Hyundai and Kia announced Thursday that they are investing $111.5 million in Arrival, a startup British automaker building electric delivery vans. The three companies will jointly develop vehicles and share know-how as Arrival scales up its operations and moves to put a vehicle on the market in the next few years.
Arrival was founded in 2015 and has 800 employees, but until now has been in “stealth mode,” revealing little about its business model or plans. But this deal is a sign it has been doing something right, says Michael Harley, an industry analyst with Kelley Blue Book. Major automakers rarely make such large investments in newly established companies. Moreover, Harley says Arrival is smart to target the commercial van market. Buyers who need fleets of vehicles care about reliability and durability, not style and leather seats, lowering the bar for entry. And they buy in bulk. “It’s an excellent space to be in,” Harley says. “They’ve decided to tap into the largest segment.”
Many electric-focused newcomers have crowded into the auto industry in the past few years, but Arrival has the goods to compete, says chief strategy officer Avinash Rugoobur. Most important, he promises its vehicles will be cheaper than their traditional, diesel-powered competitors, even if battery prices don’t continue to fall. He points to the startup’s simple design, vertical integration, lack of legacy costs, and the modular platform that will allow it to build a variety of models from the same basic bits.