Rimac Group made headlines in June after it raised €500 million ($537 million) in a Series D round led by Goldman Sachs and SoftBank Vision Fund 2. The deal valued the Croatian startup at $2.2 billion, prompting the question: How has this company succeeded where so many other EV makers have struggled?
Rimac, which merged its hypercar division with French supercar maker Bugatti in November, has taken a two-pronged approach the industry has not seen before: It’s continuing to make hypercars as Bugatti Rimac while using the knowledge gleaned from that process to develop technology to supply other automakers through its Rimac Technology subsidiary. Its client list includes Porsche, a four-time investor that now holds a 20% stake in the company.
Founded in 2009 in the garage of Mate Rimac, then a 21-year-old student, the company has become a Croatian sensation, one of two unicorns in the country, alongside Infobip, an IT and telecommunications business.
“I view their secret sauce as the complementary nature of the two businesses — how the test bed for the hypercar creates value for the B2B supplier,” said Stephen Beck, founder and managing partner of management consultancy cg42. “The two businesses feed off of each other without really competing against one another.”
The first car born of this venture is the $2.5 million Rimac Nevera hypercar, slated to come to market this summer. Rimac claims the 1,914-horsepower EV can accelerate from zero to 60 mph in 1.85 seconds, faster than any other production car and enough to catch the attention, or admiration, of other automakers.
But expanding beyond the hypercar niche is a strategic move designed to guarantee multiple long-term revenue streams that support its 10-figure valuation, especially as it plans to become a publicly traded company. Instead of focusing on making new EV models for mainstream audiences like other EV startups, Rimac has established itself as a crucial supplier of battery technology specifically around software optimization, advanced driver assistance systems and energy storage.
“As a specialist in electric hypercars, the tiny automaker has proven themselves to have a tremendous amount of engineering talent,” said Ed Kim, president and chief analyst at AutoPacific. “I can’t think of another niche automaker that also became a supplier to a larger automaker.”
In addition to Porsche, Rimac also supplies Automobili Pininfarina, Koenigsegg and Aston Martin with battery technology and other components for high-performance EVs. The latest round of funding has drawn attention to another Rimac shareholder, Hyundai Group, which invested $90 million in the company in 2019 and partnered with Rimac to develop battery-electric models for Hyundai’s high-performance N subbrand and a fuel-cell vehicle.
Rimac said the relationship with Hyundai, which had been rumored to end due to Porsche’s larger stake, is “all good,” but may be “limited in potential due to their market positioning and also their philosophy of doing a lot of stuff internally.”
“But, in general, we are working with many or most of the OEMs,” he added.
However, supplying so many different competitors can be a fraught balance. “What’s important to them is that our shareholders have nothing to do with the project,” Rimac said. “So if we do something for Porsche, Hyundai doesn’t know about it. If we do something for Hyundai, Porsche doesn’t know about it. If we do something for Ferrari, nobody knows about it.”
The Series D round will be used to nearly double Rimac’s current workforce; build a $200 million, 25-acre campus for Rimac’s Zagreb, Croatia, headquarters, slated to open in 2023 and described by Rimac as the country’s largest such building; open new offices and facilities throughout Europe; and develop and produce hypercars, and eventually, tens of thousands of EV components each year.
A cornerstone of the expansion is to grow its international talent network. “In Croatia, we have access to smart, good young people, well educated, but there is absolutely zero experience [in automotive manufacturing],” Rimac said.
The half-billion in funding, which poises the company to scale quickly, “speaks volumes,” said Edgar Faler, senior industry analyst at the Center for Automotive Research. “If they have access to capital, there’s obviously folks that are believers in their business model.”
“We see ourselves as more of a tech company than a car company, which we have also proved by delivering tech to the car companies,” Rimac said in a May briefing with reporters, sharing a rare glimpse into the company’s strategy. “We’re not selling just a component like a battery or something, but more of software-based solutions or data analytics and things to do with getting data from cars.”
However nimble, Rimac’s size creates supply chain challenges, especially for the electronics in short supply due to COVID lockdowns in China.
“Unfortunately, sometimes that means overpaying,” Rimac said. “Buying small, little components with huge, incredible premiums that are like 10, 20, 30 times more expensive than they would normally be.
“You would think as a small-volume manufacturer we don’t have a bunch of supply chain issues because we don’t need millions of components,” he added, “but because we have this high level of vertical integration, as soon as you miss one component, you are stopped — you cannot move forward.”
Overall, Rimac’s supplier business is not especially suited to mass-market EVs, he said.
“For bread-and-butter cars, the car companies will do it themselves, or with very, very big suppliers, like LG or CNTL that are much better than us at doing things like that,” Rimac said. “We will be more of a partner for those cars where it really comes down to performance and range and weight and in space. So when they want to compete with the best, when they want to compete with Tesla or some of the U.S.-based startups which make those things in-house, they usually come to us.”
Though Rimac is in high-growth mode, it’s avoiding the temptation to shortcut the route to a traditional IPO by merging with a publicly traded shell company known as a SPAC. Instead, it is preparing for an eventual IPO when the time is right.
“There were lots of companies that are nowhere near our achievements that raise tons of money that have huge valuations,” he said. “At some point, we were thinking, ‘Are we the only crazy ones that are missing out on this opportunity?’ But we were always saying, you know, we have a 100-year horizon. We think really long term and we want to do really well.”
The company continued to grow as other EV makers folded, declared bankruptcy, shouldered scrutiny from the U.S. Securities and Exchange Commission and U.S. Department of Justice and saw their stock prices tumble.
“The market for all of these EV companies hasn’t been great in the last months,” Rimac said. “When everybody was doing a SPAC, we were like, ‘We don’t want to do this. This is crazy.’ And I was saying that publicly when everything looked very rosy for those SPACs that it’s going to end badly.”
“So I told you so,” he added.
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