you know, sort of politicize it and make it for the environmental focus. And basically what you're describing is a car buyer is the person that's going to buy the Rivian?
9:20 Speaker 01 Yeah, I think we do. I think a lot of our customers have more of a leaning towards caring about sustainability in different ways.
9:27 Alex Kantrowitz? But the thing is, the one thing I'm noticing-
9:30 Speaker 01 We don't want to try to drive a fork between people because of that.
9:32 Alex Kantrowitz? For sure. And the one thing that I'm noticing though is also that someone who drives Rivian today has to be well off, right? The cars start, I think around $70,000.
9:43 Speaker 01 Yeah.
9:43 Alex Kantrowitz? And I, you have to have some money to be able to do that. But looking ahead, you are developing cars that are going to cost in the $45,000 range to $50,000 range.
9:54 Speaker 01 Yeah.
9:54 Alex Kantrowitz? And those are going to roll off the lines, I think in 2026. So can you just very briefly describe the state of the product line that you have today and what you're working towards?
10:05 Speaker 01 Yeah, I love, I'm glad you talked about this. The, the launch product, really think of it as a flagship. It's a sibling set truck and SUV, as you said, starting price of around $70,000. The average transaction price is closer to $90,000. So, you know, these are, you know, $90,000 on average, these are expensive vehicles.
10:24 Alex Kantrowitz? Yeah, I've driven that pickup truck. It is fun to drive, very smooth.
10:28 Speaker 01 It's great.
10:29 Alex Kantrowitz? You don't feel like you're driving as big of a car as you are. And yeah, when you hit the accelerator, it really, really gives it a go.
10:38 Speaker 01 Yeah, yeah.
10:39 Alex Kantrowitz? And by the way, for the, for the Tesla fans, I'm happy to have Elon on the show if he wants to come on. I'm going to drive a Cybertruck. So this is not a stick it to Elon interview. I just want to put that out there. But anyway, continue.
10:53 Speaker 01 That's great. Yeah, so in that premium segment, if we think about it as vehicles priced over $70,000, the R1 product line has been extremely successful. The R1S is actually the best-selling premium SUV in the state of California, not the best-selling premium electric SUV, the best-selling premium SUV period in California, across the whole US. It's the best-selling premium electric vehicle. So the product and the brand have really resonated with folks that can afford, and we've seen a really broad cross-section of buyers. So people that are trading in everything from high-performance sports cars to off-road vehicles to Teslas to pickups.
11:36 Speaker 01 So it's a really nice, broad funnel of interests we've drawn in. So the goal, of course, with the lower-priced product is to take that market share success that we've had and apply it to a much, much larger audience with a price point that with R2 starts at 45 and then with R3 starts considerably lower than that.
11:53 Alex Kantrowitz? What's considerably lower than that?
11:56 Speaker 01 We haven't announced yet. I knew you were going to ask that, but we haven't announced yet, but meaningfully lower. And of course, the goal is to continue to make the brand, the products, or company accessible to more and more people. And the reason we started at the high end is it shouldn't be surprising with low volumes and building out scale. We wanted to have a product that had enough price that allowed us to build scale, build capabilities, and then put us in a position to then launch a very high-volume product with a lot more capacity, a much more built-out supply chain for our next product.
12:32 Alex Kantrowitz? Okay. And so you have those in the pipeline, and now you're starting a joint venture with VW. It just closed. We're recording on the week that it closed. We're going to air this the week afterwards. It's a $5.8 billion deal. There's a lot of moving parts there. VW is going to use your technology. You're going to get some money, a billion-dollar loan right off the bat, and I'm sure there are other parts that I'm not aware of. So talk a little bit about why it makes sense to partner with VW. One of the... Things that you mentioned earlier was that you want to make sure that there's a lot of EVs and all different types of models that are available to lots of different people. And that's the way that this is going to get off the ground.
13:16 Alex Kantrowitz? And of course, the VW group has Audi and Porsche and VW. And is this sort of the way to get those different models to like electrify these models? And then sort of make it available to lots of different people?
13:31 Speaker 01 Yeah, I mean, I couldn't be more excited about the Volkswagen relationship and partnership. We started these discussions more than a year and a half ago. And, you know, a deal of this size and this complexity certainly takes time. But Volkswagen as a group is the second largest vehicle manufacturer in the world, very close to the largest in terms of size, in terms of number of vehicles. And the reason I started Rivian was to have as much impact as possible and to help drive and accelerate the transition to renewable energy and sustainable transportation. So the opportunity to take our technology and help Volkswagen Group create products that are highly compelling and that will pull more customers in across a variety of different form factors, price points, brands, markets, you know,
14:16 Speaker 01 across the planet was really, really enticing and exciting. And of course, the technology we developed is really strong. And it's, you know, I think there's really two companies in the world that have this level of vertical integration and an architecture that's used hardware consolidation to massively simplify the topology of computers, which is us and Tesla, of course. And so Volkswagen has really leaned in with us. And so the $5.8 billion deal reflects just the scale of this. I think often, as we've talked about this, it's not fully appreciated how big of a commitment this is beyond the capital from Volkswagen to build.
