But electric vehicle firms such as UK van company Arrival SA
and Fisker 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, Ford
Motor, 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
executive.
Arrival raised about $660 million (roughly Rs. 4,900 crores)
from its March public offering and is building two U.S. plants: one in North
Carolina making vans for United Parcel Service, 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 and Italy's Comau - eschewing expensive
made-to-order robots. Comau is owned by automaker Stellantis NV.
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 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 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 US 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 is leaning in to
agreements with American Axle and Mitsubishi Motors Corp 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 to build their EVs, while Fisker has a similar
agreement with Taiwan's Foxconn.
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."
© Reuters
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