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Thursday, September 2, 2021

EV startups hunt for low-cost roads to mass production

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

But electric vehicle firms such as UK van company Arrival SA and Fisker Inc 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, Ford Motor Co 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 from its March public offering and is building two U.S. plants: one in North Carolina making vans for United Parcel Service Inc, 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.

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