14:57 Speaker 01 Architectural dependency around our hardware stacks, that's the ECUs and compute platforms. And then the software platforms that we built across their whole brand portfolio.
15:08 Alex Kantrowitz? So can I ask what that means? Does that mean like the Porsche is going to have Rivian electrification and battery within it? Or create a model?
15:16 Speaker 01 So the deal is just for the, basically our computer architectures or our, what we call ECUs, electronic control units, and then the software that runs on them. It's, it doesn't include batteries, drivetrain. It also doesn't include autonomy. It doesn't include vehicle platforms.
15:30 Alex Kantrowitz? You have an autonomy program?
15:32 Speaker 01 Oh, yeah, yeah.
15:33 Alex Kantrowitz? Last time we spoke, it didn't come up. It didn't seem like you guys were going to pursue that path, but that's new.
15:40 Speaker 01 I'd say the autonomy, if you're serious about being a player in automotive, it's, it's not like a choice. It's, it's, it's so fundamental to the future of, of transportation. So we've, we actually, we just launched a gen two vehicle. This is a big effort, but we completely remapped how we did our platform. We brought everything in-house. So we have 55 megapixels of cameras on our vehicle. It's the largest number of megapixels on, in, outside of China. We have five radars and then we have a very powerful compute platform. And we've designed, of course, this in-house. And the beauty of what's happened in autonomy is it's really, uh, requires a closed loop,
16:25 Speaker 01 like heavy flywheel of data where your data coming in off the vehicles. You know, you see unique incidents, unique events, and you use that to train the model. And so we've designed that entire data pipeline to allow a really robust layer of training. And of course that training takes a lot of, you know, H100s and it's a lot of compute. But, but that's what we're building.
16:47 Alex Kantrowitz? But you're pushing towards full autonomy or is this is partial?
16:51 Speaker 01 So what we have today is if you get into a Rivian, you put it on the highway. It will drive itself on the highway. It can change lanes on the highway. But it doesn't leave that when you leave the highway, you retake control. And so what will happen for us is we'll continue to grow and expand the number of of roads and the types of roads that the vehicle can operate on.
17:09 Alex Kantrowitz? Okay, so back back to VW, you're going to be providing all this computer work for their for their cars. And so are they just going to replace what they have in there or use ingredients of it? Like if I'm driving a Porsche, am I going to be on like the Rivian system?
17:23 Speaker 01 Yeah, so let me first describe how with the exception of us in Tesla, what a vehicle network architecture looks like. And it it's useful to just have a little bit of history on it. So if you go back to the early 1960s, cars didn't have computers in them. They were completely mechanical. You know, any any controls in them were analog. And one of the first sets of electronic control units to make its way into a vehicle was for fuel injection system, somewhat ironically. And those fuel injection systems were controlled with these little computers. Those little computers were built by companies like Bosch. And that began the the slow process of seeing computers increasingly get used across the vehicle.
18:08 Speaker 01 And as that happened, we went from a computer that's controlling, let's say, the fuel injection system to, in some vehicles today, 50 to 100 small little computers placed throughout the vehicle that are all supporting some specific function. Maybe it's a computer to raise and lower the windows. Maybe it's a computer to control the seat settings. Maybe it's a computer to adjust the climate control, the the air conditioning system. But you've had, we we basically witnessed this massive proliferation of a highly disorganized, highly function-based computer architecture. And all those computers are developed by tier one suppliers. Those tier one suppliers write the software on them. And as a result, it's very hard to make an update to to very simple things.
18:53 Speaker 01 So take, for example, the sequence of what happens when you walk up to the car and it unlocks. You have, you know, an antenna that's controlling communications with the car. You have the door unlock mechanism, which is another computer. You have the seat adjustment for making easier in and out. Another computer. You have the lighting, which is another computer. You probably have something that's emitting some sound or noise.
19:16 Alex Kantrowitz? There's lots of computers in the car.
19:18 Speaker 01 Ten computers that have to just do that open, close sequence for the car. And so to make a change to that experience requires several, you know, in that case, probably ten suppliers to coordinate a software update. And it's absolutely fundamentally a flawed and wrong architecture. So what you'd want to do is consolidate the number of computers down and have a number of zonal based or geographically paced computers. And so these things are called zonal architectures. That's what we've developed. And it's much cheaper because you cut out ninety, ninety-five percent of the computers in the car. You have a much smaller number of more powerful computers and they do a lot of things. And so that's what we've, that's what we've built.
