Electric car and van startups racing to become the next Tesla all want to avoid Elon Musk’s journey through “manufacturing hell.”
But electric vehicle companies like British van company Arrival SA and Fisker are taking very different paths to overcome the challenges of the profitable mass production that nearly broke Tesla.
Some have found investors willing to hand over billions to finance their journey. Rivian has raised about $10.5 billion (about INR 77,975 crores) from Amazon, Ford Motor and others as it ramps up production to build electric vans, pickup trucks and SUVs.
Startups without Rivian’s wads of cash need cheaper paths to mass production or risk failing in the electric vehicle arms race — a danger Musk repeatedly highlighted on Tesla’s July 26 earnings conference call.
“What is remarkable is that Tesla did not go bankrupt to achieve production volume,” Musk said.
During 2017 and 2018, Tesla struggled to increase volume production of the Model 3 sedan, with the then-loss automaker burning money as it struggled with an over-reliance on automation, battery issues and other bottlenecks. She even built a new line in just two weeks in a huge tent outside her Fremont, Calif., factory to meet her production targets.
The traditional approach taken by many automakers over the years has been to spend over $2 billion (about INR 14,850 crores) on a factory large enough to build 240,000 vehicles or more annually.
Arrival opted instead to build bus and electric van “microfactories” – small factories costing $50 million (about Rs. 370 crores) that are light on expensive equipment. Arrival doesn’t need paint shops – which can cost hundreds of millions of dollars – because their vans are made of a light colored plastic composite.
The arrival plans micro-factories close to key customers around the world, reducing shipping costs and hiring local workers.
“You have to raise so much money to do this in the traditional way that prevents startups from coming up with new ideas,” said US chief Mike Abelson – a former executive at General Motors Co.
Arrival raised about $660 million (about Rs. 4,900 crores) from its March public offering and is building two plants in the US: one in North Carolina, which makes vans for United Parcel Service, its biggest customer yet the moment, and another one in South Carolina that will make buses. In addition, it is building a factory in Spain. Abelson said the Arrival will announce more factories later this year.
The first microfactory arriving in Bicester, England, will serve as a model for other factories. The lack of a paint shop is just one of the ways the company avoids the expensive items that traditionally define automotive production.
The startup’s engineers have built molds for plastic body panels that cost thousands of dollars against the millions of dollars required for a traditional metal die. Arrival engineers also designed their own molding machines.
Abelson said Arrival needs around 70 robots per microfactory and the startup is buying only commonly used generic robots from long-time suppliers to the auto industry Kuka AG and Italy’s Comau – avoiding expensive custom-made robots. Comau is owned by the automaker Stellantis NV.
Robots are programmed to perform double or triple tasks. In a large traditional car factory, if you need to apply adhesive at different points during assembly, add more adhesive stations along the line to produce one vehicle per minute.
But at Arrival’s microfactory there will be an adhesive station, and internally designed autonomous wheeled robots will carry a chassis back and forth during the assembly process.
Staying small means Arrival can commit to 10,000 vans per plant instead of 100,000, says Abelson. Each microfactory will create about 250 jobs, nowhere near the many thousands created by a large car factory in the past.
“That means if a plant doesn’t work, it’s not a disaster for the local economy,” Abelson said. “The closure of a big car factory is a big hole to be filled.”
‘Work our way back’
Electric vehicle maker Canoo Inc. adopted a similar approach to Arrival’s. But CEO Tony Aquila said Canoo will build a “mega-microfactory” to serve as a hub for future smaller factories.
Electric Last Mile Solutions plans to launch a small electric van in the United States later this year and will initially reassemble pre-finished Chinese-made vehicles at a former GM plant in Mishawaka, Indiana, adding new seat belts and other safety features. safety to meet US regulations.
CEO James Taylor said he will initially save hundreds of millions of dollars on stamping dies and body shop welding equipment. As the recipe grows, it will incorporate more American pieces over time.
“We’re going to step back, adding more and more local content as we go forward,” Taylor said.
Other startups are outsourcing manufacturing to cut costs.
Tel Aviv-based REE Automotive Holding is leaning on deals with American Axle and Mitsubishi Motors Corp to help build its electric platforms for large-scale people transport and delivery vehicles.
“The biggest challenge for new players like us is that ultimately you need to manufacture at the automotive level and at the automotive scale,” said Daniel Barel, CEO of REE Automotive. “With us, everything comes in an automotive scale because it’s American Axle or Mitsubishi.”
REE and Fisker have also teamed up with Canadian car supplier Magna International to build their EVs, while Fisker has a similar deal with Foxconn of Taiwan.
Contract manufacturing agreements reduce upfront costs, in exchange for Magna or Foxconn for cutting revenue and potential profits. Henrik Fisker, chief executive of the EV startup that bears his name, said the alliances should also help protect equipment and parts at a time when supply chains are in turmoil.
“Foxconn and Magna, they will get all the equipment they need,” Fisker said. “They have the capital. They have the reputation. We are not here to open our own factory in the desert.”
© Thomson Reuters 2021