Q1 2025 Rivian Automotive Inc Earnings Call

At this time, all participants are in a listen-only mode. After the speaker's presentation, we will conduct a question and answer a session. I'll now turn the call over to Derek Mulvey, Vice President Finance.

Speaker Change: Good afternoon and thank you for joining us for Rivian's first quarter, 2025 earnings call. Today I am joined by Argyz Karinj, our CEO and founder, Claire McDonough, our Chief Financial Officer, and Javier Varela, our Chief Operations Officer.

Speaker Change: Before we begin, matters discussed in this call, including comments and responses to questions reflects management's current views as of today.

Speaker Change: We will also be making statements related to our business, operations, and financial performance that may be considered forward-looking statements under federal securities law.

Speaker Change: Such statements involving risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are described in our SEC

Speaker Change: During this call, we will discuss both gap and non-GAAP financial measures. A reconciliation of gap to non-GAAP financial measures is provided in our shareholder letter.

Speaker Change: Just before this earnings call, we published and filed a shared letter which includes an overview of our progress of the recent months. I encourage you to read it for additional details around some of the items we'll cover on today's call. With that, I'll turn the call over to RJ who will begin with a few opening remarks.

RJ Scaringe: Thanks, Doug. Hello, everyone, and thanks for joining us today. During our call, I'll highlight key developments in the first quarter and provide an update on the progress we're making against our value drivers.

RJ Scaringe: First I'm excited that Rivian delivered a second consecutive quarter of positive gross profit, with a gross profit of $206 million. This reflects an outstanding effort from the team and a continued focus on costs and operational efficiency.

Speaker Change: Gruner is now met the gross profit milestone with Volkswagen Group and expects to receive $1 billion in funding at the end of June , which Claire will provide more details on in her marks.

Speaker Change: Customers continue to love our brand, our vehicles, and our products. In the first quarter of 2025, R1S remained the best selling SUV with a starting price over $70,000 in California. In the R1S was the number one best selling electric SUV in the United States with a starting price over $50,000.

Speaker Change: Parter what customers love about Rivian is the seamless integration of technology into the product experience and the enhancements that come with our over the updates.

Speaker Change: One of our most critical technology focus areas which customers will start to see the output of is a Rivian autonomy platform.

Speaker Change: With the launch of our second generation platform, we entirely change the perception stack and compute. Our R1 vehicles now have 55 megapixels of cameras and more than 200 tops of onboard inference.

Speaker Change: We designed this platform around an AI-centric approach where the vertically integrated technology hardware has enabled us to build a data flywheel for training our model with an end-to-end approach.

Speaker Change: With the scale of our second-generation fleet growing, the strength of a robust sensor set feeding our data flywheel is enabling an important acceleration to our technology. The metaphorical plumbing for training our AI driving models is in place, and the resulting benefits are just starting to be seen.

Speaker Change: We believe control of the data flywheel and associate autonomy platform will be important for a timey development which we expect to have a greater impact on consumer purchasing decisions as you look towards the second half of this decade.

Speaker Change: We recently launched hands-free eyes on driving for our second generation vehicles for highway driving and this is the very start of a steady stream of ongoing enhancements which we plan to make. We are focused on delivering term by turn autonomy as quickly as possible, while expanding from hands-free eyes on to hands-free and eyes off.

Speaker Change: We believe eyes off functionality and autonomy in urban settings will enhance the overall product experience.

Speaker Change: Considering our broader AI work, including Rivian autonomy, there are several product and technology advancements which we've been working on but not yet shown or discussed.

Speaker Change: This is what we plan to host an AI and autonomy day. We'll share more of our product and our technology roadmap. I'm really excited to reveal more of what we're doing here.

Speaker Change: As Rivian continues to innovate through AI, I'm also excited to announce Aiden Gomez is joining our Board of Directors.

Speaker Change: Aiden is the co-founder and CEO of Cohear, and he brings extensive experience, enterprise-wide across AI and is a terrific addition to our board.

Speaker Change: In parallel to technology development, Rivian is making significant progress in R2, including the start of our validation builds and the continued work on a 1.1 million square foot expansion to our normal Illinois manufacturing facility.

Speaker Change: We also announced the construction of a 1.2 million square foot supplier park in normal for which much of the building construction is complete.