20:01 Speaker 01 And so to your question, if you're driving a Porsche or an Audi a few years from now, it will have Rivian computers in it. And those Rivian computers will be running Rivian software. But the way it drives, the what it looks like on the screen.
20:13 Alex Kantrowitz? Internal combustion versus electric.
20:16 Speaker 01 That'll be completely just, you know, specific to the brand.
20:19 Alex Kantrowitz? Have you talked about also doing a deal that puts your, some of your electrification in their vehicles?
20:25 Speaker 01 Well, there's lots of ways we could expand the deal beyond electronics, but we haven't, we haven't said anything publicly. But I'd say this, we, we've.
20:32 Alex Kantrowitz? That sounds like you have had that, that conversation.
20:35 Speaker 01 We've had all kinds of conversations with different manufacturers over the years. And I couldn't, I couldn't be more excited about the potential of what, what we're building with Volkswagen. Volkswagen Group, across their brands. So there's, there's certainly.
20:52 Alex Kantrowitz? Potential there. So what do you get from them outside of money?
20:57 Speaker 01 So one of the challenges that we have in building and growing our businesses is sourcing scale. And so now if you imagine negotiating, let's say, a processor for R1 and R2 volume, you can get a certain level of volume. If that same chipset is being used across Porsche, Audi, Volkswagen, Bentley, Skoda, you know, a handful of brands, you know, with much higher volumes, you can really accomplish advanced pricing. It also allows us to, on a lot of the core platform that we're building, and this is what we've done in setting up the joint venture, develop some of these core building blocks that can have the benefit of sharing the development costs across many different products.
21:41 Speaker 01 So it makes a lot of economic sense or, you know, industrial logic sense to have one platform in terms of software, in terms of electronics, that can be applied to many, many different brands, many different portfolios, many vehicles.
21:55 Alex Kantrowitz? As you're talking, it seems to me like it would make a lot of sense to just merge these two companies. Why is it important to you to stay independent?
22:03 Speaker 01 Yeah, well, again, to be clear, this isn't, we're not like the things that customers will experience, they'll experience like better over the year updates, but they're not going to, if you're in an Audi, you're not going to see Rivian parts, and if you're in a, you know, if you're in a Rivian, you're not going to see Audi parts. So, you know, it's really at the software level. So I think the way I look at it is we're building a company that designs and develops vehicles, but we also have a huge technology focus, and so we also embedded within that as a technology company. And clearly, as demonstrated by this deal, we're selling technology. So we have a clear business line that's in addition to just the vehicles themselves.
22:47 Alex Kantrowitz? Yeah, and when you talk about the advantage in negotiation with suppliers, to me, that really seems like maybe an underappreciated part of this. Just given the state of the Rivian business today. Now, obviously, your cars are on the road, they're selling well, they work well. Like I said, I've driven it, I liked it a lot. But there's also business challenges. And you know, you look at the billion dollar loan that VW is giving right away. Also, the state of losses at Rivian. There've been multiple quarters of billion dollar losses. There was a billion, 1.5 billion Q4 2023. We're talking in Q4 2024. 5.4 billion lost last year. You're losing 40,000 per car today. How sustainable is that?
23:32 Alex Kantrowitz? And how do you plan to flip that? Because I know the plan is to flip it.
23:37 Speaker 01 Yeah, but if the plan's not to flip it, we might as well just shut the doors. Yeah, of course. So I guess there's two ways, two things to think about here. So the first is there's a level of R and D expense and G and A OpEx that are necessary to build a business like what we're building and to be world-class and leading in terms of technology. So and that that means there's a, there's a caloric burn of number of people necessary to develop that much technology. And today, it's outsized relative to our scale because we're not developing all this technology because we're just going to sell two premium products.
24:22 Speaker 01 It's because we plan to sell many millions of vehicles a year. But we have to grow into that. So there's a heavy investment, call it like a forward investment in technology build out, which has always been the plan. Similarly, we also need to go build ahead on service and go to market infrastructure. And service in particular takes a ton of money in the beginning to build. It's lots of, you know, brick and mortar sites, lots of training of teams.
24:49 Alex Kantrowitz? Fixing the cars and the happens.
24:50 Speaker 01 It's very expensive. But in the beginning, it's all cost, it's all OpEx. But over time, it actually becomes very profitable. And once it's profitable, it becomes a really wonderful tailwind. Tesla is a great example. It's one of the big tail ones they have is they have a great, highly profitable service arm. So that's one side of it. So that's getting built out and that's just the nature of what's going to consume cash for us in the short term. The other
25:14 Alex Kantrowitz? Before we go to the next side, can I just say two things? First of all, the company's 15 years old. So how much investment is there going to be until it starts to pay off in profitability? And then second, on the service part in particular, one of the things I hear from Rivian owners is it's quite expensive to repair the car. So I'm curious if that's something that you're planning to address in the future.
