Rivian Automotive, Inc. (RIVN) Earnings Call Transcript & Summary

Our next company, which is Rivian, once again at this conference, this time virtually. RJ participated in the conference with us 2 years ago. We do have, as you can see here, RJ Scaringe, the company's Chairman and CEO. So RJ, thanks for joining us.

Yes. Thanks, Rod. It's great to be with you.

So I wanted to just to level set everybody, I think as most people who are on this call know, Rivian started production of the R1T pickup truck, their first big electric delivery van, for Amazon, and also possibly a few R1S SUV starting in the fourth quarter of last year. The reviews that we've seen on the first consumer product have been terrific. Motor Trend said that the R1T was the most remarkable pickup that they've ever driven. And I've seen dozens of other reviews that essentially all say the same thing. So people really love it. And it feels like right now, you really don't have to worry about demand for the product. Of course, that window won't stay open forever, but this is looking very promising at this point. So I'm looking forward to talking to you a little bit about what's been happening and the launch. So let's just dive right into things. You started delivering them not only to Rivian employees but also to civilians who've been lucky enough to get them so far. So could you talk a little bit about how that's gone so far? What's the consumer feedback now that it's getting into people's hands? And just what's the honest sort of where improvements need to be made as well.

Sure, sure. I mean it's been perhaps one of the most rewarding parts of building the products is seeing the reaction from customers and seeing the places they're going and the things they're doing, the reactions of their kids, seeing, of course, [ to launch ] on my own kids' eyes, climbing from the gear, [indiscernible] climbing to the front trunk. But what we found is people are really reacting to all the little details that we spent a lot of time on, everything from the way the fabrics in the seat are integrated to the open grain wood and the IP, to the software integration of the platform, of course, the driving dynamics has been great response. And for the early customers, they've also have to just see the product get better every 2 weeks with new software releases. And it's really a new way of looking at a product where the expectation, and what we hope we help train customers to expect, is that the vehicle doesn't age with time, it gets better with time. So that's new features, that's improved features, improved usability. So relative to, let's say, the vehicles that as you referenced, MotorTrend drove months back, so for the vehicle you drive today, it's a very different experience. It's enhanced, it's improved. We have a really cool software update dropping this next week, with a whole bunch of features that are going to be coming with it. So that's one of the things that we found that customers are really reacting to and then they get hungry for it. So when the next release, what's in the next release. So our -- all of our guys that we call our, essentially the folks who interact with customers are getting lots of questions from existing customers saying, what's next? What feature is going to be in the next drop, which has been a lot of fun.

So is the -- whenever a new product launches, there are always -- I wouldn't call them defects, but there's always areas for improvement. Some of them are physical or engineering, and some of them are software related. Are you finding that most of the things that you have to tweak in the vehicle at this point, are they largely on the software side, or just this kind of a combination?

Well, the software side will continue to evolve and grow. So our self-driving platform continues to be enhanced. We'll add features to it. Some of the applications that are built into the user experience and what you see in the same vehicle, by definition, they'll be different in 6 months from today, they'll be different 6 months later from that. So that was really the intent of how we architected the vehicle. And the reason we vertically integrated the controls, the electronics, the software stack, all of that was built in-house. But with regards to some of the physical aspects, I mean, there's lots of little tweaks that we find, and I'd give you just a good example of one. On the top of the tailgate, there is a cover piece that sits in the first -- I don't know, first 2 months, 2.5 months of production, it was a single piece. And we changed the design, actually, the rubber insert, so that if you're stacking a surf board or a board on that surface that has really sort of non-slippery surface. So that was just a running change. And there's a whole lot of little treats like that. They're very subtle. You wouldn't necessarily even pick up on them unless I pointed them out. But the goal is we've seen vehicles in the field and we notice things, we have the opportunity to continually drive those changes in the products.

That's great. And it's very different, I think, than what most automakers do, which is come out with a product, and that's basically it for the first 5 or 6 years, or the next 5 or 6 years on a platform. Have you also delivered the EDVs, the delivery vans to Amazon at this point?

