Rivian's CEO on Elon Musk's Influence, Affordable EVs, and The Grid's Risky Future — W/ RJ Scaringe

Channel: Alex Kantrowitz

Published at: 2024-11-20

YouTube video id: RemR5UiN6As

Source: https://www.youtube.com/watch?v=RemR5UiN6As

let's talk with the CEO of electric car
maker rivan 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 welcome to
Big technology podcast a show for
cool-headed new on conversation of the
tech world and Beyond today we have one
of my favorite CEOs in the tech World
rivan CEO RJ scarin is joining us here
to talk everything EVS including what's
going on with his company is joint
Venture with VW some Elon Musk and then
also China's electric vehicle boom RJ
great to see you welcome to the show
thanks Alex good to be on with you 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 uh Elon
Musk has endorsed Donald Trump he's of
course the Tesla CEO and rivan
competitor uh musk is he's been
intimately involved in the transition
and he's being called the first buddy uh
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 oh jeez uh I mean I I
think the the broader state of just how
politicized uh electric vehicles have
become is is a bit surprising I I think
you know Tesla and
Elon uh having a relationship with with
President Trump has is actually helpful
to electrification it's it's certainly
going to provide the perspective of uh
the importance of EVS so I I look at
that as a positive um you know 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 uh the
products the technology
certainly um how they've helped really
create momentum around the movement
towards
electrification but you never look at
the relationship between Elon and Trump
and be like can't really believe that
that's happening I wouldn't have
expected that if on the list of things I
would have uh predicted a year ago this
wouldn't have been one of them but you
know electrification uh the drive
towards sustainable energy this is
unfortunately this is a political issue
it should not be this is a human issue
and and having folks that that are pro
EVS on both sides of the AIS is a really
important thing and so Elon taking that
role uh certainly I think could be
helpful yeah and you mentioned it could
be good for EVS and it's weird Tesla's
stock went up 40% since the election
rivian stock is kind of flat but just
talk about like what Elon might be doing
there I I wouldn't you know 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
like what would you want I think I'd
answer I'd answer it from the
perspective of what's best for the world
and what I I truly and deeply believe is
best for the world is we need to have
multiple uh choices as a consumer so
that means lots of different companies
building High highly compelling products
uh those products need to give customers
Choice which is ultimately what's going
to drive us from you know sub 10% EV
adoption to 100% EV adoption and so the
mechanism mechanisms to help drive that
are are both the carrots and the sticks
the carrots uh you know typically are
consumer facing and we had have had a
$7,500 tax credit that's consumer facing
the sticks or or 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 emission
standards or uh hit certain levels of
electrification Zer Mission vehicle
credits and the credits are helpful in
that they don't cost the government
anything uh 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 are
building more efficient vehicles and you
have Tesla of course is the biggest um
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 uh to
electrification so I think any roll back
there is actually it may in the
short-term help car companies but in the
long-term um you know car companies that
back off their electrification
strategies are going to find them find
themselves in a really uh challenged
position uh 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 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
um right yeah but I do think mechanisms
that help drive towards the future state
are important 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 uh all 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 magat train um
so we're not really sure what driving a
Tesla says about about you right now
what does driving arivan 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 rivan owner I love that
question um so when you think about a
product and then the brand that comes
out of the product I think uh it's easy
sometimes to get caught up in an
attribute so to confuse an attribute of
the product let's say acceleration or
off-road capability with the 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 the the the company in a
broader way than just the capabilities
of the product set and so you 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 a
charging station a service location and
one of the key words we think about is
inviting and inviting in the sense that
this is uh as a brand as a company we
want to invite people into
electrification we want to invite people
into new
technology uh you 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 and that part of that
you've seen emerge in our communities so
our communities are very uh active uh 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 get they see new parts of the
world together uh 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 a 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 uh political beliefs it's going to
span religious beliefs and we've we're
witnessing it 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 rivan yeah I think we do I think
a lot of our customers have more of a
leaning towards caring about
sustainability in different
ways but um but the thing is one thing
want try to drive a fork between people
because of that for sure and the one
thing that I'm noticing though is also
that the someone who drives rivan today
has to be well off right the cars start
uh I think around $70,000 yeah 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 and
and those are going to roll off uh 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 yeah love I'm glad you talked
about this the the launch product uh
really think of 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 yeah I've driven that pickup
truck it is fun to drive very smooth
it's great 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 uh really gives it a go yeah yeah
and by the way for the for this Tesla
fans uh I'm happy to have Elon on the
show if he wants to come on I'm going to
drive a a cyber truck so this is not a
stick it to Elon interview I just want
to put that out there but anyway
continue that's great yeah so in the in
that premium segment uh you know if we
think of it as Vehicles priced over
$70,000 the uh the R1 product line has