25:35 Speaker 01 On how much more, like this is, I'll get to that sort of, I have to answer the full question first, but the
25:40 Alex Kantrowitz? Okay.
25:41 Speaker 01 Part of it is the vehicles themselves have to start to make money and there's a fixed cost element to that. But the, the efficiency of how we're developing technology is still very high. So we've built really something that no one else has built other than Tesla, with the capital being deployed on the product side and have award winning products between consumer and commercial. We haven't really talked about the van, but the van is, I would argue, without question, like the best
26:07 Alex Kantrowitz? I see it all over the place in Brooklyn, delivering Amazon packages.
26:10 Speaker 01 Yeah, it's the best delivery van in the world. But so that's like, that's part of building out. That's been the plan. On the service side, it's, you know, it's always highly circumstantial and idiosyncratic around what's the cost of a, of a service event. And so we, we track this all really closely. There are certainly some repairs that are more expensive for us by virtue of us not having a lot of service infrastructure in place. So if you break down in the middle of nowhere, or in an accident that's very far from Rivian location, you're just because there's no infrastructure there to support, it is more expensive. And that's one of the reasons we have to go build that out. And fortunately for our customers, that really gets covered through our warranty. So the
26:51 Speaker 01 warranty period is something we have to eat the greater cost of, of let's say being 100 or 200, 300 miles from a service location. But that's being solved really quickly because of how fast we're building. The infrastructure. But to come back to the broader question, which is, you know, when do we, when do we start to make money? A really core part of this is getting our cost of goods sold to be meaningfully below what we're selling our vehicles for. And this is a hard, sometimes a hard number to fully appreciate, the fixed cost versus the variable cost aspect. And our CFO and I try to talk to this a lot in our earnings calls, but just the baseline
27:31 Speaker 01 of running a plant, a supply chain, the infrastructure to support that, means that you need a certain level of volume just to cover those fixed costs. And the plant that we've set up in Illinois, our normal plant, will have 215,000, 215,000 units of capacity between R1, R2, and EDV. And we're using a small fraction of that today. So there's fixed cost disadvantage, or you might say like, there's a lack of fixed cost absorption that's happening, which has a, you know, a compounding challenge in the short term. But even with that, we've continually said this, we have a pathway before the launch of R2 to start to demonstrate the profitability of the business.
28:15 Speaker 01 And really key to this is taking the bill of material costs, that's what we pay all of our suppliers for the parts, down quite a bit. And what's been, just to give you a little history on that, what's been really challenging there is most of our, not most, 100% of our bill of materials for what we launched with was negotiated in 2018, 2019. And if you sort of wind the clock back to 2018, 2019, and this was before we had put any vehicles on the road, very few people even knew what a Rivian was, we didn't have a plant, the auto industry was at peak volume, so the suppliers weren't really eager to take on risk of a new company. So we had to, just to get parts, we had to pay a significant, what I'd characterize as a risk premium.
29:00 Speaker 01 And we rationalized it by saying, well, to launch, we have to just sort of hold our nose and take the fact that we can't negotiate any, any better pricing today. And the logic was, once we launched, the success of the product will allow us to renegotiate those rates down. Of course, what we didn't predict was COVID hitting in 2020 and then launching in 2021 when the supply chain was A disaster. Through one of the worst crises sort of in the history of the automotive supply chain. So not only did we not get to negotiate pricing down, but we had to battle to not get the pricing to go up too much. And there was new premiums on top of the other premiums. So it was just an absolute bare knuckle fight. And hindsight's 2020, but one of the challenges that compounded all of that is we launched three products at the same time. We launched
29:44 Speaker 01 a truck, an SUV and a van all at once. So we had three supply chains, thousands of parts, hundreds of different suppliers that were just trying to manage, all of which were asking us for more money. So fast forward to today, we had a major shutdown of the plant intentionally, where we shut down the plant, replaced about half the bill of materials with new suppliers. And we now have a much healthier supply chain. And we're going to start to see that here in Q4, where we've negotiated more than 20% savings just between Q1 and Q4 of this year out of our bill of materials. And we're going to continue to see those savings come in over the course of 2025 and even into 2026. But all that
30:26 Speaker 01 together is leading to, you know, I put it like this to my dad a couple of weeks ago, I've never been more confident in the business, the long term of R2 and what that represents. And the market desire for a brand of products that's unique and distinct, but also just what's happening operationally for us as a business and all the learnings that have gone into that launch.
30:51 Alex Kantrowitz? I was just watching one of your interviews with the New York Times where David Gallas brought up this tweet that Elon Musk had, that you guys would be bankrupt within six quarters and you kind of threw up your hands. But suffice it to say, you'll be around to ship the R2 in 2026?
