Amazon Buys 100,000 Electric Trucks from Rivian (Total EV SUVs, Pickups Built to Date: 0)
Talk about a startup coming out of nowhere: Amazon this week announced it’s buying 100,000 electric delivery vans from startup Rivian. Prototypes may reach Amazon next year, with deliveries from 2021 to 2024.
The Amazon order rockets Rivian from amusing curiosity (“hey, one more EV startup, like Fisker for trucks?”) to a company getting considerable attention at the November 2018 LA Auto Show (with SUV, pickup prototypes unveiled) to being taken seriously by bankers ($700 million Amazon investment in February, $500 million Ford investment in April plus announced Ford plans to use the Rivian platform in a Ford vehicle) to Player-with-a-Capital-P this week (at $100,000 a truck, Amazon’s order equals $10 billion).
This is the kind of trajectory WeWork was hoping for.
Amazon CEO Jeff Bezos revealed the electric-truck order Thursday in Washington as part an announcement that Amazon will meet the terms of the Paris climate accord a decade earlier than previously stated. Amazon now gets 40 percent of its energy from renewable resources now; that will climb to 80 percent by 2024 and 100 percent by 2030, Bezos said.
Investments in Rivian Total $1.5 Billion
Rivian’s backstory is impressive. It was founded by RJ Scarange, an RPI and MIT grad, in 2009 with initial plans — sort of like the initial plans of Elon Musk — to build an electric sports coupe. Its focus shifted in 2011 to autonomous EVs, and the company relocated to Michigan to be closer to the bulk of US-based automobile components suppliers. It then shifted toward electrification, de-emphasizing but not dumping the autonomous aspect. In 2017, Rivian bought a manufacturing plant in Normal, IL, previously used by Mitsubishi and effectively a near-production-ready facility, much as Tesla purchased the former NUMMI car plant in California.
At the end of 2017, Rivian announced its first two vehicles: a five-passenger pickup (R1T) truck and seven-passenger SUV (R1S). They were shown publicly at the November 2018 Los Angeles auto show. Rivian says they’re designed for Level 3 autonomy, meaning hands-off driving on some roads (typically interstates), but the driver must be ready to take over.
Rivian has had good luck with investors: $200 million in in 2018 from Standard Chartered Bank, $700 million in February 2019 from Amazon, $500 million from Ford in April (GM was also seeking to invest in Rivian), and $350 million this month from Cox Automotive, bringing total investments in the company to $1.5 billion. The company is currently privately held, with more than 1,000 employees and facilities also in San Jose and Irvine, CA, and in the UK, as well as Michigan and Illinois. So while it’s something of an unknown to the general car-buying public, investors and VCs know about Rivian, and they like the focus on pickups and SUVs where other automakers primarily are working on sedans, and smaller ones at that.
All this investment, plus tax abatements and credits from Normal, IL, have come on the promise that Rivian will begin shipping its SUVs and pickups. The company says that happens in 2020. Perhaps feeling the heat from a comparatively small (for now) company, Tesla is projecting a November reveal for its electric pickup.
Bezos: Same-Day Delivery Helps the Climate
Bezos says Amazon’s push to two-day, one-day and now same-day service counter-intuitively benefits the climate. Read this excerpt from USA Today’s Nathan Bonney, who covered the announcement and deserves credit for staying awake during a climate change press conference:
Bezos said he remains optimistic that the world can successfully confront climate change despite dire scientific projections of sea-level rise, environmental catastrophes, health epidemics and extreme weather. “You can invent your way out of any box – and that’s what we humans need to do right now,” he said. “I believe we’re going to do it. I’m sure we’re going to do it.”
Asked how Amazon’s move to one-day or same-day delivery affects the environment, he defended the company’s business model, saying that short delivery times require local warehouses and often can’t be done by carbon-heavy planes. “It actually turns out that as you increase the speed of delivery, you have less carbon,” he said. “That is counterintuitive.”
In other words, quick delivery times force Amazon to have lots of local warehouses, with freight delivered to the warehouse by truck, and also going out by truck, not plane, to customer homes and businesses. It also means: You have to be big to pull this off.
Our fleet is Electrifying! Thrilled to announce the order of 100,000 electric delivery vehicles – the largest order of electric delivery vehicles ever. Look out for the new vans starting in 2021. pic.twitter.com/y5qYpuy2WP
— Dave Clark (@davehclark) September 19, 2019
The above tweet is by Amazon SVP of operations Dave Clark after Bezos spoke. Click to see the entire Twitter thread, replies, and thread drift: rants about treating employees better, fast delivery being bad for the climate, attacks on President Trump, and questions on whether the vehicle “can be converted to a mini-camping van.” It’s good reading if there’s nothing going on at the office.
Amazon and the Paris Agreement
The Paris Agreement, or climate accord, is a 2015-2016 negotiation among 196 countries to limit the increase in global temperatures to 2 degrees Centigrade above pre-industrial levels. President Trump in June 2017 said the US would withdraw from the accord. That doesn’t stop US or US-headquartered global companies from following the Paris Agreement because it’s good for the company’s image, good for the globe, or that it might actually save money.
Amazon is exactly the kind of company suited to using electric vehicles. The stop-start urban/suburban nature of the majority of its business is ideal for vehicles that regenerate energy through braking. With combustion-engine vehicles, that energy is instead dissipated into as heat, which is why brakes are also called friction brakes.
Amazon has been under pressure from activists and employees (Amazon Employees for Climate Justice) to do more for the environment. Shareholders have not been quite as supportive; many want Amazon to do good, but perhaps not if it keeps AMZ share prices from their ever-upward march.
It remains to be seen how Amazon handles rural deliveries after 2024. Some 97 percent of America’s land area is rural but less than 20 percent of Americans live there and only 3 percent are on farms. Currently, all Amazon delivery vehicles use combustion engines. (Actually, Amazon’s delivery trucks now are typically UPS and some USPS trucks.) It costs Amazon more to deliver those packages out in the sticks, and an electrified truck might not make it through the day. (And if it doesn’t, where does it recharge in 30 minutes?)
One solution might be, as Amazon does for some of its rural and urban-areas deliveries today, is to hand some packages off to the US Postal Service. The mid-term solution may be to continue with combustion-engine trucks, perhaps using plug-in-hybrid drivetrains, for ex-urban deliveries. Amazon’s commitment to being carbon-neutral could involve buying offsets or using strategies that overcome any carbon emissions of combustion engine vehicles. Electric vehicles may also be part of Amazon’s plan to shift more deliveries in-house.
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