Executive Summary
Rivian Automotive Inc. is an electric vehicle manufacturer selling pickup trucks and SUVs. The conducted studies have shown that the best markets for Rivian are European markets, such as Norway. The Norwegian market is lucrative for Rivian for several reasons, such as tax exemptions for zero-emission manufacturers and the overall adoption of electric vehicle culture. As for the strategies for expansion, the company focuses on strengths retrieved from SWOT analysis that can help Rivian gain a competitive advantage and looks for potential investors (Truett, 2019). At this point, Rivian’s concentration on reinforcing charging networks, incorporating off-road performance, and lowering the vehicle price through tax exemptions will contribute to Rivian’s strong entry into the market. The entry mode should be a small-scale entry, and the most suitable option for the business is a strategic alliance with local entities. Markets and potential advantages and disadvantages should be analyzed to see the effectiveness of different strategies provided by Rivian.
Introduction
Rivian Automotive, Inc. is a company that designs, develops, produces, and distributes electric automobiles and components. The business was established in 2009 and is headquartered in San Jose, California (Rivian Automotive, Inc., n.d.). The firm sells pickup trucks and SUVs that are able to seat five people (Rivian Automotive, Inc., n.d.). Due to the quality and sustainability of the goods, the company is currently popular among both investors and customers. Moreover, increasing revenues and the desire to create more innovations spurred the business to expand its nationwide presence. Still, there are limitations, such as high prices for models. Considering the gradual replacement of gasoline and petrol vehicles and the prospects of electric car manufacturers, Rivian Automotive, Inc. can be in demand in overseas markets. The report aims to analyze Rivian Automotive Inc.’s international expansion, focusing on the most advantageous markets for electric vehicle manufacturers. The paper will explain the market in Norway and Saudi Arabia, provide clear diagrams of the key advantages and disadvantages, and state the introduction of Rivian Automotive Inc. into these countries.
Norway as the Target Market vs. Saudi Arabia
Opportunities and Challenges in The Market of Saudi Arabia
When it comes to the potential markets that might be lucrative for Rivian, the countries with a low preference for electric vehicles and renewable energy will not be advantageous. Moreover, countries with developed networks tend to be more successful in expansions (Hendriks, 2020). According to the new trade theory, governments play a crucial role in the promotion of new sectors and industries. However, as for the EV industry, not every country is eager to incorporate such an approach. For example, Saudi Arabia is one of the countries with an abundance of oil and is mainly a public sector-driven economy (Saudi Arabia – Market Opportunities, n.d). According to Al Yousif & Yousif (2020), by the end of 2018, this country was utilizing over three million barrels of oil daily for domestic energy use. Though Saudi Arabia’s transformation programs and visions propose a radical shift toward privately owned enterprises, the advancement of electric car manufacturers is still slow.
The Saudi Arabian automotive industry is saturated with diesel and petrol vehicles manufacturers. Moreover, the kingdom anticipates that internal combustion engine (ICE) cars will account for the majority of vehicles owned in the Saudi Arabia region during the next 15-20 years (Al Yousif & Yousif, 2020). In 2020, the Kingdom of Saudi Arabia accounted for over 52 percent of automobile sales in the Gulf Cooperation Council (GCC) and 35 percent in the Middle East and North Africa (MENA) area (Al Yousif & Yousif, 2020). From the table, it can be seen that car sales are growing, yet, unfortunately for electric vehicle manufacturers, EVs will account for only 32,000 units in Saudi Arabia.
ICE vehicle market owning Despite worldwide dynamics and legislation that favor electric vehicles (EVs), Saudi Arabia does not desire to abandon internal combustion engine (ICE) vehicle markets since they represent the majority of the cars in the country. More specifically, Toyota owns 30 percent of the region’s market, Hyundai and KIA take up 26 percent, and Renault-Nissan-Mitsubishi is at 9 percent (Al Yousif & Yousif, 2020). The remainder is mainly controlled by General Motors, Fiat Chrysler Automobiles, and Ford. Furthermore, there are only four commercial vehicle manufacturing factories, and their capacity is limited.
The National Industrial Development Center (NIDC) intends to recruit three or four Original Equipment Manufacturers within the Internal Combustion Engine and Electric Vehicle industries. The objective is to manufacture 300,000 cars yearly with a 40 percent domestic production by 2030, complying with the country’s Vision 2030 targets (Saudi Arabia automotive market, n.d.). By this year, new urban areas should be created and cities can become more developed for visitors (Aboneama, 2021). Via financing, tax breaks, and tariff privileges, the NIDC strives to promote and encourage manufacturing (Saudi Arabia automotive market, n.d.). Yet, considering the aforementioned preferences of the population to use ICE vehicles and the extreme competition in this region, the market of Saudi Arabia is not suitable for Rivian.