31:08 Speaker 01 Yeah, that we're, I mean, just look at the numbers on it. We've got just under $7 billion in cash. We just with the Volkswagen deal, another $5.8 billion coming in. You've said a couple of times, we have debt from Volkswagen. Just to clear, we've had $2.3 billion coming from Volkswagen to date. There's a few additional tranches of capital that come in. Actually, the last tranche is actually the billion dollars in debt. So we take equity and then licensing fees first. But but we have in total that 5.8 plus the roughly 6.7. So what we've guided to publicly and have communicated to shareholders and to analysts, that's not only enough capital to launch R2 in normal, but it's enough capital to launch our second R2 plant in Georgia and
31:53 Speaker 01 take us through positive free cash flow.
31:56 Alex Kantrowitz? Okay. Couple of questions about electrification for you and the environment. Also, in that interview, you mentioned that the grid today is 60% fossil fuel, 40% renewable and nuclear. And the move away from fossil fuels towards this grid that is getting more sustainable will end up leaving us with a better state in terms of our quest to make sure that this environment doesn't crumble on itself. So I'm just kind of curious, like, do you think that the timeline that we're on is sufficient to be able to get the gains from electrification that we are trying to get? Because every time I read a story about the climate, it's always
32:41 Alex Kantrowitz? like, we are at the point of no return. We're approaching the point of no return. We are beyond the point of no return. Antonio Gutierrez from the United Nations in 2022 said the climate crisis had passed the point of no return. So how do you think about this? Because if we're beyond the point of no return, why am I going to end up buying an EV versus an internal combustion engine? Because does it matter?
33:05 Speaker 01 So there's a few things I want to say here. This is a philosophical point, which is we are, as we as a society, have built a certain style of living, and we've built this massive base of technology and A whole fabric of an industrial ecosystem, really over the last 150 years. And we've built it around fossil fuels. And it's allowed for you and I to do what we're doing here, to be in different places and different locations, having a conversation, among many other things that allows us to do. But it's come off the back of fossil fuels. And so while our parents, grandparents and great-grandparents are the generations that
33:47 Speaker 01 built this world, our generation and maybe the next generation have the responsibility of completely rebuilding it in a way that doesn't require or run on fossil fuels. And we can debate how much supply of fossil fuels we have left, but it's indisputable that it's a finite resource, meaning there's not an infinitely deep well of oil or infinitely a deep mine of coal. It is something that, you know, you could argue is 100 years, maybe it's 125 years, but we will absolutely, without changing in our changes to our behaviors, run out of fossil fuels. And so we have to make the change. Like if I want my kids' kids' kids to live a life like we live, it's not a choice.
34:28 Speaker 01 And again, it's like truly, fully, 100% indisputable that we have to move off of it. So the philosophical view that I carry is moving off of it later and saying, oh, we'll let the next generation deal with this, or just we'll run out of it and we're running a brick wall and then the lights will go off. You know, that mentality is just loading up the risk on the planet. We're taking hundreds and hundreds of millions of years of atmospheric evolution where we saw all this carbon sequestered out of the atmosphere, put into plants, those plants got buried in the crust of the earth, those plants over hundreds of millions of years converted to oil and coal. We're reversing it really quickly, like the difference in time scales is orders of magnitude.
35:09 Speaker 01 And so there's no practical reason that I can identify at all to delay the transition. So to make the point further, the future state is going to be renewable energy, it's going to be electric, everything will be, you know, there's not going to be like little engines running and things. And so from an economic point of view, we want to be on that future state technology. Not doing that would be saying in 1910, let's invest in horse production capacity. So that's like the economic argument is let's be part of the future, your global economy. The climate argument is there's lots of models that look at when's the point of no return. Even past the point of return, more carbon is still worse.
35:51 Speaker 01 So let's, we're already gonna, we're already experiencing like real time, even today, a worse world in terms of climate patterns, weather patterns than what, like what I grew up with as a kid. And so we need to curtail that as much as we can. So I think it's, it's urgent that we do everything we can to create new products, new technologies across everything. It's not like Rivian is one slice of what needs to be thousands of companies like Rivian that are doing products in their respective spaces. Heat pumps for buildings, you know, micro mobility for cities, you know, electric, mass transit, like these are all big things that need to all get built. And so certainly you could say, well, that's not my problem.
36:36 Speaker 01 Like let's ship the problem to the next generation.
36:38 Alex Kantrowitz? No, I wouldn't say that.
36:39 Speaker 01 But it's just like, but I think, I think we have a responsibility to our kids and our kids' kids' kids to do something right now.
36:46 Alex Kantrowitz? So a lot is demanding more juice from the grid right now. You have EVs that are rising. You have AI, which like seems like it needs another nuclear plant every other day. And you have Bitcoin. I don't know how big that is, but I imagine it's big. Is our grid in good enough shape to sustain all these at once?