The Amazon program is really unique because the way in which this was developed was different than, let's say, the consumer products because we have the customer with us for the full journey, so to speak. So from the earliest sketches to the product development cycles to early deals to then validation prototypes, they've been with us through that process. And there's a key element. We actually launched a fleet that we'll be thinking of as a pilot fleet about a year ago. And that pilot fleet of about 25 vehicles, there are pictures of these showing up delivering packages across the country. But the purpose of that was to provide really strong feedback groups from learning. And of course, some of those are physical, so where we put grab handles and what the seating surface feels like, but also a lot of it is software, and software around the HVAC control, software around the powered bulkhead door. Does that open and close when the vehicle isn't parked, or do they open and close when the emergency blinkers are hit? So where we are today with that program is we are ramping production, getting the production systems working, but we're also finalizing with -- in close conjunction with Amazon, the software that's going to be released so that the vehicles are ready to go out and scale. And it's just -- again, it's a unique situation where we can make sure that the first vehicles that are deployed at scale really fully embody everything that we hope they are in terms of driving efficiency and making the operations more efficient for Amazon.

I was hoping you can maybe talk a little bit about making all of these vehicles. So there's a lot of interest in what's happening behind the scenes at your plant in normal. What's happening in the supply chain? We've been talking about supply chain issues, I think, without nonstop here for the past 2 years. But we know bigger production started a little slower than you expected. You had expected by the end of the year to produce about 1,200 vehicles, you delivered around 1,000. I've seen these kinds of variances pretty routinely during launches. We've seen them at Tesla, we've seen them at Ford, I've seen them at others. But obviously, you're under a microscope here with the first product launch. So maybe to the extent that you can, talk to us about what's really going on since you last spoke? What's looking good? What's been more challenging kind of within the 4 walls of your plants and suppliers?

Sure. I guess just as a little bit of backdrop. Our production plan, you sort of think of it as a single plant, but really, there's multiple lines within the plant. And to oversimplify it, we have a few shared operations like the paint shop, like our stamping operations. But when it comes to what you normally think of in terms of vehicle production, the general assembly or final assembly, there's 2 completely separate lines, one for our commercial vehicles and one for the consumer vehicles. In the case of the consumer vehicles, these are R1- based platform vehicles. So today, it's R1T and R1S. So as you think about bringing up the facility, we're actually launching all 3 of those programs essentially at the same time, at a very similar time. So the R1 team was the first to start production in the fall. And as you described, it ramps through the end of the year a little slower than we had hoped for a variety of [ issues ]. And then R1S, we had the first 2 produced late last year, and that product is now slowly ramping up as we continue doing production for all the R1 products, R1T and R1S. And then in parallel to that, and on a separate line from that is the EDV, as you described a few moments ago. So with that said, what's happened since our last earnings call, whereas we talked about in the earnings call the combined challenges of supply chain as well as some of the internal challenges with ramping our battery module production as well as the overall vehicle operation. Where things are today is that the plant is really starting to ramp nicely where it sits out in front of our supply chain. And the constraint today has shifted from what we're capable of producing to really how rapidly all of our suppliers can ramp. And this probably isn't coming in too much of a surprise given the challenges that are well understood and documented, of course, within the semiconductor space, but I'd say even more broadly across the entirety of the supply base. So this is the vast majority, which I think about [indiscernible] of effort is making sure our suppliers are ramping, understanding if they're not ramping how we can help them. And it is challenging. We have a data from the buyer, we're not dealing with some type of component. We have several today that are red items, so to speak, that are at risk of slowing the line down or [indiscernible] the line stoppages. And so the result -- or the output of that is we have teams that go on site, our quality teams, our ramp teams that go out to support, making sure we stay in front of that as we day-over-day work to increase the volume at these plants and we need to make sure we're doing the same at our suppliers.

