In the world of vehicle manufacturing, not just EVs, bigger is usually seen as better for economies of scale. Gigantic centralized factories pumping out thousands of vehicles. What if there was another way? A new EV company on the scene is challenging that notion. Arrival’s microfactories are rethinking how an EV is built. Let’s take a closer look.

We’ve all seen images of the massive factories that pretty much every auto maker in the world builds out for themselves. From GM to VW and Tesla’s Gigafactories, they’re all doing it. It’s one the reasons that it’s so hard for new auto companies to break into the market. It can cost well over $1 billion to build out a new plant.1 2 That means a car company has to produce a huge volume of cars at that factory before it can realize a profit for the expenditure.

Companies like Tesla have used first principles thinking to challenge the norms for how to design and manufacture cars. Instead of retrofitting existing car designs and systems, they approached the design of an EV from the ground up, as well as the support structure around it. As a vertically integrated company they’re able to achieve performance and prices that the competition is struggling to meet.

We’re starting to see the fruits of that approach now, but even Tesla is using the gigantic factory approach for their business with Gigafactories to manufacturer their batteries, Model 3’s, Y’s, and pretty soon, Cybertrucks and Semis.

And that’s where Arrival comes in. In case you don’t know who Arrival is, they’re an EV company based in the UK that’s starting to expand out to the US. They were operating in stealth mode since 2015, but came out more recently with their products and approach. Instead of focusing on the consumer market, they’re starting with commercial vehicles like buses and vans, which is really an untapped market for EVs at this point. It’s also an easier market to get converted into electric since they typically have set routes, depots, and the costs savings from charging and maintenance speak for themselves with potential buyers. Arrival is expecting that commercial customers can see somewhere between 15% – 50% improvement in the total cost of ownership versus a diesel equivalent.

But it’s how they’ve designed and are manufacturing their vehicles that really caught my attention. Instead of going big they’ve gone tiny … or micro … with their factories that is. So what is a microfactory? Well, I had a chance to speak to Mike Abelson, the head of Arrival Automotive, which is responsible for the manufacturing and sales of the vehicles about just that.

“It is very different. I would say at its core, it’s this idea of distributed manufacturing that we want to be able to put the vehicle assembly plants, instead of one large plant in one city somewhere in the world, we want to put many of them scattered around the world. We want to be able to deploy them very quickly. In pursuit of this model, what we’ve done is we’ve developed a series of technologies in the company that enable this manufacturing approach.” -Mike Abelson

They’re going to be rolling out smaller plants close to the areas where the vehicles are being purchased and used. And they don’t have to wait years to take on the enormous task of building out a major factory.

“What we can do is purchase or lease a building that was built to be a warehouse and install all of our equipment in that building, and then have that building up and running as a microfactory in six months or less. This gives us enormous flexibility on where we site the microfactories, because we aren’t purpose building a building.” -Mike Abelson

“…besides being just a fraction of the size of a traditional factory, it’s a fraction of the capital investment as well. We announced the first bus microfactory will be in Rock Hill, South Carolina and we announced the investment with that plant was going to be $46 million.” -Mike Abelson

That’s a drop in the bucket compared to other new factory build outs and even converting factories over to electric production. Just look at GM announcing a few weeks ago that they’re spending $2 billion to transition their Spring Hill, Tennessee factory. A pretty stark contrast. While they’re producing very different types of vehicles compared to each other, and at very different scales, you can still start to see why microfactories caught my attention.

But the thing I struggled with at first was how they could possibly produce massive buses and vans in much smaller spaces. This is another area that caught my interest. The design of the vehicles themselves … they didn’t design them in isolation. They designed the vehicles and the factories hand-in-hand. That all starts with the composite material they use for all their vehicles.

“It is a proprietary material and process that we’ve worked on for some time. The reason it’s important in the microfactory is, one, it eliminates stamping tools. Most vehicles are made from stamped sheet metal and it eliminates painting because the color is molded into the material. When you look at a traditional assembly plant, the major areas of an assembly plant would be the press shop where the panels are stamped, the body shop where they’re put together into a vehicle body, the paint shop where the body is painted. Then what’s called general assembly where all the other parts are put to it. With this composite approach, we’ve eliminated the press shop and we’ve eliminated the paint shop.” -Mike Abelson

“Then finally, as far as what else is different in the design of the vehicle, we don’t use any welding. A typical automotive body structure is spot welded together. We use processes more from the aerospace industry, adhesives and mechanical fixings. All these things together enable this microfactory approach where wireless capex can be deployed into an existing building and can be deployed very quickly.” -Mike Abelson

When it comes to commercial vehicles like buses and delivery vans, you’re going to want something that stands up to daily abuse. Something that won’t show dings or dents. Something that can even hide scratches. The composite material they’ve designed hits all of those needs and more. It’s not going to rust or dent. If you scratch the side of a van, you’re not going to have to prime or paint it because the panel is the color it is. So a brown UPS van is brown through and through. And old panels can be fully recycled by grinding them into pieces, heating and remolding into a brand new panel.