37:05 Speaker 01 Absolutely not. No, no. It's, I mean, that's, that's the, that's the thing that makes this such a unique moment in time. It's a, we have one and a half billion cars on the planet that need to be replaced. We have thousands of coal power plants that have to be turned off. We have thousands of natural gas power plants that have to be turned off, replaced. We have a grid that's archaic and doesn't have any of this supply and demand mapping that we should be thinking about. You know, doesn't have, you know, effective ways from a policy point of view of managing things like net metering. We have buildings that are leaking air and aren't, aren't sealed properly for thermal. I mean, there's just like opportunity after opportunity after opportunity. And so you could look at it and say, oh my goodness, this is terrible. What are we going to do? Or you could look at it in our view and it's like,
37:50 Speaker 01 holy cow, there are so many business opportunities to go build this future world. And you said AI and I'm glad you brought it up. I mean, imagine the scale of this transition. This is not a once in a generation transition. This is a once in a... There's only one time that the world went through the fossil fuel revolution. So like, like the 18, late 1800s is only going to happen once. And the turn off of fossil fuels is only going to happen once. And the turn on of renewable energy and carbon free energy is only going to happen once. That's a once in a planet activity. And we also are only going to have one time where artificial intelligence is birthed into the world. And the fact that those two things by coincidence are happening at the same time.
38:33 Speaker 01 And then further that we happen to be alive now at this moment that's... This is going to be a very interesting chapter in a history book 2000 years from now, which is the end of the fossil fuel era, the birth of artificial intelligence, the beginning of renewable, sustainable energy. It's like, wow, how is this all like, how are we so lucky as people today to be born and alive at this hypercritical moment? So yeah, none of the, like, the world is not set up right. We have like, the whole grid has to be redesigned. The policy around has to be redesigned. The battery structures around have to be redesigned. There's a lot to build.
39:09 Alex Kantrowitz? I mean, knowing the way that we move as a species, it seems like we might be screwed. Too negative?
39:15 Speaker 01 No, I, I, I think that, I was at a dinner last night with, with a bunch of entrepreneurs that are building different types of businesses in essentially these two spaces, either energy or AI. And the level of excitement and enthusiasm to go create this future state that you see in other CEOs or the founders, but you see it across the business is inspiring. You know, whenever, whenever I'm dealing with a really hard problem within Rivian, one of the things I do that's really effective is I literally just go wander over into like, into the engineering area. And the inspiration of seeing it like really smart people, super capable people that are busting their tail to try to solve hard problems within Rivian.
40:00 Speaker 01 You know, it's inspiring and there's thousands and thousands of people like this across the world, across many different companies. And so I think that's...
40:10 Speaker 01 You know, that, of course, is what's going to get us as a species through this really challenging moment. So I have a lot of confidence in that, but it's not easy.
40:18 Alex Kantrowitz? Right.
40:19 Speaker 01 It's not a walk in the park.
40:20 Alex Kantrowitz? Is it going to take an old technology? And by that, I mean, what do you think about nuclear? Is that one of the solutions here?
40:26 Speaker 01 Yeah, you referenced something I said at the Wall Street Journal discussion or New York Times discussion. Yeah, I mean, today, our grid is about 20, just under 20% of it is nuclear power. The other, for non-carbon, the other roughly 20-plus percent is renewable. So of the 40, it's half and half. And it's going to be hard to build renewable energy as quickly as we need it. So I do think nuclear is going to play a role. And you joked about it, but with the growth of AI and the energy needs for that, there's going to be, I think, reinvestment in that technology.
41:04 Alex Kantrowitz? Oh, for sure. Yeah, I think that's, it's an emerging story that we're going to be watching here. And I'm curious to see how it plays out. Okay, I definitely still want to talk about China. And if we have time for it, hybrids. So why don't we take a break and talk about that right after this? This episode is brought to you by Avpoint. Everyone's racing to roll out AI right now. Co-pilots, chatbots, agents doing real work. But here's the part nobody loves talking about. All that AI runs on your data. And most teams have no single way to see it, secure it, and prove it's under control. That's exactly what Avpoint does. For 25 years, they've been the trusted layer beneath the world's most demanding data, now extended across your entire AI estate.
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43:20 Alex Kantrowitz? And we're back here on Big Technology Podcast with Rivian CEO RJ Scaringe. RJ, explain to me how China has been able to develop $10,000 electric vehicles that apparently run pretty well. Is it the fact that they are... that there are phone companies that have been working on batteries that are doing it? Is it government subsidies? What exactly is enabling them to do that? Is it low-wage labor? And is there a way that that can be replicated elsewhere around the globe?