So what -- just maybe dive a little bit deeper into that situation. Because you give the impression that sometimes, automakers, they can point to suppliers and there's things that are beyond their control. Are there things that you can actually do like build shy strategy where you don't -- you build a vehicle and it's missing a [ plastic trim ] or I don't know how deep this really goes. But are there things that you can do to kind of mitigate the problem so that you can get to the kind of volumes that you want to get to?

Yes. Absolutely. And it's very much dependent on the area in the vehicle. So if it's, let's say, a plastic trim part, it's a very straightforward process to build the vehicles and collect them at end of line and add that trim part after the plastic trim part's availability improves. On other components that may be nested deeper in the vehicle, they may actually stop the line. And the most painful among those are within the semiconductor space. So some of the sort of the core platforms that are necessary to run the vehicle, necessary to have the vehicle go through end-of-line testing, if those are delayed or those are constrained, that in turn will constrain our production. So with that said, on something like, I'd say, a plastic part or something like an extrusion and sheet part, in most cases, we'll deploy resources to go to the suppliers to do whatever it takes, inclusive of supporting them on ramping their teams, to supporting them in hiring, supporting them even in some cases, where we put our team members on site to help run their lines where they've had labor challenges or ramp-up challenges. In the case of semiconductors, there's far less than we can do. Unfortunately, we're not able to go in and run the line, so to speak, or to go in and really materially move to drive progress into the system because it's such a bigger, more challenging constraint. So in that case, it's spending -- consists of spending a lot of time with our various semiconductor suppliers, making sure that they understand the importance to us and then making sure that we're building those relationships with longevity in mind such that we can secure appropriate allocation.

Can you maybe talk a little bit about just building visibility into that? So like, we ran a quick calculation based on your output from December 15 through the end of the year, and we just used a 6-day work week and estimated that you're doing 30 vehicles a day, something like that. And you'll eventually need to get that from 30 to 60, which is over 4,000 units a quarter, and then, eventually, this plant is capable of doing 25,000 or more. So just running all of this, you've got, I think, at least 400 suppliers. There's a lot going on in all these different places. But how do you kind of get your head around the whole entirety of the value chain? And when do you think you'll start to get to a point where you're sort of keeping pace with the supply chain and the plant brand?

I mean, Rod, you said it, it's an important point. There's 400 -- roughly 400 suppliers providing approximately 2,000 components or systems in the vehicle. And the challenges for missing a single part, that vehicle can be delivered. So it's very much the challenge of managing the small minority of problem areas, meaning most of the systems in the vehicles are ramping. So it's not like we're talking about 90% of our supply chain is challenged. We're talking about 2% or 3% of our supply chain is challenged. So the advantage of that is that it means we can focus our effort on the small number of suppliers that are having ramp issues, that are having production constraints. And as I described in the suppliers that we can help with or in the suppliers that are easy to resource like a machine resource, that it's relatively commoditized. [indiscernible] a machine that's one supplier, it's very easy to have a second supplier brought up to also perform that machining operations. So those, we're able to really stay in front of. And the way we do that is, as you'd expect, we have a daily dashboard, a weekly dashboard, a monthly dashboard that essentially gives us visibility into where we're going to have bottlenecks as we continue to ramp. As you said, certainly higher than our exit velocity into 2021. So with that said, the most challenging and, I would say, more painful are in the semiconductor space because it's a game of allocation and dividing allocation with other OEMs or other applications in many cases. One of the advantages we have here, while we're not able to necessarily go in and ramp those chip suppliers, we can have flexibility because we've designed all of our compute platforms, and these are designed in-house. So there's some level of flexibility where we can replace a certain chipset with a different chipset that may have less of a constraint. And so we're certainly doing that. So -- and a lot of these changes we're making are not necessarily to unlock constraints this week or this month, but they're addressing a constraint that we see on the horizon of, let's say, Q2 or Q3. So we're very much looking at the full ramp through the duration of this year and, of course, into 2023 and making structural or technical changes at the board level to facilitate that ramp. And with that said, I mean, this is -- I have a daily call, this is like -- this is -- my day starts with this conversation, which is one of the biggest...

