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…ved slower than we thought, but the economics are so advantaged that we're really clear in it long-term being a big space. Do you already sell those vans to others? Will you sell those vans to others? Yeah, we just started about a year ago selling to others, but the ramp up has been slow. When you think of large operators of vans, very often these are not the companies that are going to take the biggest risks on technology or be on the front edge of early adoption. So we think of it as they take smaller steps with pilots, prove the model, prove that they can support the charging infrastructure, and then once they see the economic advantage, then I think many will make the switch. Going back to the Rivian story being a bit unlikely, the other thing that seems to me is getting reliable production going is really hard. And again, it feels like the first cars that roll off the line should be super janky and unreliable and everything like that. In preparation for this episode, I've been stealing my wife's Rivian. I've been really enjoying it. And it is—you were making fun of me because it's a used version that we bought, not a new version. So it's the ‘23 model, which is one of the earliest ones. And it's awesome and it works great and the build quality is incredible and things like that. And so again, that's the other part to me that feels unreliable in the story, just it feels like that's not where a hardware company usually goes. So how did you guys get the quality and reliability good out of the gate? Yeah, I mean one of the things that's so different about building a car company versus most software, most technology companies, and for that matter even how venture capital has been, how it's evolved and how it takes place is the first product of most startups, like usually a tech or software centric startup is pretty loose. It's there to demonstrate that the idea holds promise and it may not have scalability built into it, but it shows there's a product market fit. And then following that there could be more capital invested to grow it, to add robustness to the product. In the case of— Minimum bet size for you is really big. t shows there's a product market fit. And then following that there could be more capital invested to grow it, to add robustness to the product. In the case of— Minimum bet size for you is really big. So in a vehicle, your first dollar of revenue takes many billions of dollars of development and the thing you launch needs to be incredibly robust. And so that means multiple winters of testing, multiple hot summers where you're testing vehicles in the desert, and a very large durability and reliability team set up to run this. And there's cultural challenges when you think about building a new company. One of the strengths of a new company very often, and I think what allows startups and entrepreneurs to excel is they're willing to try new things as businesses, that gets embedded into the culture. There's a certain move fast and break things mindset, and that's great for technology, it's great for pushing boundaries, but it's very different than the skills and the cultural mindset you need to run stable operations, where let's say if you're running a manufacturing plant, you need repeatability, you need a lot of process orientation. And so just for us, this step of going from a product development company, developing new technology, making prototypes, which are wonderful, and demonstrating that those prototypes are capable and then transitioning that into a production system that can scale and has high quality and robustness built into it. It took a lot of work. It was hard. But the first version of many hardware products have a lot of teething pains. Did the R1 have a lot of teething pains? Did you guys do something different to avoid that? Well, for us, we launched, we made a few. If I could go back in time, I probably would change one thing. We launched a truck and SUV, so the R1eT and the R1S—a sibling set of products. At the same time we launched a commercial van. We launched three different products at the same time and we were building out our plants starting in the beginning of 2020 and then launched in 2021. And so, trying to build out an industrial ecosystem, turn on a supply chain and then ramp a product is hard. Doing that in the middle of COVID is really hard. And doing that across three different product lines was extremely hard. And I presume you mostly just ate those cost increases because it doesn't make sense to spike the cost of the vehicle. Did you debate whether you should pass along the cost increases or eat them? Well, in parallel to this, of course inflation went really wild in 2022 into 2023. So the price of vehicles grew quite a bit in that same timeframe. And so we did add in reaction to that. We did have adjustments to our pricing, but we've tried to be really stable in pricing because it's always hard if your pricing's moving around a lot, it wreaks havoc on the residual market. It's not great. You can’t plan for car purchase. but we've tried to be really stable in pricing because it's always hard if your pricing's moving around a lot, it wreaks havoc on the residual market. It's not great. You can’t plan for car purchase. It's just really hard for consumers. We've tried to be really methodical with that. But saying all that, we had to sort of grow through ‘23, we resourced a lot of our bill of materials. We launched what we call Gen 2 of the vehicle—which you don't have—but is a meaningful step forward in terms of technology, but also a considerable reduction in the overall cost of the vehicle. And so finally, end of ‘24/beginning of ‘25, we started to hit a positive gross margin. So Q4 of ‘24, Q1 of ‘25, positive gross margin. We're extremely bullish on long-term profitability, but this business is really tough if you have disruptions to supply, just the fixed costs are really tough. What's the Gen 2 pitch? What's most exciting from a tech point of view? Is it autonomy? Is it something else? Boy, yeah, there's a lot there. We didn't change the exterior of the car much. So really we redid a lot of the interior, like the guts of the car. And the biggest change was on Gen 1, we designed and built all the electronics in the car, but we allowed for a number of the compute platforms to be specific to an area, like specific to a domain. The zonal architecture where you move to— Yeah, so the reason we did that at the start is we needed to move fast. So let's say you're on the body controls team, your timeline isn't necessarily the same as, let's say, the powertrain controls team or the vehicle dynamics team. And so we allowed the proliferation of a few different domains that we knew long-term would consolidate. But we made the decision because we said we own the whole software stack, we own the electronics, the consolidation will come in step two. And then with Gen 2 we went from 17 down to three. So now we have what we call an East zone controller, a West zone controller and a South zone controller. When you say controller, these are the computers and the integrated kind of systems management?…

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