been extremely successful the r1s is
actually the bestselling premium SUV uh
in the state of California not the
bestselling premium electric SUV the
bestselling premium SUV period uh in
California um across the whole us it's
the bestselling premium electric vehicle
so it's the the the product and the
brand have really resonated with folks
that can 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
so it's a really nice broad funnel of
interest that we've drawn in so the goal
of course with the lower PRC product is
to 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
and what's considerably lower than that
we haven't announced yet I knew you're
going to ask that but we haven't
announced yet but but meaningfully lower
um and and of course the goal is to to
continue to make the brand the products
you know our company accessible to more
and more people and the reason we
started at the highend is it's it's it's
shouldn't be surprising it with low low
voles and and building out scale we
wanted to have a product that had enough
price that allowed us to um build scale
build capabilities and then put us in a
position to then launch a very high
volum product you know with a lot more
capacity a much more built out supply
chain for our you know for our next
product
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 $5.8 billion dollar 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 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 and of course the VD 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 yeah I mean I 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 it you know a deal of this
size in this complexity certainly takes
time but you know Volkswagen as a group
is the second largest Vehicle
Manufacturer in the world um very close
to the largest and in terms of size in
terms of number of vehicles and you know
the reason I started riving was to have
as much impact as possible and to help
drive and accelerate the transition to
renewable energy and sustainable
transportation and so the opportunity to
take our technology and help Volks bag
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 across the
planet uh was really really enticing and
exciting and of course the technology we
developed is is really strong um and
it's you know we 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 uh the topology of computers
which is us and Tesla of course and so
you know Volkswagen has really leaned in
with us and so the the $5.8 billion deal
reflects just the scale of this I 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 um to build
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 can I ask what that means does
that mean like the Porsche is going to
have rivan electrification and Battery
within it or create a model of so the
deal is just for the basically our
computer architecture so our what we
call ecus Electronic control units and
then the software that runs on them it's
it doesn't include batteries drivve
train it also doesn't include autonomy
it doesn't include vehicle platforms you
have an autonomy program oh yeah yeah
last time we spoke didn't come up it
didn't seem like you guys were going to
pursue that path but that's new 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 um
we actually we just launched a Gen 2
vehicle this was a big effort but we
completely remapped how we did our
platform we brought everything
everything in house so we have U 55
megapixels of cameras on our vehicle
it's the largest number of megapixels on
uh in outside of China uh we have five
Radars and then we have a 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 a requires a closed loop
like heavy flywheel of data where you're
data coming in off the vehicles you know
you see unique incidents or 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 um but
that's what we're building but you're
pushing towards full autonomy or is this
is partial so what we have today is if
you get into a Riv and you put it on the
highway it will drive itself on the
highway um it can change lanes in the
highway but it doesn't leave that when
you leave the highway you retake control
and so 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 okay so back
back tovw 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
rivan system 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 a little bit of
history on it so if you go back to the
early
1960s um cars didn't have computers in
them they were completely mechanical um
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 and the the slow
process of seeing computers increasingly
get used across the vehicle 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 plac
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 we had we we
basically witnessed this massive
proliferation of a highly disorganized
highly function-based uh 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 um
to make an update to to very simple
things so take for example the sequence
of what happens when you walk up to the
card and it unlocks you have you know an
ant an 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 get in and out another computer
you have the lighting which is another
computer you probably have something
that's emitting some sound or noise
there are lots of computers in the car
10 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 10 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 the a
number of zonal based or GE GE
geographically based computers and so
these things are called zonal
architectures that's what we've
developed and it's much cheaper because
you cut
out 90 95% 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 um
that's what we built and so to your
question if you're driving a a Porsche
or an Audi a few years from now it will
have rivan computers in it and those
rivan computers will be running rivan
software but the way it drives the what
it looks like on the screen combustion
versus electric that'll be completely
just you know specific to the brand have
you talked about also doing a deal that
puts your some of your electrification
in their
vehicles well there's lots of ways we
could expand the deal Beyond uh
electronics but we haven't we haven't
said anything publicly but I'd say this
we we've engag sounds like you had that
that
conversation we've had all kinds of um
conversations with different
manufacturers over the years and I
couldn't um I couldn't be more excited
about the potential of what what we're
building with Volkswagen vks my group
across their brands so there's there's
certainly uh poti think so what do you
get from them outside of
money so one of the challenges that we
have uh in building and growing our
business is 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 scoda
you know a handful of Brands uh you know