I think just about every plant manager has told me that, and when I talked to them that their day starts and ends with just ensuring that they get all the parts that they need, and that's always the case. But just to leave people with the right impression, are you saying that you're making progress? So as we're going from where we were in Q4 to where we were in January, where we are in February into March, do you see that sequential improvement? And it sounds to me like you see something even further as you get into Q2 based on engineering changes that you're making and swapping out things. But maybe just the tone of what you're saying, I want to make sure that, that's clear.

Yes. We're absolutely making progress. The -- the thing to keep in mind is that the semiconductor shortages that I'm referring to here are not a Q1 challenge. [ It's for 2020 ]. It's going to remain a challenge for the course of 2022. So it's important that we, as a company, plan for that -- plan for that with, as they described, substitutions or plan for that with contractually negotiated allocations. But this is a real constraint that every manufacturer, certainly ourselves including, are managing. With regards to the progress we're making, though, I mean, this is the sort of steep part of the ramp, steep part of us growing as a business where daily records are being set, not necessarily day over day, but certainly in some part of the plant, a record is set every single day. So we are improving there every day, which is exciting. [indiscernible] And it's really good to see the organization continue to really grow and learn what it needs to be operating at much higher bonds as a company. So that's been exciting to see. And I'll also note that with all that progress, it's taken efforts. So the first 10 days of January, we actually had the plant shut down in terms of production to make a number of changes to the line, to improve the line based on learnings from Q4. And we're now, of course, reaping the benefits of some of those line improvements that were made. We've had the challenges of Omicron. We had, for a number of weeks, we had more than 800 people out of the plant with -- that tested positive for COVID. And these are hard to sort of plan around, you have 800 people out in a single day and to have that happen for several weeks, I mean, that would set -- peak of Omicron, very challenging. But where things sit today, we're really starting to see all those pieces come together. The outcome of making improvements to the line, coupled with the organization and not just the team that's here, but also some of the additions we've made to the team really start to demonstrate the operational capability and working towards the target state of operational excellence and the target state of this becoming really a pillar of strength for us as we go, not just through this launch, but in future launches and future programs like what we're setting up in Georgia for our future vehicles.

And you've alluded to this in what you said earlier about just the engineering capability that you have in-house, which I'm sure is a big asset. It's because you can make engineering changes to the vehicle for better manufacturability, low line costs and things like that. One of the things that you're doing as well is vertical integration is a key work stream. You've talked about that. Maybe you can talk a little bit more about that. Because I know that you have a plan to bring your motor manufacturing in-house. You have a plan to bring cell manufacturing in-house. Can you talk a little bit about what the opportunity is? What that means for Rivian?

It's interesting, as you look at all the different components in the vehicle and as I said, there's a lot of them, which one represents decision as to how do we secure that component. We develop it ourselves and build it ourselves, we develop it ourselves at have someone else build it. So we find an available component to work with a supplier to develop the components. So in a number of areas, we've decided to work with the existing supply base. And largely, those have been the areas that we feel the supply base does a strong job at that, and the product itself wouldn't be differentiated because of that. So an example of that is tires or airbags, [ they're different]. Or one vehicle, we're working with Autoliv on our safety systems, and they're an incredible supplier. But with that said, there's a number of areas within the vehicle that we do believe create true structural advantages in the long term, so it's completely controlled in-house. And the structural advantages are really embodied in both structural cost advantages as well as feature or attribute advantages, meaning the vehicle performs better, the vehicle has better efficiency, the vehicle is more desirable. And with that, I'd broadly characterize the bearers of focus for us in terms of vertical integration into the electronics in the vehicle, so that's the computers or the compute platforms across the vehicle, so things like what you might think of as like a vehicle dynamics, control module or body control module, self-driving compute platforms, our infotainment and in-vehicle digital experience platform. These are all things that we built in-house. And then, of course, the software that sits on top of those. And not just the applications layer, but the full pack of software is something we felt very strongly about in terms of our need to develop and own that. But then moving out from the electronics, the network architecture, the software stack into the battery system and into the driveline. We've also taken a very strong point of view that these are areas that we also need to control. And so what we're going to see launching later this year is a [indiscernible], so single motor [indiscernible], and that's a fully vertically integrated motor assembly. So we're winding the motor first, as we're doing the launch. We build inverter, we build the gearbox. And it's exciting because it's also part of our product offering. We offer a different gearing of the R1. So this is referenced to ones that are in the market today. This is a quad-motor setup, there's 4 motors, each motor controlling the wheel individually. So it's exceptional performance, it's really precise torque control for each wheel. But if you do end up having 4 motors in the vehicles, from a cost point of view, that performance comes with some expense. So the dual motor setup is a really nice offering where we still get incredible acceleration but with the cost efficiency of 2 motors instead of 4. So that's something that not only do we design that, but the equipment that it's built on and the lines that it's built on, that's all in-house. And so that activity is underway as well. And as you alluded to, the battery side of the vehicle, we think is among the most important areas to deeply control the supply chain. And that's deeply control -- that's inclusive of, in the long term for us, developing ourselves in-house, manufacturing those cells and spending a tremendous amount of time and effort on the upstream supply for the cells, so the raw materials. That's everything from lithium, so copper foil, but not necessarily owning the mines, but certainly having a significant degree of influence in control from a cost point of view on those raw material input streams.

