Big Technology Podcast - Rivian's CEO on Elon's Influence, Affordable EVs, and The Grid's Risky Future — With RJ Scaringe

Episode Date: November 20, 2024

RJ Scaringe is the CEO of Rivian. He joins Big Technology Podcast for a deep discussion about the state of electric vehicles and where Rivian goes from here. We go into depth about Elon Musk's role in the coming Trump administration and what Scaringe would do if he was the "first buddy." Then we talk about Rivian's affordability, its partnership with VW, its road to profitability, and more. Stay tuned for the second half where we discuss energy and the grid — and Scaringe shares a passionate stance on plug-in hybrids. --- Enjoying Big Technology Podcast? Please rate us five stars ⭐⭐⭐⭐⭐ in your podcast app of choice. Want a discount for Big Technology on Substack? Here’s 40% off for the first year: https://tinyurl.com/bigtechnology Questions? Feedback? Write to: [e-mail]

Let's talk with the CEO of Electric Carmaker Rivian 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, nuanced conversation of the tech world and beyond. Today we have one of my favorite CEOs in the tech world. Rivian CEO, RJ Scouringe, is joining us here to talk everything EVs, including what's going on with his company, his 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. Elon Musk has endorsed Donald Trump. He's, of course, the Tesla CEO and Rivian competitor. Musk is, he's been intimately involved in the transition, and he's being called the first

buddy. 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, geez. I mean, I think the broader state of just how politicized electric vehicles have become is a bit surprising. I think, you know, Tesla and Elon, having a relationship with President Trump is actually helpful to electrification. It's certainly going to provide the perspective of the importance of EVEs. So I look at that as a positive.

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, the products, the technology, certainly 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, I can't really believe that that's happening. I wouldn't have expected that. On the list of things I would have predicted a year ago, this wouldn't have been one of it. But, you know, electrification, the drive towards sustainable energy, this is,

unfortunately, this is a political issue. It should not be. This is a human issue. And having folks that are pro-EVs on both sides of the aisle is a really important thing. And so Elon taking that role, certainly I think could be helpful. Yeah. And you mentioned it could be good for EVs. And it's weird, Tesla 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 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 it from the perspective of what's best for the world. And what I truly and deeply believe is best for the world is we need to have multiple choices as a consumer.

So that means lots of different companies building highly compelling products. 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 mechanisms to help drive that are both the carrots and the six. The carrots, you know, typically are consumer facing, and we had, I've had a $7,000, $5,000 tax credit that's consumer facing. The sticks or sort of forcing mechanisms are the fines that manufacturers have to pay if they're not building vehicles that are, you know, hit certain greenhouse gas emissions standards or

hit certain levels of electrification, zero emission vehicle credits. And the credits are helpful in that they don't cost the government anything. So we actually sell our excess credits to other manufacturers, so it becomes a cost to manufacturers and a source of income for those that are building more efficient vehicles. And you have Tesla, of course, is the biggest 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 great. It's all margin. We sell the credits to other manufacturers. So I think the credits is actually a really helpful way to help direct investment within the manufacturers and ensure that, you know, in 2030-year-olds around, or 2035 roles around, that there's multiple companies that have made the investments and made the commitment to electrification. So I think any role back there is actually, it may in the short-term help car companies, but

in the long-term, you know, car companies that back off their electrification strategies are going to find themselves in a really... a challenged position as it gets out to 2030 and beyond where the pure play folks like us or Tesla have had no other choice but to become cost effective at building really compelling products. So, you know, if 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. Right. Yeah, not, but I do think mechanisms that help drive towards the future state are important. And not until you mentioned that. 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 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 Maga-Train. So we're not really sure what driving a Tesla says about you right now. What does driving a Rivian 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 Rivian owner? I love that question. So when you think about a product and then the brand that comes out of the product, I think 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 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 company in a broader way than just the capabilities of the product set. And so you've probably felt this or seen it in the way that we manifest across every touchpoint, 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 as a brand, as a company, we want to invite people into electrification. you want to invite people into new technology. You know, 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 part of that, you've seen emerge in our communities.

So our communities are very active. 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 together, they see new parts of the world together in a way that we dreamed about back in 2020, 2021. I remember we would have presentations and we'd say,

boy, if we do this really well and we created 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 gonna span age demographics, it's gonna span political beliefs, it's gonna span religious beliefs,

and 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 as a car buyer is the person that's going to buy the Rivian. Yeah, I think we do. I think a lot of our customers have more of a lending towards caring about sustainability in different ways. But the thing is, one thing that I'm noticing.