with much higher volumes you can really
accomplish Advantage 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 cost
across many different products so it it
makes a lot of economic sense or and 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 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 in
dependent yeah the
well again to be clear this isn't um
we're not like the things that customers
will experience they'll experience like
better o over thee updates but they're
not going to
um if you're in an Audi you're not going
to see rivan parts and if you're in a uh
you know if you're in a REV you're not
going to see Audi parts so um you know
it's really at the software level so I
think the way I look at it is we 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 is a technology
company and clearly as demonstrated by
this deal we're selling technology so we
we have a a clear business line that's
in addition to just the vehicles
themselves yeah and when you talk about
the advantage in negotiation with
suppliers to me that really seems like
maybe an underappreciated part of this
um just given the state of the rivan
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 um 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 rivan um there have been
multiple quarters of billion dollar
losses there was a billion 1.5 billion
uh Q4 2023 we're talking in Q4 2024 5.4
billion lost last year you're losing
40,000 per car today um how sustainable
is that and how do you plan to flip that
CU I know the plan is to flip it yeah
but if the plan's not to flip it we
might as well just shut the doors um
yeah of course so I guess there's two
ways two things to think about here so
the first
is um there's a level of R&D
expense and GNA Opex that are necessary
to build a business like what we're
building and to be worldclass and
leading in terms of technology
so that and that that means there's a
there's a caloric burn of number of
people necessarily to develop that much
technology and today it it 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 it's because we plan to sell
many millions of vehicles a year uh 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
uh 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 happens it's very expensive but in
the beginning it's all cost it's all
Opex but over time it actually becomes
very profitable um and once it's
profitable it it becomes a really
wonderful tailwind and
you know Tesla is a great example of
this one of the big tail ones they have
is they have a great you know highly
profitable service arm um 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 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 Revan 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 on how
much more like this is I'll get to the
that sort of that's to answer the full
question first but the okay 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're we've
built really something that no one else
has built other than Tesla uh with the
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 um I would argue without
question like the the best deliver see
all over the place Brooklyn delivering
Amazon packages 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 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 of surface
infrastructure in place so if you break
down in the middle of nowhere or in an
accident that's very far from a rivan
location you know just because there's
no infrastructure there to support it it
is more expensive and that's one of the
reasons we have to go build that out and
you know fortunately for our customers
that really gets covered through our
warranty so the warranty period is
something we have to eat the greater
cost of of let's say being 100 or 200
300 mies 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 the broader question which is you
know when do we when do we start to make
money uh 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 a hard
sometimes a hard number to fully
appreciate the fixed cost versus the
variable cost aspect and our CFO and I
try to you talk to this a lot in our
earnings calls but um just the the
Baseline of running a 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 um the plant that we've set up in in
Illinois uh our normal plant will have
250,000 215,000 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 uh um 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 and really key to this is
taking the bill of material cost that's
the 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 billing materials for 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 arivan was we
didn't have a plant um 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 and
we rationalized it by 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 launch the success of the
product uh 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 going
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 O other premiums so it was
just an absolute bare knuckle fight and
you know hindsight's 2020 but one of the
challenges that compounded all of that
is we launched three products at the
same time we launched a truck an SUV and
a van all at once so we had three Supply
chains you know thousands of Parts you
know hundreds of different suppliers
that were just trying to manage all of
which asking us for more money so fast
forward to today we we had a major
shutdown of the plan intentional 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 uh 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 uh come in
over the course of 2025 and even into
2026 but all that together uh is leading
to you know I put it like this to my dad
a couple weeks AG I've never been more
confident in the business the long term
of of R2 and what that represents
and the the market desire for a brand of
products
that's uh unique and and distinct but
also just what's happening operationally
for us as a business and all the
learnings that have gone into that
launch I was just watching one of your
interviews with the New York Times where
David gallis uh brought up the uh this
tweet that Elon Musk had that you you
guys would be bankrupt within six
quarters and you kind of threw up your
your hands but suffice it to say you'll
be around to ship that R2 in
2026 yeah yeah we're I mean just look at
the numbers on it we've got um just
under $7 billion in cash we just with
the Volkswagen deal another 5.8 billion
coming in you've said a couple times we
have debt from Volks just to clear we've
had $2.3 billion comeing from Volkswagen
uh to date there's a few additional
tranches of capital that come in
actually the last trunch is actually the
billion dollars in debt so we equity and
then licensing fees first um but but we
have in total that 5.8 plus the roughly