So it sounds like the motor in-sourcing, these are pretty expensive components and they've got gearboxes and power electronics. And it's not even just bringing -- taking 2 motors out if you've got those associated parts. This could be a few thousand dollars per vehicle. On the battery side, I'm hoping you can just talk a little bit more about that and what that really gets you. Where do you stand in terms of in-sourcing of those batteries? And what's kind of happening behind the scenes in terms of just securing supply of those?

Yes. Well, what I'd sort of characterize -- to broadly characterize how we think about the battery supply chain, what I would say is we're at a really interesting inflection point whereby up until recently, battery supply largely exceeded battery demand, such that, like in our launch products, we were able to secure supply contractually from an existing production capacity that existed within the supply chain. We've publicly talked about this before. The products you're seeing on the road, our launch products, this is through a great relationship with Samsung SDI. And it's a cylindrical cell that we're using a 217 configuration. And we think that structural relationship is likely to see, meaning future sort of ways of securing cells are going to require some level of investment. And I broadly sort of bucket those into 2 categories. There's the approach of co-investment where the OEM, along with the supplier, co-investment capacity, and that can take on many forms, everything from joint venture to prepayments to guaranteed offtake agreements, but some form of commitment, contractual commitment or joint venture commitment to the creation of that capacity, that dedicated capacity. And then the other approach to creating that self-supply is to actually build it yourself. So in our case, we're pursuing all of those approaches. So to start, we're sourcing cells from existing capacity we take to sell. We do everything else. We put it into a module. That module is a simple pass. We design all the hybrid electronics, the design all the battery control modules. All that, of course, is done in our frontier. And then we're also, parallel to that, developing deep relationships with a number of different suppliers that we co-invest in the creation and securitization of dedicated capacity, capacity dedicated for Rivian. And then in parallel to that, as I described, is the design and development of in-house family of cells and, of course, the design development of the production systems for that. And this is an area that we've spent a lot of time on, and as you know, we're really excited about. So we're building a pilot line as we speak for our in-house cells. That pilot line will be -- is being designed to operate at fairly high levels of scale such that we're proving not just at a miniaturized scale what the equipment needs to do, but the actual equipment we're proving out in terms of everything from electrode coating, to cell formation, to assembly, all that being proven out at a scale that's representative of a plant that will eventually scale into many tens of gigawatt hours of capacity and then eventually, as we continue to grow the company, hundreds of gigawatt hours of capacity. So that's a key initiative for us, [ to secure and invest in ], and it's something that I would say we haven't talked a lot about, but we're excited to certainly do so over the coming, call it, next 12 months.