Norwegian Market as the Most Suitable Option
European nations are among the countries that are more encouraged to incorporate the transition from ICE vehicles to electric vehicles. In this sense, the adoption of Norway’s zero-emission vehicle (ZEV) policies can be considered a triumph. The success is attributed to a comprehensive package of subsidies designed to encourage the market adoption of zero-emission automobiles (Norwegian EV policy, 2022). According to Jaiswal and Zane (2022), as nations apply more eco-friendly approaches, they need more technologies. Since the early 1990s, many administrations and large alliances of parties have steadily adopted measures to accelerate the shift from ICE vehicles to electric vehicles. The Norwegian government has set a target of incorporating zero-emission vehicles for all new automobiles sold by 2025 to reduce the negative effect on the environment (Ciccone, 2018). Such zero-emission vehicles must be either electric or run on hydrogen (Norwegian EV policy, 2022). By February 2022, the country had over 470.000 licensed battery electric vehicles (BEVs) (Norwegian EV policy, 2022). In 2021, the given type of automobile had a market share of 64%. The shift’s pace is intimately tied to policy measures and a broad range of stimuli.
Moreover, besides the rapid adoption of ZEVs, there is also a series of reasons why Norway is a perfect market for electric vehicle manufacturers. The first factor is the developed infrastructure for vehicle charging. In this sense, it is vital to understand that a “well-organized charging network” is crucial for the long-distance travel of EV owners (Norwegian EV policy, 2022). By February 2022, Norway had over 470.000 electric vehicles and 4.000 automobiles that are able to fast-charge simultaneously (Norwegian EV policy, 2022). Even though electric vehicle owners recharge at home and do not require fast charging on a regular basis, they believe it is critical to have the alternative to fast charging if necessary.
The second factor that makes the Norwegian automobile market lucrative for EV manufacturers is the advantageous tax system. The overall idea that is conveyed through policies is that choosing ZEVs instead of high-emission vehicles is more financially beneficial. The Norwegian political parties strive to achieve full eradication of the latter with the help of the “polluter pays” concept (Norwegian EV policy, 2022). This way, owners of high-emission vehicles pay higher taxes than owners of EVs. Such an approach provides benefits for ZEV manufacturers since this tax system does not cause revenue loss.
In 2021, electric automobiles accounted for about two-thirds of new vehicles sold in the Norwegian region, with Tesla being the best-selling automotive manufacturer, as the nation strives to be the first to cut out the sales of gasoline and diesel vehicles. Like the Kingdom of Saudi Arabia, Norway also produces oil (Klesty, 2022). Yet, the former has promoted the transition to zero-emission automobiles by exempting battery electric vehicles (BEVs) from taxes levied on ICE vehicles. Such a tax reduction is projected to help raise total electric sales by up to 80% in 2022, earlier than the deadline of 2025 deadline to finish the transition from petrol and diesel-powered vehicles to zero-emission vehicles (Klesty, 2022). Gross vehicle sales in Norway increased by 25% in 2021 to a historical figure of 176.276 vehicles, with completely electric vehicles accounting for 65 percent of the total (Klesty, 2022). The market share increased from 54 percent in 2020. According to industry sources, electric vehicle sales in Norway might account for up to 80 percent of the overall market by 2022. Thus, it is evident that in comparison to the Kingdom of Saudi Arabia, Norway is the best market to enter for Rivian.
Most Appropriate Strategy for Expansion in Norway
As seen above, the largest electric vehicle manufacturer that dominates the Norwegian ZEV market is Tesla. Based on the competitive pressures that Rivian Automotive is likely to face in its expansion, among the strategies that would be most appropriate for expansion into the Norwegian target market are the strategies that focus on Rivian’s strengths. According to Porter’s Diamond Model of Competitive Advantage, Rivian has competitive advantages due to high demand, mild government policies, and firm strategies. In order to identify the further strength that needs to be amplified and weaknesses that must be eliminated, a SWOT analysis should be performed that allows comparing Rivian to Tesla.
Rivian’s Strengths
The first strength of Rivian is its membership program for EV owners. Rivian follows Tesla’s lead in establishing a one-of-a-kind customer experience with the Rivian Membership program. Nevertheless, the given program outperforms what Tesla is ready to offer. This can be considered a competitive advantage of Rivian Automotive Inc. The membership program of the EV manufacturer offers free unlimited charging through the company charging network (Rivian, n.d.-a). Moreover, the company provides assurance services, wherein Rivian will provide the customer with an expert to assist in recharging the EV.
