Electric vehicle startups seek low-cost routes to mass production

BICESTER, England, Aug. 17 (Reuters) – Electric car and van startups racing to become the next Tesla Inc (TSLA.O) all want to avoid Elon Musk’s journey through “manufacturing hell” .

But electric vehicle companies such as British van company Arrival SA (47K.F) and Fisker Inc (FSR.N) are taking very different paths to meet the challenges of profitable mass production that nearly shattered Tesla.

A few have found investors willing to pour billions to finance their trip. Rivian has raised around $ 10.5 billion from Amazon.com Inc (AMZN.O), Ford Motor Co (FN) and others as it ramps up production to build electric vans, pickup trucks and SUVs.

Startups that are running out of Rivian’s wads of cash either need cheaper paths to mass production or risk failing in the electric vehicle arms race – a danger Musk repeatedly pointed out during the call. to Tesla’s results on July 26.

“What’s remarkable is that Tesla didn’t go bankrupt to hit volume production,” Musk said.

In 2017 and 2018, Tesla struggled to increase volume production of the Model 3 sedan, with the then-loss-making automaker spending money due to over-reliance on automation, battery issues and other bottlenecks. He even built a new line in just two weeks in a huge tent outside his factory in Fremont, Calif., To meet his production goals.

The traditional approach taken by many automakers over the years has been to spend over $ 2 billion on a factory large enough to build 240,000 or more vehicles per year.

Arrival instead opted to build “micro-factories” of electric vans and buses – small factories costing $ 50 million and requiring little expensive equipment. Arrival doesn’t need paint shops – which can cost hundreds of millions of dollars – because their pickup trucks are made from a lightweight, colorful plastic composite.

The arrival foresees micro-factories close to major customers around the world, reducing shipping costs and hiring local workers.

“You have to raise so much money to do this the traditional way that it prevents startups from coming up with new ideas,” said North American director Mike Abelson – a former General Motors Co (GM.N) executive.

Arrival raised around $ 660 million through its March public offering and is building two factories in the United States: one in North Carolina which makes vans for United Parcel Service Inc (UPS.N), its largest customer in this area. day, and another in South Carolina which will manufacture buses. In addition, it is building a factory in Spain. Abelson said Arrival will announce more factories later this year.

‘MICRO-FACTORY 1.0’

Arriving’s first micro-factory in Bicester, England, will serve as a model for other factories. Lack of a paint shop is just one of the ways the company will avoid the big ticket items that have traditionally defined automotive production.

Engineers at the startup built molds for plastic body panels costing thousands of dollars compared to the millions of dollars needed for a traditional metal die. Arrival engineers also designed their own molding machines.

Abelson said Arriving needed around 70 robots per micro-factory, and the startup only purchased generic robots that are commonly used from long-standing automotive industry suppliers Kuka AG (KU2G.DE) and Italian Comau – avoiding expensive made-to-order robots. Comau is owned by the car manufacturer Stellantis NV (STLA.MI).

Robots are programmed to perform double or triple tasks. In a large traditional auto plant, if you need to apply adhesive at different points during assembly, you add more adhesive stations along the line to produce one vehicle per minute.

But in the Arriving microusine, there will be an adhesive station and self-contained, in-house-designed wheeled robots will haul a chassis back and forth throughout the assembly process.

Getting small means Arriving can commit to 10,000 pickup trucks per year per plant instead of 100,000, says Abelson. Each micro-factory will create around 250 jobs, far from the thousands created by a large car factory in the past.

“This means that if a factory is not functioning, it is not a disaster for the local economy,” said Abelson. “The closure of a large auto plant is a big hole to fill.”

‘WORK OUR WAY BACKWARD’

Electric vehicle maker Canoo Inc (GOEV.O) has adopted a strategy similar to that of Arrival. But CEO Tony Aquila said Canoo will build a “mega-micro-factory” to serve as a hub for future smaller factories.

Electric Last Mile Solutions (ELMS.O) plans to launch a small electric van in the United States later this year and will initially reassemble pre-finished vehicles made in China at a former GM plant in Mishawaka, Indiana, adding new ones. seat belts and other safety devices to meet US regulations.

CEO James Taylor said it would initially save hundreds of millions of dollars on stamping dies and body shop welding equipment. As revenues increase, it will incorporate more American coins over time.

“We’re going to be working backwards, adding more and more local content as we go,” Taylor said.

Other startups are outsourcing manufacturing to cut costs.

Tel Aviv-based REE Automotive Holding Inc (REE.O) is looking into deals with American Axle (AXL.N) and Mitsubishi Motors Corp (7211.T) to help build its electric platforms for vehicles from large-scale delivery and passenger transport vehicles.

“The biggest challenge for new players like us is ultimately that you have to manufacture on an automotive scale and an automotive scale,” said Daniel Barel, CEO of REE Automotive. “With us, everything is already happening at the automotive level because it’s American Axle or Mitsubishi.

REE and Fisker have also both teamed up with Canadian automotive supplier Magna International Inc (MG.TO) to build their electric vehicles, while Fisker has a similar deal with Foxconn Technology Co Ltd (2354.TW) of Taiwan.

Contract manufacturing agreements reduce up-front costs, in exchange for Magna or Foxconn taking reduced revenue and potential profits. Henrik Fisker, chief executive of the EV startup that bears his name, said alliances should also help secure equipment and parts at a time when supply chains are harassed.

“Foxconn and Magna, they’ll get all the gear they need,” Fisker said. “They have the capital. They have the reputation. We are not here to set up our own factory in the desert.”

Reporting by Nick Carey in London and Ben Klayman in Detroit Editing by Joe White and Matthew Lewis

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