Have you -- I know that you have this relationship with Samsung for offtakes. Have you moved on to the next step already, where you've sort of made commitments to various vendors and gotten them to commit to capacity or co-investment in line with that?

Yes, some sort -- yes. We haven't announced anything yet, but certainly, I would just -- I would say it's absolutely critical to our strategy. And I think it's an important point to also make that these are not mutually exclusive. So we'll continue to secure cells from Samsung's existing capacity. We have a great relationship there. As you've said, we're going to need to build multiple additional supplier relationships with co-invested capacity. And while I said we haven't announced, those are certainly things we're spending a lot of time on, and we look forward to eventually making announcements there. And then in parallel to that, and again, not exclusive to the previous 2, we're also developing our in-house cells. And in the reality, I think, as you've heard me talk about before, I think this is going to be one of the biggest constraints for overall electric vehicle adoption, is the supply of cells. And I think it's perhaps the least talked about part of ramp-up. If we look at the policies that are going in place across the world, the product portfolios you plan across many different companies, enabling the scaling that we're looking to achieve, and I'd say broadly, the industry needs to achieve, it requires a very large increase in cell production capacity. When I say very large, we're not talking 2x, we're talking 20x and we're talking about that happening over the next 10 to 15 years. So what we see today with the semiconductor supply-demand mismatch, where clearly demand is exceeding supply, depending on the type of semiconductor, we're talking about a supply-demand mismatch of maybe 1.25x to 1.5x. If we look at the future state demand for cells relative to the current state supply, it's a delta 20x. So there's a tremendous amount of risk that what we feel today in semiconductors represents a small appetizer of what we're going to see itself. And it's the reason we lean so heavily into securing the supply chain, and taking this multi-pronged approach. And it's one of the most important areas of focus for us in the business.

How deep are you going in that? We had a little panel with the head of Argonne National Labs Battery Group, and he just, given analysts some advice about just asking management teams about what they're securing in terms of lithium, graphite, nickel, all of these things. Are you actually going down to that level and securing [ capital ] materials and making commitments that go all the way down to the feedstocks?

I would say it like this. I think if we're serious about electrifying at scale, that's not a choice. It's a requirement. It's something we spend a lot of time on. There's a tremendous amount of strategy in terms of overlaying our cell chemistry road map with our self-supply road map with, of course, our raw material supply road map. And going on and sourcing specific grades of specific materials needs to be done intentionally such that it lines up with the chemistries we're planning. Of course, there's some that apply to all. But whether you're looking at the carbonate versus different materials, I mean you have hydroxide and the lithium side, and you have to really be intentional around which areas you're securing. So we built the team that understands that really well and understands the mining aspect, understands the pricing dynamics, understands the supply chain nuances here that are very different than, let's say, buying an airbag. They're very different than buying a seat system. These are whole new skill sets that the auto industry previously haven't had the reach, as you sort of alluded to, hasn't had reach set deep into. But we believe it could be an absolute necessary core competency. So we're focused on that for sure.

That sounds very important, and I'm glad that you guys are looking at that. Let's just pivot a little bit to the business model. One of the things that we really like about your business model in terms of TAM and potential profitability is direct sales. Of course, you don't have to deal with dealers that are cleaving off several hundred basis points of margin, and also, in some cases, creating an inconsistent customer experience. But just as importantly, this direct relationship with consumers is going to lead to recurring revenue, consumers or commercial customers. So when we look at your profitability, it's not just driven off of the number of vehicles that you're producing this quarter or this year. It's the number of [ vehicles ] that are going to be in operation as well. And that could lead to a pretty sizable recurring revenue stream. So I was hoping you could talk a little bit about how and when does that play out. So on the consumer side and the commercial side, when will we start to see that coming together?

