Rivian: RJ Scaringe

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Oh yeah.

Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raz, and on the show today, how R.J. Scaringe was laughed out of the room when he set out to make an all-electric pickup and how that motivated him to build Rivian, a truck to push gas-guzzling vehicles off the road. Most startup founders are motivated by a purpose. You have to be in order to withstand the volatile ups and downs of building a business. And that purpose is often about introducing a product or service that you believe will have an impact either in your community or industry or in the world at large. And this applies to many of the brands we've profiled on this show. For Paulina Vexler of Universal Standard, the purpose is to create a more inclusive clothing brand. For Sam and Mariah Calagione of Dogfish Head Brewery, the purpose is to bring culinary techniques to the art of beer brewing. And for R.J. Scaringe, the purpose is about building a better car, better for drivers and better for the planet. But the difference between R.J. and the vast majority of the brands we've profiled on this show is time scale. It would take more than a decade of research and development before his company Rivian Automotive was able to sell anything. So this is the story of someone who found a way to merge his idealism with a huge market opportunity. Rivian is trying to solve a very hard problem. Actually several hard problems. And it's why R.J. Scaringe has been at it since 2009. That was the year R.J. and a group of collaborators started a small car company that would eventually become Rivian. R.J. wanted to build electric cars. But he knew then, as he does now, that to really make an impact with consumers, you have to make it easy and appealing. And for R.J., the way to get there was going to be with electric trucks. Now, even though you may think you see electric Teslas and Kia everywhere you look, electric vehicles only make up around 4 to 12% of all cars on the road in the US. And most of those electric cars are sedans. But the top selling vehicles in America aren't sedans, they're trucks. Ford's F-Series, Chevy's Silverado, and the Ram pickup dominate car sales in the US. So to get most people driving electric cars, you really have to win over the truck owners. When R.J. got into the car business in 2009, GM and Chrysler were cratering. Both companies would be bailed out by the government. This was not an obvious time to get into the industry. But what R.J. had and has is patience and a long-term vision. He knew and still knows that to mass-produce electric cars in the US and then get consumers to buy them will take time. By the end of 2022, Rivian expects to deliver around 25,000 electric trucks to waiting customers. It's a drop in the bucket when it comes to overall car sales, but within a few years, the company hopes to become the biggest electric truck maker in the world. There are growing pains for sure, which you'll hear about. Supply chain challenges, costs, manufacturing delays. But given what R.J. and his team have already been through for the past decade, these are just more bumps in the road. R.J. grew up in the 1980s on the Space Coast in Florida. His dad was also an engineer and an entrepreneur.

So, even as a six-year-old, you already had an idea of what you wanted to do when you grew up. Like, you were that focused.

Wow.

All right. So you were in high school, if I knew you in high school, would I have known you as that's R.J., he wants to build things. He's going to be an engineer. Was it already clear at that point?

Wow. Would you watch like those films about those great captains of industry who started car companies?

Totally.

Yeah. I mean, there's a complete renaissance happening which obviously is what we're going to talk about today. But I wonder, when you knew you wanted to make cars right from a young age and you ended up studying engineering at Rensselaer Polytechnic in New York, and then you went on to get your doctorate at MIT, I'm wondering, you were hoping to start a car company, you knew this from the time you were young, so why did you think you needed a PhD?

Wow. You were single-mindedly focused. You wanted to go to the best graduate school presumably.

Wow. That is unbelievable. You're like a unicorn in that sense because I almost never meet people who had that much foresight. You were literally thinking about how MIT could help you in your quest to start a car company one day.

Yeah. All right. So if I met you in 2005, 2006 when you're doing your graduate degree at MIT and I would have said, 'So R.J., people are telling me that you're really interested in starting a car company, but at the same time you want to start a business so you've got to solve a problem. There are a number of problems you can solve. You can say the existing American car isn't compact enough or it's not cool enough or there's no Italian designing, you know, design schemes in American, like we need beautiful American cars or we need faster American cars. What was the problem you wanted to solve? Was it about fuel efficiency? Was it about emissions? Was it about design? Was it about quality, price? What?'

That was what was motivating you?

Yeah. Like a Flintstones car.

It's interesting because around this time, it may have been around this time, 2004, five, six, it may be earlier. I can't remember, but there was a documentary. It was called something like 'Who Killed the Electric Car?' or something. And I remember there were a lot of conversations around like GM made this amazing electric car and lots of people loved it and then they just killed it. And there was conversation around this time 2005, 2006 like electric cars really were not viable. Do you remember those conversations?

All right. So this was what you're focused on. And when you were set to get your PhD and go out into the world, was it clear to you already that you would not go and work for another company from the get-go, that you literally get your cap and gown and you would take it off and you would start your own thing?

The next day. This was not Rivian. This was the company you founded called Mainstream Motors.