We don't want to try to drive a fork between people because of that. For sure. And the one thing that I'm noticing, though, is also that someone who drives Rivian today has to be well off. right, the cars start, I think, around $70,000. Yeah. And 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. Yeah, yeah.

And those are going to roll off 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, I love, I'm glad you talked about this. The launch product, really think of as a flagship. It's a sibling-set truck in 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. It's cool. 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 gives it a go. yeah yeah and by the way for the for this has the fans uh i'm happy to have elan on the show if he wants to come on i'm going to drive a cyber truck so this is not a stick it to elan 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 the r1 product line has been extremely successful the r1s is actually the best selling premium SUV in the state of California, not the best-selling premium electric SUV, the best-selling premium SUV period in California. Across the whole U.S., it's the best-selling premium electric vehicle. So the product and the brand have really resonated with folks that 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 pick up. So it's a really nice broad funnel of interest that we've drawn in. So the goal, of course, with the lower price product is to take that market share success that we've had and apply it to a much, much larger audience with the price point that with R2 starts at 45 and then with R3 starts considerably lower than that. 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 meaningfully lower.

And of course, the goal is 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 high end is, it shouldn't be surprising. With low volumes and building out scale, we wanted to have a product that had enough price that allowed us to build scale, build capabilities, and then put us in a position to then launch a very high volume product with a lot more capacity and much more built-out supply chain for our, you know, for our next product. Okay.

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 a $5.8 billion 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 part. partner with VW. One of the things that you mentioned earlier was that you want to make sure that there's a lot of VVs 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 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 and this complexity certainly takes time but you know Volkswagen as a group is the second largest vehicle manufacturer in the world very close to the largest and in terms of size in terms of number of vehicles and you know the

reason I started Rivian was to have as much impact as possible and to help drive and accelerate the transition to renewable energy and sustainable transportation. So the opportunity to take our technology and help Volksman Group create products that are highly compelling and that will pull more customers in across a variety different form factors, price points, brands, markets, you know, across the planet was really, really enticing and exciting. And of course, the technology we developed is really strong. And it's, you know, 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 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 $5.8 billion deal reflects just the scale of this. 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 to build architectural dependency around our our hardware stacks, that's the ECUs and compute platforms. And then the software platforms that we built across their whole brand portfolio is a really big deal. So 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? 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, drive 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, it 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 not like a choice. It's so fundamental to the future of transportation. So we've, 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 in-house.

So we have 55 megapixels of cameras on our vehicle. It's the largest number of megapixels outside of China. We have five radars. And then we have 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 requires a closed-loop, like heavy flywheel of data, where your data coming in off the vehicles,

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 H-100s and it's a lot of compute, 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 rivion, you put it on the highway, it will drive itself on the highway. It can change lanes in the highway. but it doesn't leave that when you leave the highway you retake control and so what will happen for us is we'll continue to grow and expand the number of roads and the types of roads that the vehicle can operate on okay so back back to vW you're going to be providing all this computer work 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 rivian system yeah so let me first describe how with the exception of us and tesla of what a vehicle network architecture looks like. And it's useful to just have a little bit of history on it. So if you go back to the early 1960s,

cars didn't have computers in them. They were completely mechanical. 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 systems, 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 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 placed 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 air conditioning system. But we basically witnessed this massive proliferation of a highly disorganized, highly function-based 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 to make an update to very simple things. So take, for example, the sequence of what happens you walk up to the car and it unlocks. You have an antenna 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 to 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's 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 a number of zonal-based or 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. lot of things. And so that's what we've, that's what we've built. And so to your question, if you're driving a Porsche or an Audi a few years from now, it will have Rivian computers in it. And

those Rivian computers will be running Rivian software. But the way it drives, the what it looks like on the screen. Internal combustion versus electric. Yeah. 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 have. expand the deal beyond electronics, but we haven't, we haven't said anything publicly. But I'd say this, we've, we've engaged. That sounds like you haven't had that, that conversation. There's lots of ways.

We've had all kinds of conversations with different manufacturers over the years. And I couldn't, I couldn't be more excited about the potential of what, what we're building with Volkswagen. Volkswagen, across their brands. So there's, there's certainly potential there. So what do you get from them outside of money? So one of the challenges that we have in building and growing our business 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 chip set is being used across Porsche, Audi, Volkswagen, Bentley, Scoda, a handful of brands, 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 costs across many different products. So it makes a lot of economic sense or 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 independent?

