The retail giant Amazon announced Thursday it plans to buy 100,000 electric delivery vehicles from Rivian as part of a larger effort to reduce its carbon footprint.
The first Rivian-made vans will be delivering packages to customers in 2021, Amazon founder and CEO Jeff Bezos said at the National Press Club in Washington, D.C. Amazon plans to have 10,000 of the new electric vehicles on the road as early as 2022 and all 100,000 vehicles on the road by 2030.
The vans will be made at Rivian's manufacturing plant in Normal, said Rivian spokesperson Amy Mast.
"Such an exciting day!" Rivian founder and CEO RJ Scaringe said on Twitter.
The announcement is part of Amazon’s pledge to be net zero carbon by 2040, a decade ahead of the Paris Accord’s goal of 2050. Amazon is the first signatory to The Climate Pledge.
“We’re done being in the middle of the herd on this issue. We’ve decided to use our size and scale to make a difference,” Bezos said in a statement. “If a company with as much physical infrastructure as Amazon—which delivers more than 10 billion items a year—can meet the Paris Agreement 10 years early, then any company can.”
The vehicles will save 4 million metric tons of carbon per year by 2030, Amazon said.
“When you make a pledge like The Climate Pledge, it will drive the economy to start to build products and services that these large companies need to meet those commitments," Bezos said. "This is why we invested in Rivian. ... That's part of what I'm so excited about.”
Amazon has been moving more and more of its logistics operation in-house, seen most recently in its high-profile breakup with FedEx. Shifting toward a battery-powered van fleet makes sense because they’re often driving at low speeds, idling, and operating in limited geographic areas with lots of stops and starts, said Sam Abuelsamid, principal analyst at Navigant Research in Detroit.
“The vehicles are going to be more expensive upfront but compared to the fuel that’s used in these types of vehicles, they’ll potentially save an enormous amount of money,” Abuelsamid said.
Manufacturing Plant Impact
Earlier this year Amazon announced it was leading a $700 million investment in Rivian. But it was unclear then what their partnership would entail.
Now we know. On Thursday Amazon clarified that its own investment in Rivian was $440 million. The 100,000-van order is separate from that investment, Mast said.
Amazon also released photos of the new electric delivery van, which features a “Powered by Rivian” label. It's different from Rivian's R1T pickup and R1S sport utility “adventure” vehicles that are aimed at the consumer market. Those R1 models were announced last fall at the LA Auto Show.
Mast said the Amazon order will not delay production of the R1 models. Production of those vehicles will begin in 2020 as scheduled, Mast said.
The vehicles will share many of the same components.
"These vehicles leverage much of the technology developed for the R1T and R1S, including battery, powertrain, thermal, controls, electrical network and connectivity platform," Rivian said in a statement. "This commonality will drive meaningful scale benefits across all Rivian-manufactured vehicles. The vehicle body and interior design, application software and suspension have been developed specifically for Amazon’s last-mile delivery operations, ensuring these vehicles fit seamlessly into the Amazon logistics network.”
The Normal plant’s production capacity is around 250,000 vehicles per year. The Michigan-based Rivian previously said it planned to build 20,000 to 25,000 vehicles in Normal in the first two years, then ramp up to as many as 50,000 vehicles annually. It’s unclear how Thursday’s announcement affects those figures.
“This works out great for Rivian, because now they have a big commitment for vehicles from that plant. You want to maximize the utilization of a factory like that to get your economies of scale,” Abuelsamid said. “That’s a big chunk of that capacity they’ll be utilizing and potentially have the ability to same sort of vehicle for other customers as well.”
Rivian’s “skateboard” platform opens up many lines of new business, even beyond the multimillion dollar investments from Amazon, Ford, and Cox Automotive, said Stephanie Brinley, principal automotive analyst at IHS Markit.
“Amazon and Ford’s interest in (Rivian) suggests there are other major companies out there that will look at their model and look at what they’ve had the opportunity to see the vehicles, and whatever due diligence they’ve had, and they’ve come away with it and said we believe this company has the potential to be successful.”
Rivian has promised to hire 1,000 full-time workers in Normal by 2024. Today it has around 130, Mast said. That's more than the 75 it's required to have by Dec. 31, 2019, to receive its local property tax breaks.
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