Can Rivian Meet Amazon’s Demand For EVs? A Cautionary Tale For The Automotive Industry

Major corporations are joining consumers in the shift towards electric vehicles. Last week, Amazon launched its first fleet of Rivian electric delivery vans after several years of planning and testing. However, Rivian continues to face difficulties in production, slowing the rollout of the vehicles. While the possibility of Amazon transitioning to electric vehicles signals a massive shift in the industry, Rivian’s inability to keep up with demand offers insight into the complexities of the automotive supply chain today. 

A Valuable (But Risky) Opportunity 

In 2019, Amazon invested in Rivian and ordered 100,000 electric delivery vans from the company as part of a broader pledge to achieve carbon neutrality by 2040. This initiative coincided with Amazon’s effort to move the delivery process in-house; by the end of 2021, Amazon had nearly 200,000 of its own fuel-burning delivery vans on the roads. The magnitude of Amazon’s operations created a tremendous opportunity for the up-and-coming Rivian to make a name for itself and make a splash in the commercial EV space.

Despite this, there were also downsides to the project, particularly in terms of its scope. Over the past few years, the automotive industry as a whole has been plagued with supply and production problems, all of which have especially affected emerging companies like Rivian, which lack the infrastructure and connections to weather major disruptions. 

From semiconductor shortages to unexpected pauses in production, and the challenges of juggling multiple assembly lines for the company’s three vehicle models, Rivian continues to struggle as they seek to get off the ground and keep up with demand.

Falling Short of Targets, Amazon is Forced to Outsource 

As a result of these ongoing supply hurdles, Rivian has had to repeatedly reassess production projections and timelines over the past few years. Initially, when Amazon placed its order in 2019, Rivian estimated that they would have 10,000 vehicles on the road by 2022. 

Since then, Rivian has fallen short of their initial targets; this year, the company has only shipped a few hundred units, and Amazon estimates that they will have received just a few thousand vans by the end of the year. While Rivian’s factory is capable of producing 150,000 vehicles per year in ideal conditions, it is currently operating at just 1/6th of its capacity.

Rivian has also been affected by external factors such as increasing competition and political developments. Rivian’s supply and manufacturing issues have threatened the company’s dominance of the commercial EV industry. 

Faced with an uncertain and longer-than-expected timeline, Amazon has begun outsourcing EV production beyond Rivian to companies such as Stellantis, Daimler, and Mahindra, thus eating away at Rivian’s market share. 

Ford and Chevrolet have introduced electric pickup truck models that directly compete with Rivian’s R1T model, which was previously the first of its kind to the market. These established powerhouses in the automotive industry have been less vulnerable to the supply chain disruptions that have hindered Rivian’s progress.

Geopolitical Factors Further Complicate Matters 

International political and economic conditions have also contributed to Rivian’s failure to meet production expectations. Russia is the world’s third largest producer of nickel, a raw material integral to the batteries that power electric vehicles. 

The ongoing conflict in Ukraine and the corresponding sanctions on Russia have led to a spike in nickel prices, forcing Rivian to pivot towards a nickel-free battery in its vans for Amazon. Meanwhile, amid plummeting stocks, rampant inflation, and the possibility of a recession on the horizon, Rivian has faced yet another obstacle, laying off hundreds of employees last week as a result.

A Cautionary Tale For Automakers Everywhere 

Rivian’s trajectory over the past few years is emblematic of several trends across the automotive industry. Spearheaded by Amazon, Rivian’s success in defining a new niche—the commercial EV space—demonstrates the ever-increasing popularity and viability of electric vehicles, and the technology’s ability to disrupt established industries beyond a consumer audience. 

Yet even with this groundbreaking achievement, no automaker, including Rivian, has been immune to the supply issues stemming from shortages of parts, the COVID pandemic, and rising costs of raw materials. Experts suggest that the coming months and years may continue to be volatile with the looming threat of a potential recession. In light of these uncertain conditions, it is critical, therefore, that companies in the automotive industry take steps to ensure resilience in their supply chains.

Supplyframe purpose-built solutions and expertise in the electronics industry make us a valuable partner for automotive leaders. Learn more about our solutions for the automotive industry today!