Yeah, well, again, to be clear, this isn't, we're not like the things that customers will experience, they'll experience like better over the year updates, but they're not going to, if you're on an Audi, you're not going to see Rivian parts. And if you're in a, you know, if you're in a Rivian, you're not going to see Audi parts. You know, it's really at the software level. So I think the way I look at it is 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 as a technology company.

And clearly, as demonstrated by this deal, we're selling technology. So we have 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. Just given the state of the Rivian 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. 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 Rivian. There have been multiple quarters of billion dollar losses. There was a billion, 1.5 billion Q4 or 2023.

We're talking in Q4, 2024, $5.4 billion lost last year. You're losing $40,000 per car today. How sustainable is that? And how do you plan to flip that? Because 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. Yeah, of course.

So I guess there's two things to think about here. So the first is there's a level of R&D. expense and G&A OPEX that are necessary to build a business like what we're building and to be world-class and leading in terms of technology so that and that means there's a there's a caloric board burn of number of people necessary to develop that much technology and today 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, 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 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, you know, thousands of people. It's very expensive. But in the beginning, it's all cost. It's all OPEX. But over time, it actually becomes very profitable. And once it's profitable, it becomes a really wonderful tailwind. And, you know, Tesla is a great example. It's one of the big tail ones they have is they have a great, highly profitable service arm. 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 a 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 review 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 have to answer the full question first, but the part of it is the vehicles themselves have to start to make money and there's a fixed cost element to that. But

the efficiency of how we're developing technology is still very high. So we've built really something that no one else has built other than Tesla with 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, I would argue, without question, like the best delivery. I see it all over the place in 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 always highly circumstantial idiosyncratic around what's the cost

of a service event, and so we track this all really closely. There's certainly some repairs that are more expensive for us by virtue of us not having a lot of service infrastructure in place. So if you break down in the middle of nowhere or in an accident that's very far from Rivian location, just because there's no infrastructure there to support, 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, let's say, being 100 or 200 and

300 miles 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 broader question, which is, you know, when do we, when do we start to make money? A really core part of this is getting our cost a good sold to be meaningfully below what we're selling our vehicles for and this is a hard sometimes a hard number to fully appreciate the fixed cost versus the variable cost aspect and our CFO and I try to talk to this a lot in our earnings calls but um just the the baseline of running 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 Illinois, our normal plant, will have 250,000, 250,000 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, 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 business. And really key to this is taking the bill of material costs. That's 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 bill of materials for what 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 Erivian was. We didn't have a plant. 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 as significant, what I'd characterize as a risk premium. And we rationalized it by saying, well, to launch, we have to just sort of hold our nose and take the fact that we can't negotiate any better pricing today. And the logic was, once we launched, the success of the product 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. We threw one of the worst crises sort of in the history of the honor of the 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 other premiums. So it was just

an absolute bare-knuckle fight. And hindsight is 2020, but one of the challenges that compounded all of that is we launched three products at the same time. We launch 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 we're asking us for more money. So fast forward to today, we had a major shutdown of the plant 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 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 come in over the course of 2025 and even into 2026. But all that together is leading to, you know, I put it like this to my dad a couple of weeks. So I've never been more confident in the business. The long term of R2 and what that represents and the market desire for a brand of products that's unique 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 brought up this tweet that Elon Musk had that you guys would be bankrupt within six quarters and you

kind of threw up your hands. But suffice it to say, you'll be around to ship that R2 in 2026? Yeah. I mean, just look at the numbers on it. We've got just under $7 billion in cash. With the Volkswagen deal, another $5.8 billion coming in, you've said a couple of times we have debt from Vogue. Just to clear, we've had $2.3 billion coming from Volkswagen to date. There's a few additional tranches of the capital that come in. Actually, the last tranche is actually the billion dollars in debt.