That's a sexy name. That's a really hot name. You're going to sell a lot of cars. This is a mainstream motor.

Mhm. And Avera was a portmanteau of a couple of different words, right?

Right. Okay. And I guess the goal of this company was to make a more fuel-efficient sports car, right? Like a hybrid. That was what you were planning to do, right?

And you say 'we', it was you and who else?

Well, this is my question. I believe you founded this in 2009, correct? And anybody who remembers 2009 knows that all the auto manufacturers, the big three, they were in Washington all the time. They were asking, not Ford, but the others were asking for help to make sure they didn't collapse. The whole industry was in crisis. GM, Chrysler for sure. This was not a good time to be thinking about starting a car company, let alone asking investors to invest in a car company when two out of the three big ones in the US were asking for bailouts.

You were trying to do this? Yeah, I'd say very unsuccessfully trying to raise capital in 2009. You were trying to raise money from like the Sequoias and the whatever out there.

You had the credential. You had the MIT credential.

Well, so I'm curious. In 2009 when you're going around asking investors if they want to invest, what you want to do at this point is to build a prototype of a product which was going to be a fuel-efficient sports car. But you needed to do that and you could do that for what, 5, 6, 7 million?

And so you raised no outside capital to begin work on the prototype. It was all like family and friends and stuff.

You bought a house in high school from like your jobs and just like you bought a cheap house then that you rented out.

Yeah. I'm just amazed at when I hear about high school and college kids who are just so focused and then they buy a house and then they rent it out and that eventually builds wealth. But that's a different story. Okay. Now, here's my question. I'm just thinking, my god, how do you build a hybrid? How do you build a prototype car that's going to work? You're in Florida. You're in this area where you grow up. It's you and got one or two people with you. How do you physically, where do you start? First of all, where do you build the car? Do you just rent a warehouse that you start working in?

Mhm. I mean, God, I can't even imagine all the problems, all the challenges you had to solve for, right, to make an engine and then an efficient chassis and suspension, powertrain, all of it. And of course, this was not going to be a completed car that you were building. It wasn't going to look like something you'd find in an auto showroom, but still, where did it start?

How did you get things made? Were you just basically getting things made for you and shipped to you in parts and you would kind of assemble it in this warehouse?

All right. It took you guys, small team of you, you had about what, like 12, 13 people working on it, I think. Something like that.

Almost two years to come up with this. And you got some attention, press attention. There's an article in the Orlando Sentinel. And it's really cool. You said at the time that you were hoping that by 2012 you guys could build these in Florida and that they would go for about 25,000 bucks.

And what about the, I'm looking at a photograph of a team of you around what would become the eventual car. This Avera car which looks pretty great. It's a blue car. Looks like a sporty little car. And so this car did drive. You did drive it, right?

And did it go, was it fuel efficient?

Yeah. But still, I can imagine, it's kind of cool. I'm looking at a picture of this small team of people around a fully built car, which is a cool achievement. I mean, you did this in under two years. And so, you were probably excited about the prospect of Florida could be this manufacturing center. You could make cars in Florida. And maybe you were kind of carried away with this vision, which I think anybody would, that you could make this happen.

I read a quote from one of the engineers who worked on this project. I think now works with Rivian who said, 'When the vehicle was done, literally you guys finished the Avera vehicle. Great achievement. Popped the champagne corks and you literally said we're switching course here. This is not the right direction.'

When we come back in just a moment, how R.J. and his team begin to design a whole new vehicle and why they decide to do it very, very quietly. Stay with us. I'm Guy Raz and you're listening to How I Built This.

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Hey, welcome back to How I Built This. I'm Guy Raz. So, it's 2013 and R.J. is in pivot mode. He's already built a prototype of a fuel-efficient sports car, but now he decides that to really make an impact, he needs to make a vehicle that's fully electric. Two vehicles, in fact, an SUV and a pickup.

Yeah.

All right. When you realized that you needed to switch direction, you knew that it was going to be all electric. I remember test driving a Tesla Roadster. I did a story about it back then and it was a sports car, electric sports car. It was really cool. So, you could have said, 'Hey, let's focus on electric sports cars.' Or you could have said, 'Let's focus on electric sedans or let's focus on an electric family car.' So there were different directions you could go in. Did you think about maybe going in that direction?

But how did you land on this idea of making a pickup truck? What were the factors that got you to that point? What were the things you realized about this particular kind of car?

Yeah. But were you, I mean put on your business hat for a second, not the engineering hat. Did you see a market opportunity in focusing on SUVs and trucks? I mean because this is still the biggest segment of cars sold in the US, SUVs and trucks. Did you realize that and say we should really go in that direction?

All right. So, you know that the future is electric and you're going to be building trucks and SUVs. And then I guess in like 2013, you guys decide to relocate to Michigan, just outside of Detroit. And it's for obvious reasons, right? The whole US automotive industry is based in the upper Midwest. But just out of curiosity, at this point, the company is like 10 or 12 of you guys?

