Russian businessman Denis Sverdlov wants to revolutionize the car industry, replacing Henry Ford’s assembly lines with small factories that cost much less.
While most companies in the industry are aiming for big sales figures to keep their large plants producing, Arrival, which will start producing electric buses and vans next year, is betting on doing just the opposite. Its microfactories require around $ 50 million of investment, compared to $ 1 billion for traditional plants. With half the capital expenditures and one-tenth the space, it will be able to build the same thing as one of those factories, he says.
“We do not use metal stamping, welding and painting shops. Instead, we are using aluminum for the chassis, proprietary components for bodywork and structural adhesive,” he says.
The company already has two microfactories, one northwest of London in the town of Bicester, and the other in Rock Hill, South Carolina, and aims to have 31 plants by 2024. While electric vehicle startups commonly burn cash during years or the profit never comes in, Arrival said it hopes to start making a profit in 2023.
Arrival’s approach received endorsement from companies such as Hyundai Motor and BlackRock earlier this year, while United Parcel Service agreed to buy the first 10,000 vans equipped with advanced driver assistance systems.
The company already has two microfactories, in London in South Carolina, and aims to have 31 plants by 2024
“There are more than 560 cities in the world, which have a population of more than a million people, and each of these cities could have a micro-factory that produces 10,000 vehicles specifically designed for the needs of that market,” says Sverdlov. “This model can be as scalable as McDonald’s or Starbucks.”
Arrival, which has partnered with CIIG Merger to raise funds and begin trading on the Nasdaq, has been valued at $ 5.4 billion. With more than 600 million shares outstanding after the merger, its valuation could rise to about $ 15 billion, according to trading since last month.
With a post-merger stake of 75%, Sverdlov’s stake is worth about 11 billion. The 42-year-old entrepreneur is richer than some Russian tycoons, including Lukoil co-owner Leonid Fedun and Alexander Abramov, chairman of steelmaker Evraz, according to the Bloomberg Billionaires Index. The businessman declined to comment on his net worth.
Stock deals put Arrival’s valuation at about $ 15 billion
Founded in 2015, Arrival now employs more than 1,400 workers. It recruited top talent from the auto and tech industries: Avinash Rugoobur, its president, was chief strategy officer for General Motors’ Cruise autonomous driving unit; Business Director Mike Ableson was vice president of electric vehicle infrastructure and global strategy for GM. Some of its engineers previously worked at Tesla, Jaguar Land Rover Automotive, Apple, and Google.
Thanks to cheaper micro-factories, the company wants to sell its electric vans and buses at the same price as diesel equivalents. In the United States, where Joe Biden’s administration wants all buses made there to be electric by 2030, a 12-meter-long vehicle would cost less than $ 450,000, Sverdlov said on a conference call last month.
The concept is credible and “solid,” said Sandy Munro, founder of consulting firm Munro & Associates, who gained notoriety by criticizing Tesla models and analyzing how they are built. As long as the company can manage supply lines to many plants, the plan is low-cost and brings it closer to customer needs, Munro says.
The sharp rise in Tesla’s share price this year has fueled the appetite for investments in electric vehicle companies including Arrival, Fisker and Nikola. New entrants have yet to register significant income, let alone profit, leading some to question whether there is a bubble. Nikola, whose shares doubled in just three days in June, has recently struggled to cope with criticism that he overstated the capacity of his early prototypes.
But for now, things are looking good for Sverdlov, who studied engineering in St. Petersburg before running a Russian mobile internet startup sold for $ 1.5 billion and serving as Russian vice minister of communications. He’s also behind Roborace, a racing autonomous electric vehicle company.