43:52 Speaker 01 Yeah, yeah. So I've been able to drive in some of these EVs you're referring to, in the $10,000 RVs, I've been in them. And it's exciting to see the...
44:05 Alex Kantrowitz? Wait, can I ask, how do you arrange those rides? Like, do you go to the companies and be like, hey, you know, I'm the CEO of Rivian, I'd like to give that a shot?
44:13 Speaker 01 In a lot of cases, yeah, in a lot of cases, that's the case. Yeah, that's what's happening. The other thing is, of course, products end up everywhere. So like, there's lots of Rivians that are in China because companies will buy them to benchmark them. Here in the US, you know, a lot of the cars that are built in China end up here. And there's third parties that buy these cars and then go to... No, well, they go to companies like us and say, do you want to try it for a day? So there's a whole industry of people that support them.
44:41 Alex Kantrowitz? That's a fascinating business.
44:42 Speaker 01 Yeah, yeah.
44:43 Alex Kantrowitz? Okay, so you've ridden them. What do you think?
44:47 Speaker 01 Well, I think first and foremost, it's important that they exist. It's important that we have choices across lots of price points. And to achieve that, you need a few things. You need really heavy cost focus at the at the design level. So the vehicles are engineered for cost. You need to have supply chains that are really robust and efficient. You, of course, benefit, in the case of China, from a much lower cost labor rate than what we have in the Western world, certainly in the United States. And then, in the case of China, you do have, just you had this in the US, but to a more, to a more elevated level, you have incentives that are happening at the federal or the local
45:31 Speaker 01 government level. And so the combination of all those things have allowed for some really attractively priced EVs to be made and produced and sold in China. And I think this is great. I think, long, long term, some of the incentive structures that we see, just like we've talked about at the start of this call, are not going to be permanent. But the efficiencies of design and some of the efficiencies that an EV affords in terms of architectural layout will start to play out as you get to lower cost batteries. Other than the battery, an electric vehicle is actually a lot cheaper to build, it's cheaper to maintain. So raw material cost, battery cell costs, these are really important things.
46:12 Alex Kantrowitz? You've taken apart some of these cars. What have you found inside them when you look inside?
46:18 Speaker 01 There's, I think, there's nothing magic. There's not like, aha, there's this.
46:24 Alex Kantrowitz? Flux capacitor.
46:26 Speaker 01 You know, there's, you could see a cost focus of part consolidation, fastener elimination, part or feature elimination. So the vehicles will reduce the number of features in the vehicle. Range is a big one, so adjusting the range down to be not a 300, 400 mile range vehicle, but maybe 150 or 200 mile range vehicle. Motor sizes are smaller, so it's less performance. So there's just a whole series of decisions that are really. Yeah, they're not, it's not like a black art. It's a well-understood, very trackable, very measurable set of decisions that are made.
47:02 Alex Kantrowitz? On the battery side, there've been mobile companies that have been able to develop EVs in China. What do you think has enabled them to do that where we have failed to do that in the US? Think about Apple, they had an autonomous driving program that didn't go anywhere. Maybe it was electric, maybe not, but we haven't really had that happen in the US.
47:24 Speaker 01 The interesting thing about the development of a vehicle, especially in a modern sense, there's batteries, there's motors. Those are, those are key elements of the architecture. They drive a lot of the cost. But in terms of customer differentiation, a lot of the differentiation sits with the design of the computers in the vehicle, the design of the software stack in the vehicle. And so companies that have a lot of experience in designing computers or designing software do have, you know, do have a viable and differentiated skill set that can be applied to vehicle design. You know, and the benefit of a clean sheet company, you know, like Rivian is, Rivian is more software engineers than any other type of engineer. You know, you have more software engineers than mechanical engineers.
48:07 Speaker 01 And so the, this, the reality is the amount of tech that's going into electronics, compute platforms and software is, is disproportionately high relative to what it was, let's say 10 years ago or, you know, 15 years ago. It's just a step change and that's only going to become more the case as time goes on.
48:28 Alex Kantrowitz? Can I ask you one more question about the battery? It seems like, or one of the things that people talk about when they talk about EVs is that I think it's lithium within the batteries, that maybe one day it's going to run out or it's really tough to get or sourcing it, you know, ends up, if you're going to buy lithium, it's going to be, you might end up running into like some human rights issues. What do you think about that?
48:48 Speaker 01 Well, first, a significant misconception and piece of misinformation in the world is that batteries like burn through and use up the materials that are in them. So like lithium gets consumed.
49:04 Speaker 01 That's not the case. So the, there's an opportunity for, once you get batteries in the system, you're going to continually reuse the lithium. So it's really a closed loop system and the value of the batteries is too high to. Even imagine a world in which, you know, they're just like thrown away. So there's no world in which you're like have landfills full of lithium ion batteries. It'd be like throwing away boxes of gold necklaces. So that's the first point is it it will absolutely end up with a closed loop, really high rate of recycling. And an example of this, which is worth calling out, is a lead acid battery where lead is not very valuable, but it's more valuable than, let's say, plastic. But the recycling rate on lead acid batteries are on 99%.
