Irvine's Karma Automotive and Rivian Build EVs for Businesses

Monday, July 26, 2021

Main News Photo

(Orange County Business Journal)

With a price approaching $150,000, Karma Automotive LLC’s hybrid electric vehicle, the Revero GT, is a sports car you drive for show.

It’s one reason the automaker bumped the model up to halo status, making room for its more affordable GS-6 luxury line.

Another nod toward pragmatism: a new fleet business, with modestly priced, light-duty electric vehicles that company statemnets indicate start in the $15,000 range. That partnership, with Ayro Inc. (Nasdaq: AYRO) of Texas, could be the one that provides some much-needed dough for the Irvine firm.

Karma this month revealed a first look at the light-duty vehicles, dubbed Club Car Current. They are smaller than a full-size truck but larger than the typical cargo cart seen in office parks, resorts, college campuses and other locations.

Karma and Ayro—a maker of low-speed electric vehicles—are touting the partnership as one valued around $300 million. They expect to bring more than 20,000 vehicles to market through 2023, using Karma’s Irvine design studio and its 550,000-square-foot Moreno Valley production plant.

Ayro, which had a recent market cap of $167 million, will bring its engineering and user base. It has yet to see significant sales of its initial vehicles, regulatory filings indicate.

The Club Cars would have a top speed of 25 miles per hour, and can run up to 57 miles on a single charge, according to Ayro, which last month announced an initial $2 million order for the vehicles. The buyer wasn’t immediately disclosed.

A Charge in Scale

The $300 million price attributed to the program would be a big step up in the evolution of Karma, which brought its initial Revero to market in 2016.

The company doesn’t disclose sales, but the Revero’s production from the start had always been built around exclusivity with reports pinning production in 2018 to around 150 cars and then ramping to 200 to 300 cars the next year.

Fleet Sale Focus

The new vehicles for Karma emphasize its desire to grow the business-to-business side of its revenue pie, even as it continues to produce luxury electrics for the consumer market.

Fleet sales are a key part of the strategy, CEO Lance Zhou told the Business Journal last year.

A Karma spokesperson said there has been interest in the Club Cars from universities and other large campuses, and for use in last-mile delivery. Dealers will now begin the work of offering demos to prospective users.

“This is just the beginning of our volume production run with Ayro and we typically do not address the numbers of vehicles produced or sold—mainly for competitive reasons,” a company spokesperson told the Business Journal.

“While our existing team at KICC [Karma Innovation and Customization Center] has been able to meet initial demands, we anticipate the need to ramp up production to meet higher order volumes from customers, and look forward to exploring the necessary expansion of our workforce in Moreno Valley,” the spokesperson said.

Rivian Playbook

Karma has more recently touted its services in the engineering, design and production space to other companies as a means of creating additional revenue streams beyond a sole focus on the consumer market.

Investors seem to like the strategy, too, with $100 million pumped into Karma by U.S. investors last year, around the same time one of its main local competitors, Rivian Automotive LLC of Irvine, also confirmed its latest funding deal, bringing in a cool $2.5 billion.

Rivian is backed by Amazon, (Nasdaq: AMZN) among a number of other investors.

Both Karma and Rivian are looking to build delivery trucks alongside their flashier consumer vehicles.

Seattle’s Amazon two years ago agreed to buy 100,000 electric vehicles from Rivian as part of its push to green its delivery fleet, with several of those electrics starting to be deployed in some markets.

Founder and CEO RJ Scaringe earlier this month offered a glimpse through his Twitter account of Rivian electric delivery vans, setting off chatter in the press that the company is readying for mass production of the vehicles.

Fleet sales are a key part of many automakers’ businesses and Rivian is no exception. While its delivery van production may be scaling up, it’s also readying for the launch of its consumer EV truck and SUV for the market.

Closely watched Rivian ranked third based on local employment in last year’s Business Journal ranking of the largest automakers headquartered here, with 400 workers. Its employee headcount has only ballooned since the time of that listing, with news reports indicating the automaker has plans for an initial public offering.

A $70 billion valuation for the company has been cited for when its stock is listed, which if met, would make it Orange County’s most valuable public company by a wide margin.

Karma, by comparison, is OC’s fourth largest automaker here with 350 employees, according to last year’s list. It too is rumored to be eyeing the public markets, potentially via a reverse merger with a blank-check company.

New Cars

Even with Karma’s latest news on the B2B side, it’s not giving up on its luxury consumer offering.

It announced in September it would begin making a more affordable luxury line, named the GS-6 Series, with the sedan priced at $83,900 and the all-electric GSe-6 priced at $79,900.  

Karma’s spokesperson said the series has so far received positive reviews from automotive trades and made consideration lists for the North American and Motor Trend Car of the Year competitions.

The spokesperson said an update on the pre-reservations for the all-electric version in the series would be forthcoming later this year closer to the launch. 

Category: Business News, Automotive News, Irvine, Amazon