So we take equity and then licensing fees first. But we have in total that 5.8 plus roughly 6.7. And so what we've guided to publicly and have, you know, communicate 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. A couple of questions about electrification for you and the environment. Also in that interview, you mentioned that the grid today is 60% fossil fuel, 40% renewable. nuclear. And the move away from fossil fuels towards this grid that is getting more sustainable 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 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 EV versus an internal internal combustion engine because does it matter so there's there's a few things I want to say here is this is

There's a philosophical point, which is we are, as a society, we as a society have built a certain style of living, and we've built this massive base of technology and a whole fabric 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 to be in different places and different locations

having a conversation, among many other things that allows us to do. But it's come all of it. come off the back of fossil fuels. And so while our parents, grandparents, and great-grandparents are the generations that built this world, 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 on an infinitely deep well of oil or infinitely a deep mine of coal. It is something that you could argue is 100 years, maybe it's 125 years, but we will absolutely, without changing and changes to our vagaries,

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 again, it's like truly, fully, 100% indisputable that we have to move off of it. So the philosophical view that I carry is moving off it later and saying, oh, we'll let the next generation deal with this, or just we'll run out of it

and we're running a brick wall, and then the lights will go off. You know, 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 coal. We're reversing it really quickly. Like the difference in time skills is orders of magnitude.

And so there's no practical reason that I can identify at all to delay the transition. So to make 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 in things. And so from an economic point of view, we want to be on that future state technology. Not doing that would be saying in 1910, let's invest in horse production capacity. So that's like the economic argument is let's be part of the future. global economy. The climate argument is there's lots of models that look at when's the point

in our return. Even past the point in our return, more carbon is still worse. So we're already experiencing like real time, even today, a worse world in terms of climate patterns, weather patterns than 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 urgent that we do everything we can to create new products, new technologies across everything. It's not like, Rivian 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 wouldn't 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 v vs that are rising you have a i 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 grid and 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 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, doesn't have, you know, effective ways from, policy point of view you've been managing things like net metering we have buildings that are leaking air and 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 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 the 18, late 1800s is only going to happen once. And the turn off of fossil fuels is only going to happen once. And the turn on of renewable energy and

carbon for 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 coincidence, 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 a history book 2,000 years from now, which is the end of the fossil fuel error, 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 people today

to be born and alive at this hypercritical moment? So, yeah, none of the, 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'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 think that I was at a dinner last night with a bunch of entrepreneurs that are building different types of businesses in essentially these two spaces, either energy or AI.

And the level of excitement and enthusiasm to go create this future state that you see in other CEOs or the founders, but you see it across the business, is inspiring. You know, whenever I'm dealing with a really hard problem within Rivian, one of the things I do that's really effective is 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, bust in their tail to try to solve hard problems within Rivian, you know, it's inspiring. And there's thousands and thousands of people like this across the world that 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. So I have a lot of confidence in that, but it's not easy. It's not going to walk in the park. 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, well, you referenced something I said at the Wall Street Journal discussion, or New York Times discussion. 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 percent is renewable. 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 do think nuclear is going to play a role. you joked about it, but with the growth of AI 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 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? Hey, everyone. Let me tell you about the Hustle Daily Show, a podcast filled with business, tech news, and original stories to keep you in the loop on what's trending. More than 2 million professionals

read The Hustle's daily email for its irreverent and informative takes on business and tech news. Now, they have a daily podcast called The Hustle Daily Show, where their team of writers break down the biggest business headlines in 15 minutes or less and explain why you should care about them. So, search for The Hustle Daily Show and your favorite podcast app, like the one you're using right now. And we're back here on Big Technology Podcast with Rivian CEO, RJ Scouringe. RJ, explain to me how China has been able to develop $10,000 electric vehicles that apparently run pretty well. Is it the fact 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 some of these EVs you're referring to in the $10,000 RVs. I've been in them. 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 you. And I'd like to give that a shot. In a lot of cases, yeah, in a lot of cases, that's what's happening. The other thing is, of course, products end up everywhere. So, like, there's lots of rivians that are in China because companies will buy them to benchmark them here in the U.S., you know, a lot of the cars that are both 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 there's a whole industry of people that support any business. Yeah, yeah.

Okay, so you've ridden them. What do you think? Well, I think, first and foremost, it's important that they exist. It's important that we have choices across lots of price points. And to achieve that, you need a few things. You need really heavy cost focus at the design level. So the vehicles are engineered for cost. You need to have supply chains that are really robust and efficient.