All right, let's break down some of the things that you had to do. First of all, you changed the name from Avera to Rivian. What was the name change about? Why'd you do that? Because Avera is a pretty good name.

Where does the name come from?

Mhm. In Florida, right? Which is not actually a river. It's the ocean, right?

Wow.

Yeah. All right. So you're in Michigan and in Ippolita's group house and you know that you're going to focus on making SUVs and trucks electric. Man, I just cannot imagine what a daunting task you have ahead of you. You've got to make a battery. You got to make an engine. You've got to design the car. You've got to I mean every and then down the road you got to figure out how to mass produce it and then you've got to find a factory and then a supply chain. Forget about all that stuff. First of all, just to even do these things I'm talking about, you need lots of money. So, was it I mean, now that you had a had the prototype of that sports car, you know, now that you proved a concept, even though you weren't doing that anymore, was it a little bit easier to attract capital?

So, all right. You had to raise money just to get this started. And I know you got and how much money did you I mean, even just to get to I don't know just start I can't imagine how much money you needed. Did you start with a small amount or with 50 or 100 million?

Here's what I'm wondering. You are the main engineer, it's your company, but now you're spending most of your time trying to raise money and I mean given that you love the engineering side, every single founder I've talked to, with some exceptions, they just the raising money side's a grind. They really don't like that part. How did you feel about having to really focus on that side of the business?

I'm curious because around 2012 when you start raising this money you did something and this is interesting because there's as you as you know I think and I hope our listeners know we do a lot of research for every interview very deep research but there is a significant gap in our research between 2012 and let's say 2017 because you very intentionally went into stealth mode. You decided we're going to just not talk about what we're doing. We're not going to publicize it. We're not going to go to the media. Was that connected to what you had done in Florida where you actually did talk to the media and you said, 'Hey, we've got this awesome car. We're going to make them in Florida.' Did that inform this strategy of just going into stealth mode and not talking about it at all?

Yeah. All right. So, let's sort of dive into this stealth mode period, right? I'm trying to because this is like a good sort of four or five year period in stealth mode. So kind of tell me what's happening.

All right. As you're in stealth mode, which I wish I had some cameras in there because I think it would have been really interesting to be in. But was at any point during that time did you think, you know, this might not work out? I mean, because I'm thinking like 80-90% chance it's not going to work out.

Did you think it was going to work? Did you think that the 2% was on your side?

How did you land on this idea of adventure, of branding this product as adventure? Because, you know, the F-150, I think of Home Depot. I go to Home Depot and there's that part of the parking lot near the lumber area and it's like all big trucks, Dodge, Ford. I'm thinking contractors, right?

As you were making progress on building these prototypes, you must have gotten to a point where you were confident that you could really now produce these and you were raising money. You started to look for a plant to actually build these cars. And one became available. It was an old Mitsubishi plant in Illinois. And you bought it. You were able to buy it, but that meant I think you paid $16 million, but then you'd have to put a lot more money into getting it ready to be an electric car plant. But that meant that you were doubling down. Like now 2016, early 2017 when you buy this plant, you're essentially saying, 'We're going to make this.'

So here's what I'm wondering. That's a huge step buying that plant and it's in 2017 and it's going to take some time before you can at that point manufacture there. At this point Tesla is really starting to make an impact. Still struggling at that point, but it is making an impact. Certainly in California, people are starting to drive it and the vehicles are getting good reviews. Did you see that? Did that make you anxious like, 'Oh god, there's just so much more far ahead of us' or did you see that as like, 'Oh, this is great. They're just helping us build this market.'

All right. So you've got this factory and at this point I have to imagine it got a little bit easier, maybe a lot easier for you to start to raise significant capital in part because the economy was getting better, venture funds flush with cash. Did it become, and you're talking about billions of dollars you have to raise, not a few million. Did that start, when did you feel like it started to become easier? You didn't have to make the case as aggressively.

Yeah. You were at the LA Auto Show, I'm assuming. Tell me what the atmosphere was like. Were there lines of people to come see? I know it got a lot of attention.

When we come back in just a moment, how R.J.'s plans to get Rivian up to speed get snarled up in the supply chain. Stay with us. I'm Guy Raz and you're listening to How I Built This.

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Hey, welcome back to How I Built This. I'm Guy Roz. So, it's 2018 and after years of near radio silence, R.J. and his team debut their first two vehicles, a pickup truck and an SUV at the LA Auto Show. And because Rivian has been operating in stealth mode for like five years, it kind of seems like they've come out of nowhere. And we explained, well, we have a team of about 600 people. And they're like, well, where did a 600 person team come from? And so I think that was what surprised the world. And it wasn't as if we thought of this concept a year ago. We had gone through so many iterations, but that was the overall tone in LA. It was just curiosity around the origin, curiosity around what's next.