Yes. It's the -- you think of the pillars of how we thought about the businesses, of course, a focus on vertical integration as I described. There was a focus on making sure we can develop and launch multiple programs, which is deeper scaling. But of equal importance to those is what is the customer relationship with the go-to-market model. And we really deeply believe, structurally, it's necessary to have a direct relationship with customers for lots of reasons, putting aside margin leakage that occurs from going through an intermediary or the inability to control the experience or the ability to control price as you alluded to. But more importantly, is it makes accessing the long tail of revenue, both on the consumer side of our business as well as the commercial side of our business significantly more straightforward to have that direct relationship. And where this gets particularly interesting is you take a big step back and say -- one was to design a methodology or a business system that was capable of delivering, let's say, 2 million or 3 million vehicles here in the U.S. market. You wouldn't answer that with saying I'm going to have 4,000 or 5,000 $10 million or $20 million brick-and-mortar locations, each of which carries 50 to 100 vehicles inventory, each of which also has service, each of which has a transaction platform, each of which has a test drive or a demand generation platform. You certainly wouldn't have 4,000 parking lots. You would come up with a way to look at all the things necessary to deliver that number of vehicles, it's [indiscernible] vehicles in the market. And you'd say, well, I'm going to consolidate new vehicle inventories based upon size of market, based upon location with far fewer distribution centers. You're going to commonize the transaction platform that's, of course, digital and digital-first and consistent across all touch points. You'd come up with a much more efficient way or facilitate demand generation and test drives. The test drives today, unfortunately, if you're a dealer, it consists of -- you have to have a 20 or 300minute conversation that you probably don't want to have with someone you probably don't want to talk to, [indiscernible]. We can make that much lower friction, and we certainly don't have to have a very high-cost salesperson facilitating that. And then lastly, and I'd say, perhaps most importantly, is you design service in a very different way. Services on a vehicle, sort of if you look out, going forward, the vehicles, every single vehicle we build is smart. Every single vehicle has a very robust diagnostic platform that has the prognostics within it to know what's wrong with the vehicle and to predict what's going to go wrong with the vehicle such that you can be much more intentional around service, and you can be much more planful, if you will around service. So the way we think about service going forward is a lot of it will be done remote, meaning service will be done at your house, will be done at your place of business. So it will be done particularly for fleets, at the fleet base of business. So in the case of our relationship with Amazon, most of the service will happen at fulfillment centers. And then for things that need to go through a service location, we design locations specifically for service from a physical location point of view, so the real estate that it's located on, to the sizing, the CapEx and OpEx of that facility can be really optimized. So essentially, the way we looked at all these customer relationships, all these touch points you historically think about durable lens of a dealer, you've unbundled them and developed a topology of solutions that's much more capital efficient, but also leads to better customer experiences, better consistency. And I think perhaps most importantly, in the case of service, much more responsive and much more predictive, such that the experience is really seamless. And, really, customers don't want to experience service. I'd rather just have my car always work. And if there is something wrong with it, that's on the burden of the company. So that's the burden -- it will be necessary to go and fix it, versus you having to schedule something and you'll bring a vehicle somewhere. So we think there's some really exciting changes to the way customers interact with us in the sense that we take a lot of the pain points away and have a tremendous amount of consistency.

So we'll -- the service part of it, I think, is pretty straightforward. Physical service is, if I'm as -- as a consumer, let's say, spend $500 a year, that's $40 a month for every vehicle that you have out there. What about the digital side of things? Because you've got basically a software-defined platform. When will we start to see where Rivian is offering this upgrade or that upgrade, or this feature that people want and are willing to pay something to get that kind of upgrade? Is that something that's far into the future? Or is that relatively near-term product planning.