6.7 so what we've guided to publicly and
have you know 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 take
us through positive free cash flow okay
couple 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 uh 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 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 uh 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 even
versus an internal internal combustion
engine because doesn't matter so there's
there's a few things I want to say here
this this is uh there's a philosophical
point which is we are as a we as a
society have built a a certain style of
living and we built this massive base of
technology and a whole fabric of a 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 be in
different places and different locations
having a
conversation uh among many other things
that allows us uh 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 built this world uh 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 deep mine of coal um 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 and um again it's like 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'll run into a brick
wall and then the lights will go off you
know that 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
Co we're reversing it really quickly
like the difference in time scales is
orders of magnitude and so there's no
practical reason that I can identify at
all to delay the transition so so to
make the 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 estate
technology not doing that would be
saying in 1910 let's invest in horse
production
capacity um so that's like the economic
argument is let's be part of the future
you know global economy the climate
argument is there's lots of models that
look at when's the point of no return um
even past the point of no return more
carbon is still worse so let's we're
already GNA 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 rivan 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
micromobility 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 like let's ship
the problem to the Next Generation no I
would say that 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 so a lot is
demanding uh 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 grd in good enough shape to
sustain all these at once absolutely not
no no it's um I mean that's that's the
that's the thing that makes this such a
unique moment in time it's uh we have
one and a half billion cars in a 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 and replaced we have a grid
that's archaic and doesn't have any of
the supply demand mapping that we should
be thinking about you know
uh doesn't have you know effective ways
from a policy point of view you've been
managing things like net
metering um 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
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 turnoff 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
coin inance are happening at the same
time 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 in a history book 2,000 years
from now which is the end of the fossil
fuel error the the birth of artificial
intelligence the beginning of you know
renewable sustainable energy it's like
wow how is this all like how are we so
lucky as as as people today to be born
and alive at this hypercritical moment
um so yeah none of the none 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
there there's a lot to build I mean
knowing the way that we move as a
species it seems like we might be
screwed too negative no I I I I think
that um I I was at a dinner last night
with um with a bunch of entrepreneurs
that are building different types of
businesses in in essentially these two
spaces either energy or Ai and the level
of excitement and an enthusiasm to go
create this future state that that you
see in other CEOs other Founders but you
see it across the business is inspiring
um you know whenever whenever I'm
dealing with a really hard problem
within rivian one of the things I do
that's really affective is I 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 rivan you know it's inspiring and
and there's thousands and thousands of
people like this across the world across
many different companies and so I think
that's you know that that of course is
what's going to get us as a species
through this really challenging moment
um so I have a lot of confidence in that
but it's it's not easy it's not walking
the is it GNA 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 yeah I well you
referenced something I said at the Wall
Street Journal uh discussion
uh or New York Times discussion um 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% is is
renewable uh 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 I do think nuclear is going to
play a role and and you joked about it
but with the growth of of AI and and the
energy needs for that there's going to
be I think reinvestment in that
technology oh for sure yeah I think
that's it's a 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 and we're
back here on big technology podcast with
rivan CEO RJ strring RJ uh explain to me
how China has been able to develop
$10,000 electric vehicle Les 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 yeah yeah so
I've been able to drive and and um some
of these uh EVS you're referring to in
the uh $10,000 RS I've been in them and
it's and it's exciting to see the 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 rivan
I'd like to depends a lot of cases yeah
in a lot of cases uh that's the ca you
know that's what's happening um the
other thing is of course products end up
everywhere so like there's lots of rivan
that are in China because companies will
buy them to Benchmark them here in the
US um you know a lot of the cars 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 oh wow there's a whole industry of
people that that's fascinating business
yeah yeah okay so you you've ridden them
what do you
think well I think first and foremost
it's it's important that they exist it's
important that we have choices across
lot of price points um and to achieve
that you know 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 um you of course benefit in
the case of China from a much lower cost
labor rate than what we have in in the
Western World certainly in the United
States uh and then in the case of china
you do have just you have this in the US
but to a more uh you know you know to a
more elevated level you have incentives
that are happening at the at either the
federal or the local 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 um and you know 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 you know are not going to be
permanent but the efficiencies of design