Furthermore, Rivian automobiles outperform Tesla models in terms of off-road and all-weather performance. Off-road capability is one of the features of Rivian for electric vehicle owners (Rivian, n.d.-b). Tesla and Rivian both provide electric automobiles with exceptional on-road operating qualities. Rivian models, on the other hand, outperform Tesla models in terms of off-road capability. While both Tesla and Rivian might operate successfully in on-road conditions of Norway due to the high quality of roads, in the off-road condition Rivian is superior. Considering that this country has mountainous areas, Rivian EV models might be preferred over Tesla.
While both Rivian and Tesla manufacture purely EVs, the first prioritizes conservation and environmental protection. The Rivian Forever Fund invests 1 percent of Rivian’s stock in programs addressing climate change and safeguarding and restoring nature habitats (Rivian, n.d.-a). As previously stated, Rivian offers a membership program that allows car owners to charge their vehicles with the help of sustainable resources such as wind and solar power. In contrast, Tesla’s environmental reputation has suffered in the past years. Lithium is utilized in electric vehicle batteries and raises environmental and humanitarian problems in impoverished nations, including Bolivia, one of the mining points (Krauss & Kohut, 2021). Thus, one of Tesla’s failings has been its management of lithium mining.
Rivian’s Weakness and Opportunity
Nevertheless, it is crucial to accentuate the weaknesses of Rivian Automotive. When compared with its competitor, Rivian’s vehicle prices are much higher, costing around $70.000 for basic models (Rivian, n.d.-b). In contrast to Rivian, Tesla’s models cost around $50.000 (Tesla, n.d.). Yet, if Rivian aims to operate in Norwegian markets, it can utilize the benefits of taxation systems to lower the prices of the vehicles.
Thus, after analyzing the strengths of Rivian Automotive, it becomes evident that in its expansion into Norwegian markets, the business must focus on creating models that adapt to the country’s conditions and provide charging networks. Moreover, Rivian Automotive should consider implementing marketing campaigns that accentuate the environment-friendly approach of the manufacturer and its product. Lastly, the opportunities that are offered by the Norwegian government will be able to eliminate the weakness of the manufacturer; more specifically, tax exemptions might allow the business to decrease prices for electric vehicles.
Entry Mode for Rivian Automotive, Inc. into the Norwegian Market
Establishing a wholly-owned subsidiary through FDI is not an appropriate way for Rivian to enter the chosen target market. As for the entry modes for Rivian Automotive, Inc., it should incorporate a small-scale entry for several reasons. First, the firm has received a total of $1.5 billion in state and municipal incentives and loans for its upcoming EV manufacturing facility in the state of Georgia (CNBC, 2022). As per the company’s statement, they “may be unable to adequately control the capital expenditures and costs associated with [their] business and operations” (SEC, 2021, p.23). Moreover, the firm addressed the issues of “obtaining permits and approvals from government authorities” for direct sales and claimed that Rivian was not ready to accept such risks (SEC, 2021, p.28). As a result, the entry mode based on a launch of an entirely new subsidiary overseas can threaten the company’s financial well-being.
Other entry modes that will not be suitable for Rivian’s expansion are exporting, franchising and acquisition. First, Rivian will have less control over the business, operations, and maintenance of integrity and values when it comes to franchising. Additionally, the company states that “there are substantial automotive franchise laws in place in many geographies around the world, and [they] might be exposed to significant franchise dealer litigation risks” (SEC, 2021, p.28). As for acquisition, such an approach might also be costly to the enterprise (Mariadoss, 2018). Lastly, exporting will contradict the values and beliefs of Rivian since such market entry is not environmentally friendly, though it is among the cheapest strategies.
Thus, the suitable entry mode for Rivian Automotive Inc. is in partnership with local businesses. In this sense, there are numerous advantages for the business. First, it is noteworthy that local companies know the culture and overall preferences of customers and are acquainted with the policies and regulations (Surdu et al., 2019). International politics, legislation, and resources have an essential influence on international commerce (Mohr & Batsakis, 2018). Because there is no standardization in the legal and political environments throughout the world, Rivian must grasp the legal and political systems in Norway when making international commercial decisions. In this case, the strategic alliance will facilitate the process of local regulations’ incorporation. Aside from being perceived as a regional enterprise, Rivian will reduce financial risks (Mariadoss, 2018). Lastly, the local companies possess knowledge about the market, aside from knowing the language and culture (Tenzer et al., 2017). Establishing partnerships with other entities in overseas markets is more expensive than franchising or exporting. The risks of the business will be divided between two parties.
Conclusion
In conclusion, Rivian Automotive Inc. is one of the fast-developing companies which is taking one of the most significant market shares in the car industry. The expansion of the business can become successful in Norway and Saudi Arabia as Rivian is aiming to decrease their emissions and pay fewer taxes that are increasing in both countries. Moreover, the company can provide Saudi Arabia, which is suffering from low progress in moving to electricals cars, with the ability to change their governmental laws. The company is famous for its sustainability which can help the economy of these two countries boost.
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