This is the really exciting part of building your own vertically integrated electronics and software platforms. You can dream a lot and you can dream about all the features you want to add. And on the consumer side, the ability to have enhanced dynamic features, the ability to have enhanced autonomous features that we can actually generate revenue from, which is exciting. But then also, linking those into the consumer side, we bundle all that into what we call our membership platform, which allows us to create a reoccurring structure, whereby we add features in this bundled fashion that just make the product better and better. And that's not to say, if you're not a member, the product doesn't also get better. But the ability to create differentiated experience, where we can rationalize having our software team just continue to push the features into the product. So that's really exciting on the consumer side. And on the commercial side, it's -- you think of our relationship with Amazon, this is perhaps one of the most exciting parts that's not immediately obvious, which is embodied in our platform, which we call [indiscernible], which essentially is an aggregation of food management services and vehicle services that allow us to look at everything from the sort of traditional, [ including ] of vehicles to life cycle management and service management to charging coordination to charging rates, which vehicle do I charge and how fast. And we can essentially put a lot of -- a denser way of describing a set of algorithms to design and build that make lots of decisions highly intelligently at a fleet level. And we continually add to that algorithm base. We're continuing to develop more and more software to make this a stronger platform and, of course, make it better and better for our customers, for our commercial customers.

Yes. I mean the opportunity in commercial is clearly there. We've had conversations with Amazon. They've told us that they couldn't replicate what they get from Rivian, even if they put 4 dongles from various companies into the vehicle in terms of battery degradation in Detroit versus Phoenix and the loading of the vehicle and all this other stuff that Rivian did that improves their cost of ownership. So that's clearly true. We're out of time, but -- yes, go ahead.

I would just say, what's interesting, we look at the way we currently run a lot of our fleets. We make very uninformed decisions often, how we charge a vehicle, how we serve the vehicle, when do we service the vehicle, what the vehicle should do over the course of its life depending on location. So the reality is we now have the information to make nearly perfect decisions. We can decide what is the true optimal in terms of minimizing costs. But to do that, you have to have integration between all the different systems. You need to understand what's the battery health, what's the vehicle needs, what's the opportunity cost of the slower charge versus the faster charge. So it's a really fun optimization problem that creates significant and real value.

Yes. I mean it's very different on an electric vehicle than it is on internal combustion, which is another interesting aspect of it. I've got one last one because we're out of time. But look, Rivian today, we think are relatively expensive vehicles, $70,000 vehicles. You have a product road map that includes other vehicles that will be more affordable and you're going to grow this company. Can you just, maybe if you could take a minute to say, okay, 2030, if you're successful, how big a company do you think you can become? How broad is the brands that you're trying to create?

Yes. It's -- as we look at the brand position we've gone after and look at R1T and R1S, I would really think of those as the flagship products, these are the sort of tip of the spear that open our brand umbrella, under which we're going to add a whole host of different form factors, different price points, of course, across all markets. And one of the reasons we've really designed the brand around this idea of both enabling and inspiring people to go do the things they want to take photographs, that brand position is really elastic. It's really elastic in that it can apply to so many different segments. And so with that, that brand [ adaptability ] across these different segments, one of the core skills we view as necessary is the ability to launch multiple programs. So to build out a portfolio that's broad enough allow us to continue to lead across multiple segments and to allow us to really work towards building a position of 10% market share within the EV space. And that, of course, requires all the things we talked about here, requires access to self-supply chain. It requires the [ deep flow ], true structural cost advantage, true structural attribute advantage at a technology level. But ultimately, it has to be wrap in products that customers are excited about. So that's on the consumer side. And in much the same way on the commercial side, we see the same type of opportunity. And again, leveraging the first product there as a flagship product, going into the largest deployed fleet in the world as the largest fleet of vehicles in the world. It gives us an opportunity to learn how to run the fleet sufficiently, build things like our [indiscernible] platform, which, of course, will then translate into a variety of different fleet applications of different sizes, different form factors across different markets. And so the first physical embodiment of going after the next generation of products is our plants that we've announced in Georgia, which, of course, isn't going to be building R1 products, but will be building future products, so products like what we've talked about in the past, our smaller format cross-over [ SUV ], the R2 program, as well as other products within both the consumer and the commercial space. So these are really key initiatives for us as we look at growing into the end of the decade to continue to meet being a leadership position in terms of product attributes, but also in terms of pricing [ liabilities ].

Great. Well, we are 4 minutes over. And -- but I do want to say thank you, RJ, for taking the time to talk to us. It's always fascinating. Very exciting time for the company, and I look forward to following it.

Thank you so much.

All right. Take care.