and 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 you know other
than the battery an electric vehicle is
is actually a lot cheaper to build it's
cheaper to maintain um so raw material
cost battery sell cost these are really
important things you've taken apart some
of these cars what have you found inside
them when you look
inside there's I I think there's nothing
magic uh there's no like aha there's
this um Capac you know there's there's a
you could see a cost focus of Park
consolidation
Fastener
elimination uh part or feature
elimination so you know the the vehicles
will will reduce the number of features
in the vehicle uh range is a big one so
adjusting the range down to be not a 3
400 mile range vehicle but maybe 150 or
200 mile range vehicle motor sizes are
smaller so it's less performance so you
know there's just a whole series of
decisions that are really um yeah
they're not uh it's not like a black art
it's it's a Well understood very
trackable very measurable
set of decisions that are made on the
battery side um there have 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 uh
program that didn't go anywhere uh maybe
it was electric maybe not but yeah we
haven't really had that happen in the US
the interesting thing about the
development of of a vehicle especially
in modern sense is there's batteries
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 you know have a lot of
experience in designing computers or
designing software uh do have you know
do have a a valuable uh 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 rivan is more
software Engineers than any any other
type of engineer uh you know we have
more software Engineers than mechanical
engineers and so the the this the 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 it's just a step change and that's
only going to become more the case as
time goes on now can I ask you one more
question about the battery it's 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 uh 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 well well first a
significant misconception and um piece
of misinformation in the world is that
uh batteries like burn through and use
up the materials that are in them so
like lithium gets
consumed um 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 Clos loop system and the value
of the batteries is too high to uh even
imagine a world in which you know
they're just like thrown away so there's
no world in which you like have
landfills full of lithium ion batteries
it'd be like throwing away boxes of gold
necklaces um so that's the first point
is it it it will will absolutely end up
with a closed loop really high rate of
recycling and 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 batter is around 99% um so
I would I would say unequivocally the
recycling rate on lithium batteries will
be you 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 um 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 um fortunately with 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 and um there's not a lot of
places to get cobalt uh it is a more
challenging supply chain from a labor
practices point of view but from a
technology point of view most companies
certainly rivan included are working to
engineer Cobalt out of the battery so I
don't think Cobalt will be a
long-term uh part of you know the
battery chemistry strategy and so we
we'll end up using materials that are
more easily accessible um 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 you two and a half decades with
the move to lithium batteries and
everything from our consumer electronics
to our cars that's becoming a much more
robust Marketplace it doesn't quite have
a Commodities Market in the sense that
Steeler aluminum do but it'll get there
and I think you'll start to see this in
some of the other materials as well now
I've been debating our whole
conversation whether I should ask you a
question about plugin hybrid s and
that's it 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 and hybrids have had in the
United States is is quite interesting
and it's worth noting and getting your
thoughts on so this is from the journal
uh the plug-in hybrid car starts to win
over over buyers and basically the way
these work is they run on B battery for
20 to 40 miles and they revert to a gas
engine and the journal story says that
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 I think that it is a um a very
short-term perspective um so we rivan
would never consider building a plugin
hybrid I I think it's it's a pure
throwaway technology just for listeners
the way that RJ said that that uh you
should have seen the the facial
expressions this is a very clear
statement here no plugin hybrids well I
just I I think it's it's a distracting
intermediate technology that I it it's
unfortunate because I think it's both it
yes I can understand for a consumer it
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 uh
terminal end State um you know I draw
the analog if you remember when um we
went from CD players to play music to
playing music off of a you know off of a
Sal Drive in between that there were a
bunch of things like there were these
little mini disk players they could hold
like 70 songs and all the companies that
built those little things as Min disc
players are long gone but they're not
they're really hard problems to solve
like to build a MP3 player they could
play off a little you know little mini
hard drive um a lot of useless
technology with developed you held one
of those you're like ah this is the
future I don't need anything else and
then yeah I the iPhone came out hybrids
is plugin hybrids are sort of that it's
a 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 and they can be
more profitable in the short term but I
I do really deeply hope that
manufacturers across the across the
globe um um invest enough resources in
electrification so they're not caught
off sides you know when 2030 2032 rolls
around and and they're not as capable as
I need to be in developing those
Vehicles okay well RJ I'm looking
forward to getting behind the wheel of
your latest generation of vehicle and uh
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
rivan uh within it that's the one I'm
looking forward to the most uh great to
see you great to speak to you as always
thanks for coming on the show
great good to see you as well thanks
again all right everybody thank you for
listening you can uh tune in to my test
drive of the latest rivan vehicles on my
YouTube channel also if you're listening
on or watching on Spotify yes we do
video there now as well so uh 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
breakdown the week's news thanks again
and we'll see you next time on big
technology podcast