Electric vehicle start-up Arrival faces delay to first working van

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British start-up Arrival is facing an array of setbacks including a delay of several years to its first saleable van, a recent vehicle fire witnessed by its largest customer, and a distracting side-project to make an electric jet, according to multiple people inside or close to the company.

Morale in parts of the business has sunk to “rock bottom” following the announcement of widespread job losses two weeks ago to preserve its dwindling cash pile.

This has led to looting of tools from one of the group’s sites and leaking of commercial information, the people say.

Concerns have also been raised over its unproven strategy of using small, highly-automated plants called microfactories.

While Arrival said it made a van in September that proves the system works, multiple people said the model in question was largely built by hand over several days.

The group also turned down a van order from Amazon that would have been worth billions because it contained an exclusivity clause, several people added. Amazon declined to comment.

Arrival founder and chief executive Denis Sverdlov accused those who provided information about the company’s problems of ‘betrayal’ © Simon Dawson/Bloomberg

After the Financial Times approached Arrival with a detailed list of questions, founder and chief executive Denis Sverdlov sent an internal message accusing anyone who provided information of “betrayal”. 

The message, seen by the FT, said leaks “cut down all that we have achieved to date and dishonour your own incredible work and the reputation of your colleagues”.

He added: “It is betrayal, which I don’t understand how, whoever did this can live with.” 

Arrival said some staff who were leaving may be disgruntled, but added there is a “motivated, passionate employee base” remaining.

Backed by Hyundai and once valued at $15bn, Arrival’s shares have collapsed since its 2021 Nasdaq listing. It is now valued at $444mn.

Dozens of electric vehicle start-ups have listed in the hope of emulating Tesla, but most have seen shares slide as they find making vehicles harder than expected.

Beginning production “is much more difficult than we thought, for sure”, Sverdlov told the FT in September.

When asked about its first model being built by hand, Arrival defended the process, saying its robots were used as planned and only parts of the operation had to be carried out manually, such as installing wiring.

The company also faces delays that have not been fully appreciated by investors, say multiple people close to or inside the business.

An Arrival electric van with the livery of delivery group UPS
An Arrival electric van with the livery of delivery group UPS, the company’s largest publicly disclosed customer © Arrival

Chief among these is developing a US van, which will be the company’s first commercial product after it ditched plans to sell a delivery vehicle in Europe, and shelved its bus and car projects to save cash.

Its European van, shown by the company at motor shows internationally, is not suitable for the US market. A new, larger model needs to be developed to pass US crash and official tests that could take years, three people said.

So far Arrival has built a US prototype, which does not fully function, two people said, and the business needs to raise more funding to develop the vehicle and build a factory in Charlotte, North Carolina.

Development work has not always been smooth.

A recent vehicle fire at its Banbury development site occurred when a van was being demonstrated for UPS, which is the company’s largest publicly disclosed customer.

No one was hurt in the incident in early September, but after the vehicle was wheeled out of the facility, the blaze melted part of the surface of the car park.

Although the company is now slimming global operations to cut costs, at one point it proposed expanding an office in Mauritius, where one of its executives has family commitments, and allowing staff to fly out and work from the tropical island several weeks a year, according to four people.

The axe on jobs has also fallen unevenly. While the business has announced “sizeable” UK staff reductions, a hundreds-strong software team in Georgia, relocated from Russia after the Ukraine invasion, were untouched by an earlier round of cuts over the summer.

In an all-staff presentation two weeks ago, seen by the FT, the company revealed it was also ringfencing funding for a previously undisclosed venture: making a jet plane.

The closely guarded plan was to make a commercial cargo plane or passenger vehicle, with a dedicated team based out of a business park in Feltham in west London and staffed in part by former executives from electric plane start-up Lilium, according to three people.

It is a “pet project” of Sverdlov, people said, and during 2020 had 26 staff, and £2.3mn in research and development costs, according to subsidiary accounts.

Robot technology used to produce the company’s electric vans
Robot technology used to produce the company’s electric vans © Arrival

“They saw lots of shiny things and tried to pursue all of them,” said one person close to the business.

Finally, the business has wrestled with increasing discontent from shareholders.

Company president Avinash Rugoobar had to break off from a US visit this year to travel to San Francisco and meet BlackRock, a cornerstone investor, according to two people. Arrival declined to comment.

Retail investors have also been turning up unannounced at its Banbury site, leading to a dedicated security guard outside the car park entrance.

This was mostly successful, although one shareholder recently gained access to the site by using the catering entrance, the people added.

“The issue with the company is it has mixed up aspiration and plan,” said one person who worked for the business. “They tried to bite off more than they can chew.”

Charlotte is in North Carolina, not South Carolina as stated in an earlier version of this story.

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