“For a commercial fleet operator that spends a lot of money every year fixing cosmetic damage on vehicles, these composite panels are a huge advantage. You made one very important point that I want to emphasize. The only reason we can build these vehicles in microfactories is because they were designed to be built in microfactories. There’s no way to take a traditionally designed vehicle and suddenly be able to build it in a microfactory. You really have to, as you put it, design the vehicle, the product, with the manufacturing method in mind.” -Mike Abelson

The lack of stamping and a paint shop is a huge savings, which was helping me to wrap my head around how a microfactory could work, but I still had so many questions. They’re not manufacturing their own batteries, so they’re partnered with LG Chem as their battery supplier. They then assemble the modules and packs into the vehicles, so not everything is built on location. Each factory will obviously have onsite employees for assembly, and they expect the composite panel material manufacturing will also be on site. But again, my head kept spinning with images of long car production lines … Arrival is doing something completely different. They aren’t following the traditional linear assembly line approach.

“The technology we’ve pursued for microfactories is what we call a cell-based technology, where there are a cluster of robotic cells and each cell is optimized performing a specific operation.” -Mike Abelson

“Then the vehicle is carried on a mobile robot from cell to cell, but they’re not all strung together in a linear fashion. We can control them through software which cells the vehicle goes into in what order. We could have the vehicle going to the same cell more than once while it’s being assembled, or we could skip cells. It gives us enormous flexibility on what we can build in one microfactory and is one of the enablers for this much lower capital cost that we see with microfactories.” -Mike Abelson

But there’s an even more important aspect to the cell structure that gives it a distinct advantage over the traditional approach.

“To your point, with a traditional assembly line, if you need to add a station, you’ve got to shut the line down because you’ve got to be doing work on the assembly line to install additional equipment. With this cell-based approach, we would build a new cell somewhere in the factory and on day one, whenever we wanted to start using that cell, we modify the software to start sending the vehicles through that cell instead of whatever other cell they’ve been using before that. -Mike Abelson

Talk about being flexible and nimble during production. That brings me to one of the remaining open questions: delivery and output. The number of vehicles a factory can output really depends on the size of the vehicle. Something like a bus is going to take longer than a much smaller delivery van.

“It’s somewhat dependent on the size of the vehicle. In the case of the buses, we’re designing the microfactory to be able to build and assemble a thousand buses per year when the plant is operating on two shifts. Likewise, for the vans, we’re designing to a capacity of 10,000 vans per year on two shifts out of a single microfactory. I mentioned our first bus microfactory in Rock Hill, South Carolina. We also have our first van microfactory already announced. That’s in Bicester in the UK, just outside of London.” -Mike Abelson

“You have to remember when you think about an assembly plant there’s what’s called inbound logistics, which is shipping all the components to the plant. Then there’s outbound logistics, shipping the finished vehicle to wherever it needs to go.” -Mike Abelson

“Even though we ship the components and the materials to more locations, we can reduce our outbound logistics because the shipping from the microfactory to wherever the vehicle is going is shortened considerably.” -Mike Abelson

And finally, the question that has been banging around in my head: why aren’t other auto companies, even some of the newer ones, not taking the microfactory approach? Mike has a long history in the automotive industry and had an interesting take.

“…there’s a tendency in the auto industry to talk all the time about vehicles that are done with a clean sheet of paper. It wasn’t until I went to Arrival and saw what they were doing, what we’re doing now, that it became apparent to me, even though we’d say a clean sheet of paper, there were all sorts of assumptions that were hidden behind or underneath that sheet of paper.” -Mike Abelson

“…you have to remember, in the industry, they’ve got all these assembly plants. Typically they’re going to find ways to reuse the assembly plants that they have because they’ve invested billions of dollars in all these assets. I can argue to a degree it’s only a company that is really starting from scratch that has the ability to build something completely different.” -Mike Abelson

“I mean, in a way when you think about all the changes in the world and in industry over the last a hundred years, and yet the vehicle assembly line was invented about a hundred years ago, and we’re still using it, or at least the vast majority of vehicle manufacturers, they’re still using that as the fundamental way to put vehicles together. You just know there’s got to be a better way to do this than the traditional assembly line.” -Mike Abelson

The week before I talked to Mike the news came out that Arrival is going public on the NASDAQ, which is expected to bring in about $660 million dollars to aid in their build out and expansion. With a factory like the one in South Carolina costing $46 million, they should be able to build out a lot of microfactories to get started delivering the first vehicles. UPS is already on board with an order for 10,000 vans, so get ready to start seeing brand new, brown, UPS EV vans in 2022. I can’t wait.

And I’m going to hold Mike to this…

“Once we have a microfactory up and running, you’ll have to come and take a look at it yourself.” -Mike Abelson

“I would be there in a heartbeat. Just let me know when and where and I’ll be there.” -Matt Ferrell

“All right. Sounds great.” -Mike Abelson

I really want to see one of these factories in operation … and to see the vans and buses in person. Just to make my personal point of view clear on this, I’m not advocating for Microfactory over Gigafactory. I have no horse in this race. The only factor that matters is if a company can deliver cars, trucks, semis, buses, or vans. Can you get those EV wheels on the road at an affordable price? On that basis, a company like Tesla is starting to deliver on the promise, but Arrival still has to prove themselves. Will they succeed? I sure hope so because we need as many of these things on the road as possible. And I’m super impressed with how they’re approaching the problem with a truly novel solution. This is what innovation looks like … and it’s exciting.

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