Insight: EV startups hunt for low-cost roads to mass production
17/08/2021 07:00
By Nick Carey and Ben Klayman
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 firms such as UK van company Arrival SA
47K.F and Fisker Inc FSR.N are taking very different roads
to overcome the challenges of profitable mass production that
almost broke Tesla.
A few have found investors willing to hand over billions to
fund their journey. Rivian has raised around $10.5 billion from
Amazon.com Inc AMZN.O , Ford Motor Co F.N and others as it
ramps up production to build electric vans, pickups and SUVs.
Startups lacking Rivian's wads of cash need cheaper paths to
mass production or risk failing in the EV arms race - a danger
Musk highlighted repeatedly on Tesla's July 26 earnings call.
"The thing that's remarkable is that Tesla didn't go
bankrupt in reaching volume production," Musk said.
During 2017 and 2018, Tesla struggled to ramp up volume
production of the Model 3 sedan, with the then loss-making
automaker burning through cash as it contended with an
over-reliance on automation, battery issues and other
bottlenecks. It even built a new line in just two weeks in a
huge tent outside its Fremont, California, factory to meet its
production targets.
The traditional approach taken by many automakers over the
years has been to spend above $2 billion on a factory big enough
to build 240,000 vehicles or more annually.
Arrival has opted instead to build electric van and bus
"microfactories" - small plants costing $50 million that are
light on expensive equipment. Arrival does not need paint shops
- which can cost hundreds of millions of dollars - because its
vans are made of lightweight coloured plastic composite.
Arrival plans microfactories close to major customers around
the world, cutting shipping costs and hiring local workers.
"You have to raise so much money to do this the traditional
way that it keeps startups from coming forward with new ideas,"
said North American head Mike Abelson - a former General Motors
Co GM.N executive.
Arrival raised about $660 million from its March public
offering and is building two U.S. plants: one in North Carolina
making vans for United Parcel Service Inc UPS.N , its largest
customer to date, plus another in South Carolina that will make
buses. In addition, it is building a factory in Spain. Abelson
said Arrival will announce more plants later this year.
'MICROFACTORY 1.0'
Arrival's first microfactory in Bicester, England, will
serve as the blueprint for other plants. The lack of a paint
shop is just one of the ways in which the company will steer
clear of big-ticket items that traditionally have defined
automotive production.
The startup's engineers have built moulds for plastic body
panels costing thousands of dollars versus the millions of
dollars needed for a traditional metal die. Arrival's engineers
have also designed their own moulding machines.
Abelson said Arrival needs around 70 robots per microfactory
and the startup is buying only commonly used, generic robots
from long-time auto industry suppliers Kuka AG KU2G.DE and
Italy's Comau - eschewing expensive made-to-order robots. Comau
is owned by automaker Stellantis NV STLA.MI .
Robots are programmed to do double or triple duty. In a
large traditional car plant, if you need to apply adhesive at
different points during assembly you add more adhesive stations
along the line to churn out a vehicle per minute.
But in Arrival's microfactory there will be one adhesive
station and autonomous wheeled robots, designed in-house, will
carry a chassis back and forth throughout the assembly process.
Going small means that Arrival can commit to 10,000 vans
annually per plant rather than 100,000, Abelson says. Each
microfactory will create around 250 jobs, nowhere near the many
thousands created by a large auto plant in the past.
"That means if a plant doesn't work out, it's not a disaster
for a local economy," Abelson said. "A major car plant closing
is a big hole to fill."
'WORK OUR WAY BACKWARDS'
Electric vehicle maker Canoo Inc GOEV.O has adopted a
similar strategy to Arrival's. But CEO Tony Aquila said Canoo
will build a "mega-microfactory" to serve as a hub for smaller
future factories.
Electric Last Mile Solutions ELMS.O plans to launch a
small electric van in the United States later this year and at
first will reassemble prefinished vehicles made in China at a
former GM plant in Mishawaka, Indiana, adding new seatbelts and
other safety features to meet U.S. regulations.
CEO James Taylor said this will initially save hundreds of
millions of dollars on stamping dies and body shop welding
equipment. As revenue grows it will incorporate more American
parts over time.
"We'll work our way 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 leaning
in to agreements with American Axle AXL.N and Mitsubishi
Motors Corp 7211.T to help build its electric platforms for
delivery vehicles and people movers at scale.
"The biggest challenge for new players like us is at the end
of the day you need to manufacture at automotive grade and
automotive scale," said REE Automotive CEO Daniel Barel. "With
us, everything already comes at automotive scale because it's
American Axle or Mitsubishi."
REE and Fisker also have both teamed up with Canadian auto
supplier Magna International Inc MG.TO to build their EVs,
while Fisker has a similar agreement with Taiwan's Foxconn
Technology Co Ltd 2354.TW .
Contract manufacturing deals reduce upfront costs, in return
for Magna or Foxconn taking a cut of revenue and potential
profits. Henrik Fisker, chief executive of the EV startup that
bears his name, said the alliances should also help secure
equipment and parts at a time when supply chains are snarled.
"Foxconn and Magna, they will get all the equipment they
need," said Fisker. "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)
((nick.carey@thomsonreuters.com; +44 7385 414 954;))