49:47 Speaker 01 So I would, I would say unequivocally, the recycling rate in lithium ion batteries will be very near 100%, 99.9%, maybe 99.99%. So with that said, in the short term, we have to extract enough lithium from the earth to support this, what eventually becomes closed loop cycle for batteries. And there's a lot of places that have lithium. Most of them aren't in the United States, so it does require trade with with foreign entities. And fortunately, with with lithium, there's, there's lots of places to get it where there's not questions around labor practices or how it's being mined. I think there's some other materials that are in the battery that are more challenging. The one that I would point to that it's the most problematic is cobalt.
50:31 Speaker 01 And there's not a lot of places to get cobalt. It is a more challenging supply chain from a labor practices point of view. But from a technology point of view, most companies, certainly Rivian included, are working to engineer cobalt out of the batteries. I don't think cobalt will be a long term part of, you know, the battery chemistry strategy. And so we'll, we'll end up using materials that are more easily accessible, or I should say more broadly accessible. And just like any other space, this is a space that's rapidly matured. So lithium, the demand for lithium has exploded over the last two and a half decades with the move to lithium ion batteries and everything from our consumer electronics to our cars.
51:14 Speaker 01 That's becoming a much more robust marketplace. It doesn't quite have a commodities market in the sense that steel or aluminum do, but it'll get there. And I think you'll start to see this in some of the other materials as well.
51:26 Alex Kantrowitz? I've been debating our whole conversation, whether I should ask you a question about plug in hybrids.
51:30 Speaker 01 Ask it.
51:32 Alex Kantrowitz? And I've been saying, well, it's boring and, but I'm going to close on it because I do think that the momentum that plug in hybrids have had in the United States is quite interesting and.
51:43 Alex Kantrowitz? It's worth noting and getting your thoughts on. So this is from the Journal. The plug-in hybrid car starts to win over buyers. And basically, the way these work is they run on battery for 20 to 40 miles and they revert to a gas engine. And the Journal story says, "The number of plug-in hybrid models on sale in the US has nearly doubled since 2019 to 47." Why do you think that these cars are doing so well? And would you ever consider building one?
52:14 Speaker 01 I think that it is a very short-term perspective. So Rivian would never consider building a plug-in hybrid. I think it's a pure throwaway technology.
52:27 Alex Kantrowitz? Just for listeners, the way that RJ said that, you should have seen the facial expressions. This is a very clear statement here. No plug-in hybrids.
52:36 Speaker 01 Well, I think it's a distracting intermediate technology. That it's unfortunate because I think it's both. Yes, I can understand for a consumer, it's maybe a smaller bridge. But it's for a manufacturer, it's going to cause them to spend a lot of time and effort on something that has a terminal end state. You know, and I draw the analogy, if you remember when we went from CD players to play music, to playing music off of a Solc drive. In between that, there were a bunch of things, like there were these little MiniDisc players. They could hold like 70 songs. And all the companies that built those little things, those MiniDisc players are long gone.
53:19 Speaker 01 But they're not, they're really hard problems to solve, like to build a MP3 player that could play off a little, you know, little mini hard drive. A lot of useless technology was developed.
53:30 Alex Kantrowitz? You held one of those, you're like, God, this is the future. I don't need anything else. And then the iPhone came out.
53:35 Speaker 01 Plug-in hybrids is, plug-in hybrids are sort of that. It's a highly distracting, technically hard to execute product. Of course, it benefits companies who have a lot of experience in engines because they can take their engine expertise and emissions expertise and they can be more profitable in the short term. But I do really deeply hope that manufacturers across the globe invest enough resources in electrification so they're not caught off sides, you know, when 2030, 2032 rolls around and they're not as capable as they need to be in developing those vehicles.
54:11 Alex Kantrowitz? Okay. Well, RJ, I'm looking forward to getting behind the wheel of your latest generation of vehicle and excited to try out the R2 and the R3 when they come out and maybe see what that Porsche is all about when it has Rivian within it. That's the one I'm looking forward to the most. Great to see you. Great to speak to you as always. Thanks for coming on the show.
54:30 Speaker 01 Great. Good to see you as well. Thanks again.
54:32 Alex Kantrowitz? All right, everybody. Thank you for listening. You can tune in to my test drive of the latest Rivian vehicles on my YouTube channel. Also, if you're listening or watching on Spotify, yes, we do video there now as well. So glad to have you here. No matter which platform you're listening to the show on or watching, and on Friday, we'll be back to break down the week's news. Thanks again, and we'll see you next time on Big Technology Podcast.
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