Commercial electric vehicle startup Arrival has a plan to dismantle one of the biggest barriers to profitability for automotive startups, and it starts with getting rid of the assembly line.
The company, founded in 2015, started early on working on the idea of a flexible assembly process, led largely by robots, which could be tweaked in real time depending on the level of features needed or the model being built. Arrival eventually developed a majority autonomous manufacturing facility, which it calls a microfactory, with pods of robots that work in geofenced areas scattered throughout a roughly 20,000-square-foot warehouse. That's a much tighter space than the typical automotive assembly plant, which often sprawls over millions of square feet.
This technology has been developed to be mobile, so Arrival can move the show from city to city and customize production orders to whatever area it's servicing. The startup's biggest customer to-date is UPS, which ordered 10,000 electric vans from the company in 2020.
The idea, said Arrival's VP of Robotics Napo Montano, is to remove bottlenecks in the production process that often plague early-stage manufacturing startups. The company says this brings down the overall cost of manufacturing, making Arrival's vans, buses and cars more affordable to customers and fattening the company's profit margins.
The automotive industry has long been known for its slim net profit margins, which normally hover around 10% for a healthy company. That's compared to profit margins of around 30% in the tech sector.
"On an assembly line, any change you make has these massive ripple effects," Montano told Insider. While highly efficient when in action, assembly lines can be difficult to modify on the fly. Even routine changes between vehicle model years often require long stints of factory downtime and millions of dollars in retooling.
"We wanted to create a system that could react in real time to changes and mistakes – robots that could adapt without halting the process," Montano said.
According to Arrival's leadership, its microfactory strategy could help the startup achieve profitability faster than competing EV startups, many of which have struggled with the complex process of building vehicles at scale. Often, a car company does not reach profitability until it is producing hundreds of thousands of vehicles annually.
Tesla, founded in 2003, only recently began consistently reporting quarterly profits. Newer EV startups Rivian and Lucid are struggling to meet production goals set ahead of their latest product launches.
Some industry experts warn that Arrival may create more problems than it solves in trying to shed the industry's proven strategy of assembly-line manufacturing. They say ambitions to eschew the assembly line, rely on robots, and make their factories mobile could cause serious issues with supplier relationships and add more upfront costs than it can save in the long run with expensive technology. Many also point to Elon Musk's "alien dreadnought" factory – a disaster of assembly line automation that eventually put Model 3 production out under tents in the factory parking lot.
Arrival executives say they are addressing these challenges by rethinking everything from the automotive industry's relationship with suppliers to how a traditional assembly process can be laid out with the help of robots.
Integral to Arrival's mobile microfactory model is flexibility in supply, sometimes requiring the company to source raw materials rather than parts. Rob Thompson, Arrival's senior vice president of materials, says it has been difficult to disrupt the longstanding relationships between automotive manufacturers and their suppliers.
Almost accidentally, Thompson said, Arrival began modeling its supply relationships after those found in the textile and apparel industries, where commodity materials are more widely available.
"We work with the materials manufacturers themselves, as opposed to the automotive suppliers," Thompson said. "That has created a lot of problems because suppliers don't like that, and the raw materials suppliers aren't used to these kinds of relationships."
On the assembly floor, industry experts have warned that too much automation can cause costly mistakes and bottlenecks.
Montano says that's an assembly line problem, not a robotics problem.
"The automotive industry has spent years bolting new technology onto a very old process," he said, referring to Henry Ford's assembly line of the early 20th Century. "We're working on a complete paradigm shift – instead of a linear conveyor belt, we have a series of robotic cells in square blocks that can move around and make decisions in real time."