You, of course, benefit in the case of China from a much lower cost labor rate than what we have in the Western world, certainly in the United States. And then in the case of China, you do have, just you have this in US, but to a more, you know, to a more elevated level, you have incentives that are happening at the, you know, 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. 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. all, you know, are not going to be permanent, but the efficiencies of design and some of the efficiencies that an EVF forwards in terms of architectural layout will start to play out as you get to lower cost batteries. You know, other than the battery in electric vehicle is actually a lot

cheaper to build. It's cheaper to maintain. So raw material cost, battery cell costs, 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 think, there's nothing magic. There's not like, aha, there's this. Flex capacity. Yeah, there's a, you can see a cost focus. So part consolidation, fastener elimination,

part or feature elimination. So, you know, the vehicles will reduce the number of features in the vehicle. Range is a big one. So adjusting the range down to be not a three, 400 mile range vehicle, but maybe 150 or 200 mile range. 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, you know, they're not, it's not like a black art. It's a well-understood, very trackable, very measurable set of decisions that are made.

On the battery side, 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 U.S. thinking about Apple. They had an autonomous driving program that didn't go anywhere. Maybe it was electric, maybe not. But we haven't really had that happen in the U.S. The interesting thing about the development of a vehicle, especially in modern sense, there's batteries, there's motors.

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 do have, you know, do have a valuable 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, Rivian is more software engineers than any other type of engineer, you know, we have more software engineers and mechanical engineers. And so the, the reality is the amount of tech that's going into electronics, compute platforms and software is disproportionately high relative to what it was let's say 10 years ago or

15 years ago. It's just a step change and that's only going to become more of the case as time goes on. Can I ask you one more question about the battery? It 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

you know, ends up if you're going to buy lithium, going to be, you might end up running into like some human rights issues. What do you think about that? Well, first, a significant misconception and piece of misinformation in the world is that batteries like burn through and use up the materials that are in them. So like lithium gets consumed. That's not the case. So 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 closed-loop system. And the value of the batteries is too high to even imagine a world in which, you know, they're just like thrown away.

So there's no world in which you're like have landfills full of lithium ion batteries. It'd be like throwing away boxes of gold necklaces. So that's the first point is it will absolutely end up with a closed loop really high rate of recycling. 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 of lead acid batteries are on 99%. So I would say unequivocally, the recycling rate in lithium ion batteries will be 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 there's a lot of places that have lithium. Most of them aren't in the United States, so it does require trade with foreign entities. And fortunately, with lithium, 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 there's not a lot of places to get cobalt. It is a more challenging supply chain from a labor practice's point of view. But from a technology point of view, most of the most of you. Most companies, certainly Rivian included, are working to engineer cobalt out of the batteries. I don't think cobalt will be a long-term part of battery chemistry strategy. And so we'll end up using materials that are more easily accessible, 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 two and a half decades with the move to lithium-mine 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 steel or aluminum do, but it'll get there. And I think you'll start to see this in some of the other materials as well. I've been debating our whole conversation whether I should ask you a question about plug-in hybrids. And I've been saying, well, it's boring.

But I'm going to close on it because I do think that the momentum that plug-in hybrids have had in the United States is quite interesting, and it's worth noting and getting your thoughts on. So this is from the journal. The plug-in hybrid car starts to win over buyers, and basically the way these work is they run on battery for 20 to 40 miles, and they revert to a gas engine. And the journal story says the number of plug-in hybrid models on sale in the U.S. 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 very short-term perspective. So, Rivian would never consider building a plug-in hybrid. I think it's a pure

throwaway technology. Just for listeners, the way that R.J. said that you should have seen the facial expressions. This is a very clear statement here. No plug-in hybrids. Well, I think it's a distracting intermediate a technology that I it it's unfortunate because I think it's both it yes I can

understand for a consumer 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 terminal end state you know and I draw the analogy if you remember when we went from CD players to play music to playing music off of a you know off of a Salt State Drive in between that there were a bunch of things like there were these little mini disc players they could hold like 70 songs and all the companies that built those little things as many 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 a lot of useless technology was developed and held one of those you're like god this is the future i don't need anything else and then yes i look at the iphone hybrids is yeah plug and hybrids are sort of that it's like 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 they can be more profitable in the short term. But I do really deeply hope that manufacturers across the globe invest enough resources and electrification so they're not caught off sides when 2030, 2032 rolls around 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 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 Rivian within it. That's the one I'm looking forward to the most. Great to see you. Great to speak to you.

As always. Thanks for coming on the show. Great. Good to see as well. Thanks again. All, everybody. Thank you for listening. You can tune in to my test drive of the latest Rivian vehicles on my YouTube

channel also if you're listening on or watching on spotify yes we do video there now as well so 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 break down the week's news thanks again and we'll see you next time on big technology podcast