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Unicorn startup Arrival lands new investment from BlackRock

Updated: Oct 21, 2020

Written by Theo Koenig - October 15, 2020

Edited by Asaf Kedem

The non-stop wave of investments in the electric vehicle market has continued this week. BlackRock, one of the world’s biggest asset management firms, announced the purchase of a $118 million stake in the UK-based provider of electric commercial vehicles, Arrival.

Arrival, founded in London in 2015, has had a rather remarkable year. The private limited company achieved new heights by obtaining the “unicorn” status (when a startup reaches a $1 billion valuation) in early January after Hyundai and Kia bought a $110 million stake that boosted the company valuation to $3 billion. Not 30 days later, Arrival’s longstanding partnership with United Parcel Service (also an investor) materialized when UPS ordered 10,000 electric delivery vans. The deal includes the option for a further 10,000 units for UPS’s global fleet. Roll out for the vehicles is set to take place starting now and continuing until 2024. A further deal was struck with Royal Mail in August while the latest round of investment from BlackRock was announced just two days ago.

Arrival has rarely publicly released information regarding the exact specifications of their fleets, called Generation 2 vehicles, though this is somewhat understandable considering the commercially oriented business model of the company. Right now, the company specializes in electric vans and buses, though it also has numerous secondary projects that are run concurrently (whispers of electric taxis and delivery robots have already begun). All vehicles employ lithium-ion batteries and function on a flat “skateboard” powertrain that allow the customers the freedom to alter the size, shape and weight of the vehicle. This means range, torque, weight and so on will vary from customer to customer, which again explains the lack of clarity surrounding vehicle specs. According to Arrival, the vehicles are priced the same as or even less than comparable fossil fuel vehicles, but the company has once more refrained from quantifying a precise number. Prices for the UPS deal, for instance, were never officially released despite much speculation online, and the same secrecy remained regarding the equity stake purchased by UPS. All we can say for certain right now is that the elegant and futuristic design for both the vans and buses are simply striking.

Arrival sets itself apart by implementing a production strategy that uses microfactories. The term actually comes from the fact that the factories have a smaller environmental footprint, especially compared to rivals such as Tesla. The concept is to build rapid but scalable factories that do not require a huge upfront investment and that are located close to the customer in order to reduce shipping costs. Materials are to be sourced from surrounding regions through localized supply chains, thereby further improving the local economy, although not much information is given regarding exactly what the company considers as “local”. Arrival announced plans just days ago to build their first microfactory in the U.S (South Carolina). The project will cost Arrival over $46 million but will begin full production by the 4th quarter of 2021. To put these numbers into perspective, the Telsa Nevada Gigafactory is estimated to cost around $5 billion and took roughly 5 years to build. While this is in no way an indicator of success for either company, we mention it nonetheless to highlight the contrast in strategies and the precedence that Arrival is setting. Microfactories further set themselves apart by employing a cell-based assembly model to produce their electric vehicles, as opposed to the traditional assembly line. Arrival has stated that this will require high levels of automation, specifically to carry vehicle components to designated assembly cells within the microfactory.

It is rather surprising to see such a titan of industry investing heavily into a mostly unproven startup. BlackRock, along with Vanguard and State Street are the 3 biggest money managers worldwide. Together they have assets estimated to be worth more than the entire GDP of China. The reason this is worth mentioning is because an investigation in 2019 by the Guardian revealed the extent of the investments the 3 firms had made into fossil fuel. BlackRock alone had a fossil-fuel portfolio totaling $87 billion and that of all 3 firms together exceeded $300 billion. In comparison, the investment into Arrival seems like a shrewd, although low-risk diversification. It definitely puts into perspective the enormity of the competition for Arrival, who are hoping to create a sustainable and zero-emission transportation model.

Auto Trendy’s take:

There is certainly a lot to unpack here. Arrival has without a doubt shown immense promise; turning the eyes of asset managers of such caliber is no small feat. It is worth mentioning here that one of the underrated characteristics of the firm is the diversity and creativity it has displayed outside of its commercial vehicle production. We have previously written about Arrival in the context of AI competition Roborace, but another example is the partnership with Charge Cars to electrify classic mustangs. The battery, motor and drivetrain are built in collaboration between the two firms and the electric mustangs are available for sale to the public.

Arrival is certainly not afraid of being different. The factories themselves are practically polar opposites to that of successful competitors but the way in which they are run will also be quite distinct. Differentiation seems so ingrained within the company that the startup is willing to deviate from a production system that has been proven to work quite formidably in the automotive world since the industrial revolution. Arrival’s move towards cellular assembly reminds us of the first revolutionary implementations of Lean startup strategy at Toyota during the 1980s. Lean implementations have certainly worked in the past and we see no reason why this should change now, especially for a startup that may value flexibility above all else.

Investments made by the recognized figures of the automotive world have almost gone unmentioned in this article but deserve to be underscored here again due to the advantages provided. Beyond the fact that these OEMs (Original Equipment Manufacturers) can share insights on their manufacturing and vehicle launches, Hyundai and Kia can offer guidance into creating a global network and obtaining economies of scale, which is arguably more difficult to establish. Beyond that, they provide credibility for a startup that did not exist this time 5 years ago.

This unicorn has definitely flown under the radar here at Auto Trendy. The company seems to have a clear identity revolving around lean strategies and taking bold risks, all the while finding strong investors to help them along the way. It is certainly early days for Arrival, especially considering the shroud of mystery surrounding the actual specifications of the vehicles. The high level of saturation currently in the electric buses and vans market may be worrisome but that being said, Arrival seems to have its sights on the bigger picture and will now have the funds to outlast less-prepared rivals. This startup deserves big credits for the work they have done until now. We will continue to keep you updated on their progress towards becoming a decacorn!

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