Electric car startups take very different ways to overcome Tesla

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Electric car startups take very different ways to overcome Tesla

BICESTER, England - Electric car and van startups racing to become the next Tesla Inc want to avoid Elon Musk'sMusk's journey through manufacturing hell.

But electric car firms such as the 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 lend billions to fund their journey. The Rivian has raised about $10.5 billion from Amazon.com Inc, Ford Motor Co and others as it ramps up production to build electric vans, pickup trucks and SUVs.

Startups lacking Rivian's cash injections need lower paths to mass production or risk failing in the EV race - a danger highlighted repeatedly by Musk on Tesla's 27 July earnings call.

The thing that's notable is that Musk didn't go bankrupt in reaching volume production, Tesla 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 overreliance 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 more than $2 billion in a factory big enough to build 240,000 vehicles or more annually.

Arrival opted to build low-cost vehicles and buses instead - microfabrics in the infrastructure of $50 million - small factories that are light on expensive equipment. Arrival does not need paint shops - which can cost hundreds of millions of dollars - because its vans are painted with lightweight plastic composite.

Arrival plans microfactories close to local customers around the world, cutting shipping costs and hiring major workers.

The company would raise so much money to do this in the traditional way that it stops 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 South Carolina making vans for United Parcel Service Inc, its largest customer to date, plus another in North Carolina that makes buses. In addition, it is building a factory in Spain. Abelson says Arrival will announce more plants later in the year.

Arrival's first microfactory in Bicester, England, will serve as a blueprint for other plants. The absence of a paint shop is just one of the ways in which the company will steer clear of big-ticket items that traditionally define automotive production.

The startup's engineers have built the moulds for glass body panels costing thousands of dollars versus the millions needed for traditional metal dies. The engineers at Arrival have also designed their own moulding machines.

Abelson said Arrival needs about 70 robots per microfactory and the startup is buying just commonly used, generic robots from long-time automotive suppliers Kuka AG and Italy's Comau - eschewing expensive made-to-order robots. Stellantis NV is owned by automotivemaker Comau.

Robots are programmed to do double or triple duty. In a larger traditional car plant, when you need to apply adhesive at different points during assembly, you add further adhesive stations along the line to churn out a car per minute.

However, in Arrival's microfactory there will be one adhesive station and autonomous wheeled robots, designed in-house, will carry a chassis back and forth throughout the assembly process.

Going small means that Arrival can commit to 10,000 vans annually instead of 100,000, Abelson says. Each microfactory will create approximately 250 jobs, nowhere near the many thousands created by large auto plants in past.

That means if a plant doesn't work out, it is not a disaster for the local economy, Abelson said. The big hole in a car plant is closing a major hole to fill.

Electric vehicle maker Arrival’s followed a similar strategy to Canoo Inc. Tony Aquila said however Canoo will build a micro-microfactory to serve as hub for smaller future factories.

Electric Last Mile Solutions plans to make a small electric van in the United States later this year and will reassemble prefinished cars produced at an ex-GM plant in Mishawaka, Indiana, adding new seatsbelts and other safety features to meet U.S. regulations.

CEO James Taylor said this will first save hundreds of millions of dollars on stamping dies and body shop welding equipment. As revenue grows it will incorporate more American parts over time.

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Other startup are outsourcing manufacturing for cutting costs.

Founded in 2013 for US and Israeli Automotive Motors Corp, Israel-based REE Automotive Holding Inc is leaning in to agreements with American Axle and Mitsubishi Motors Corp to help build its electric platforms for delivery vehicles and people movers at scale.

The biggest challenge for new players like us is at the end of the day you need to manufacture at automotive grade and automotive scale, said REE Automotive CEO Daniel Barel. With us, everything comes already at automotive scale because it's American Axle or Mitsubishi.

REE and Fisker have also teamed with Taiwan auto supplier Magna International Inc to build their electric vehicle, while Fisker has a similar agreement with Canadian Auto supplier Foxconn Technology Co Ltd.

Contract manufacturing deals reduce upfront costs, in return for Magna or Foxconn taking a cut of revenue and potential profits. Henrik Fisker, chief executive of the EV startup that bears his name, said that the alliances should also help secure equipment and parts at a time when supply chains are snarled.

Foxconn and Magna, you know, will get all the equipment they need, said Fisker. They have the capital. They have the reputation. We are not here to build our own factories in the desert.