All right. So, you make this big splash at the auto show in 2018, and I want to fast forward here just for a moment because it's going to take you a while to get these vehicles built for actual customers. But you start to get orders like thousands and then tens of thousands of pre-orders from people who want to buy a Rivian. And then finally I think something like three years later, 2021, the first electric pickups roll off the line.

You know, we had a recent episode of this show with Max Levchin, the co-founder of PayPal and the founder of a firm. And that's exactly what motivates him, solving hard problems. That's what gets him out of bed. And when I was talking to him, I was thinking how hard the problems he's working on, how hard they are to solve. But I talked to you and I'm like, this is like at a stratospherically different level because here we are and we're talking about your company that is now public. It's worth 30, $40 billion, but whatever the market cap is today, the stock market's been a little nutty. But even with this amazing rise, this overnight success story that's I don't know 13 years in the making, right? You still have massive challenges ahead of you. For example, just making enough cars. You've got tons of people who are excited about these vehicles, have put down deposits and have ordered them. You were hoping to deliver between 20,000 and 40,000 a year in 2021. That hasn't happened. I'm not trying to criticize you for that. I'm just saying, it's an enormous challenge. So, walk me through why it's so challenging to make 20 or 30 or 40,000 of these cars a year.

At full capacity, how many trucks and SUVs can the plant produce a year in Normal, Illinois?

You have, I think, about more than 80,000 people who put deposits down on a car. Which is awesome, but I guess some of them are going to have to wait maybe two years before they see their car.

Yeah. I mean, and sometimes listeners accuse me of stressing founders out, and I don't mean to do that because you've had a lot of stress over the years, but you got to deliver 100,000 vans to Amazon by the end of this decade. That just be a little stressed out about that.

Let's talk about Tesla. They are still sort of the biggest player and the most developed electric car manufacturer in terms of their network of chargers and the technology and driverless technology. But they are also litigious and they have directed lawsuits against you guys and against another EV company for technology infringement. So this is something that you have to deal with. You are being sued by them. They contend that you hired away some employees and got some intellectual property. So are those lawsuits that actually affect your ability to do what you do or are they just distractions that you don't really worry about?

When you think about most people are driving gas and buying gas powered cars and I think there's like 250 million cars on the road in the United States alone. And 98-99% of them are powered by gasoline. Just thinking about the math there, it's going to be a while before it's all electric on the roads in the US.

You are a vegan. You don't eat any animal products. And even the car is vegan. There's a vegan leather and it's not really pushed too much. And because some people see that as a political stance, not just a personal health stance or wanting to help the environment. So do you intentionally not push that side of the car?

Because you don't want to make a car for blue state America, right? I think from what I've read, most electric car owners tend to be politically left of center which is unfortunate because in order to make it sustainable, everybody's going to want to buy these. You want to appeal to everybody. You want everyone from the most conservative to the most liberal people not even thinking about their politics when they buy a car, they just buy a great car. Is there a way, and it may be Ford's F-150 electric vehicle that does it, that kind of opens the floodgates and actually opens a market for everyone.

When you think about this path that you've taken, pretty amazing. You've got this facility and all these employees, 13,000 people, and these two products that people love and want more of, you can't make them fast enough. Multi-billion, tens of billions of dollars in value this company is now valued at. And I know you're still far away from being able to breathe, but how much of where you are today do you attribute to just the grind that you put in? And how much of it do you think has to do with luck?

When do you know you'll be successful? When can you say, 'Okay, we made it.' Are you there now?

That's R.J. Scaringe, founder and CEO of Rivian. By the way, Rivian loves to tout all the bells and whistles on its pickup, including a hidden cubby behind the rear seats that can accommodate a foldout portable camp kitchen complete with stove, sink, pots and pans, coffee maker, and grinder. And if you don't want the kitchen, the space is also big enough to fit a fully grown, stretched out human being, should you ever have a need for that.

Hey, thanks so much for listening to the show this week. If you enjoy our show and want to show your support, can you help me out and spread the word? Maybe tell a friend about How I Built This or send out a message on social media. If you want to contact the team, our email address is [email protected]. If you want to follow us on Twitter, our account is @howibuiltthis and mine is @guyraz. And on Instagram, we're @howibuiltthis and I'm @guyraz. This episode was produced by Alex Chung with music composed by Ramtin Arablouei. It was edited by Neva Grant with research help from Sam Pollson and technical assistance from Robert Rodriguez. Our production staff also includes JC Howard, Casey Herman, Liz Metzger, Carrie Thompson, Katherine Cipher, Elaine Coates, John Isabella, Chris Messini, and Carla Estz. I'm Guy Raz and you've been listening to How I Built This.