Competitive advantage is a slippery fish in any business where things change quickly. One moment you’ve got hold of it and you’re posing for the victory photo, then the next second it’s slipped from your grasp and landed in some other guy’s boat.
The automotive sphere is one such business, and right now the competitive advantage hasn’t been so hard to grasp for 100 years. Pre-WWII there were thousands of car brands in Europe alone that were born, created a model or two then died off from lack of investment or uncompetitive products.
Back then the race was simply to create the best and most commercially appealing car, using an eventually fairly standardised layout of driver controls and body styles. These days it’s all about the race to electrification. Winning isn’t just about building the first electric car, or even the first range of them. It’s about who can truly, finally combine what major car makers already know, specifically about mass-producing cars with real-world customer appeal, with the best of a rapidly-advancing technology and an affordable showroom price tag that includes a profit margin.
Major car makers have not been tuned towards making electric cars. The bottomless pit of knowledge they can tap when it comes to building a four-wheeled vehicle with a combustion engine and seats is, in many ways, scrap when switching to EVs.
The chassis needs to be a different shape and design, potentially built to include battery packs as stressed members, or to hold them in places combustion-powered cars won’t allow. The drivetrain is a different size, the weight distribution is altered, the passenger cell can be a different shape, and the list of differences goes on. Hell, you can’t even use the same brakes and windscreen wiper systems on EVs, because they’re suddenly too noisy.
Starting almost from a blank sheet of paper is something that big car makers are having to do. It’s a horrendously expensive thing, though, and fraught with banana skins. Just ask Tesla; for all its success it still can’t build its cars fast or well enough, by many accounts. It’s not an easy thing for an automotive behemoth to continue building ICE cars as normal while also reinventing the wheel on the other. Doesn’t it make more sense, then, for these less manoeuvrable giants to turn to a tiny rival that’s focused entirely on EVs?
Various startups in the USA and elsewhere have been created from big investment with the sole focus of developing purpose-built electric cars. These designs are as much about tech as they are about automotive functionality, neatly mirroring the way the car in general is going. Rivian is one that was in the headlines earlier this week: Ford has invested $500m in the fledgeling SUV and pickup maker, before Rivian has even put a car into full production. For its cash Ford will get access to Rivian’s ‘flexible skateboard’ EV-specific platform that could underpin electric versions of any and all of its large models. That saves Ford a tonne of cash in the wider scheme of things.
Let’s also suppose that Rivian makes a success of its own business, and that people start buying the R1T pickup instead of the F150. All of a sudden it’s a real threat to Ford and its first attempts at proper electric cars, but not only that; by that time Rivian’s shares would make the actual $500m deal look like a bargain. It’s better (cheaper) for Ford that it gets on board sooner and makes a friend of Rivian before it becomes an enemy.
What’s in it for Rivian, apart from half a billion George Washingtons? Arguably the small company is taking the bigger risk. By selling its core build technology to the mighty Blue Oval, it could undermine its future ability to build its own cars. Ford will probably always be able to do that better and for a lower price. With that in mind Rivian could be planning to limit itself to OEM parts supply with a few niche (expensive) side-products of its own. It’s a sustainable business model… until Ford builds its own EV chassis. At least Rivian is also supplying Pininfarina.
Porsche has made a similar arrangement with Rimac (the latter company, as it happens, also supplies tech to Pininfarina for the PF0 hypercar). Taking 10 per cent of the Croatian uber-EV maker has given Rimac some welcome R&D cash in exchange for sending some key EV performance technology Porsche’s way. And if the Porsche profit machine thinks buying ideas from other people is the best idea for making money in the future, who’s to argue otherwise?
Big car makers are in a race not just for electrification but for their business health for the next 20 years. Finding the right solutions at the right prices has become a matter of sink or swim; it’s just ironic that these leviathans, so long disdainful of small rivals, have had to turn to them for the answers.