Speaker Change: This supplier park will help us further reduce costs for our normal production.

Speaker Change: Next year we plan to start construction on our Georgia facility, which is planned to provide an additional 400,000 units of annual capacity for R2 and R3 once fully built out. Rivian's long-term investment in technology such as autonomy, software, electrical hardware, and propulsion has provided substantial cost and performance advantages.

Speaker Change: For example, our development of the R1sonal network architecture and associated software is the foundation of what's going into R2.

Speaker Change: with the expected scale of R2. Our investments in this technology begin to build a structural cost advantage which is a core element of delivering R2 at a price point expected to start at $45,000.

Speaker Change: Rivian's enterprise readiness for R2 stretches beyond just technology, design, and manufacturing for the product. It spans the entire organization as your skill or systems, processes, and infrastructure for rapid growth.

Speaker Change: I couldn't be more excited for R2's launch. Last week I was driving an R2 prototype and the vehicle was just incredible.

Speaker Change: Looking externally, the global trade regulation and policy environment is also top of mind. This is complex, multi-layered, and rapidly evolving. It impacts our global supply chains, trade, and consumer sentiment.

Speaker Change: We have 100% US vehicle manufacturing and majority of our bill of materials, excluding cells or resources from the US or USMCA Qualified.

Speaker Change: However, we are not immune to the impacts of the global trade and economic situation which you expect to impact material costs, material availability, capital expenditures, and the demand backdrop.

Speaker Change: Importantly, as previously announced, the LG battery cells for R2 will initially be produced in Korea, but these cells are expected to be produced in Arizona starting by early 2027.

Speaker Change: With thousands of employees in the U.S. and more than two million square feet of new construction underway at our normal Illinois campus, Rivian shares the president's excitement in expanding domestic manufacturing capacity and continued U.S. technology leadership. I can't wait for R2 and the long-term potential of our mid-sized platform, which we will build in our Illinois facility and future Georgia facility.

Claire McDonough: Lastly, thank you to our employees, customers, partners, suppliers, communities and shareholders for this support. With that, I will pass the call over to Claire.

Claire McDonough: Thanks, RJ. I also want to thank our team for a tremendous quarter. As RJ mentioned in the first quarter of 2025, we achieved $206 million of gross profit, which resulted in the second consecutive quarter of positive gross profit. This fulfills the gross profit milestone associated with the next $1 billion of funding expected from Volkswagen Group in association with our joint venture.

Claire McDonough: This positive growth profit is the result of the hard work of our teams as we continue to focus on driving cost efficiency throughout the business. [inaudible]

Claire McDonough: Importantly, when we isolate the first quarter performance of our automotive segment, we generated positive growth profit, excluding the impacts of regulatory credits and depreciation.

Claire McDonough: While our gross profit levels may vary over the next few quarters, given some of the policy impacts we expect to experience, we believe this milestone is reflective of the progress we have made taking cost out and driving towards profitability.

Claire McDonough: As we look forward to launching R2, we expect a faster path to profitability as compared to R1. And we also expect that the volumes of R2 in our normal facility will help lower the total fixed cost per unit across all vehicles coming out of the normal plant.

Claire McDonough: In the first quarter of 2025, we produced 14,611 and delivered 8,640 vehicles from our manufacturing facility, which was the primary driver of the $922 million of revenue in the automotive segment.

Claire McDonough: As previously stated, first quarter deliveries decreased due to delivery of more EDVs than the seasonally typical during the fourth quarter of 2024, resulting in limited EDV delivery volumes during the first quarter of 2025.

Claire McDonough: This impact on automotive revenues was partially offset by increased average selling prices due to proportionately higher consumer deliveries as well as an increase in the sale of automotive regulatory credit.

Claire McDonough: Total Software and Services revenue for the first quarter of 2025 were $318 million, primarily due to new vehicle electrical architecture and software development services, remarketing sales, and repair and maintenance services.

Claire McDonough: Our total gross profit was 206 million dollars, our highest quarter to date, which includes 92 million dollars from automotive gross profit, and 114 million dollars from software and services gross profit.

Claire McDonough: R.A. Justin Ibadal losses were negative 329 million dollars as a result of the ongoing investment we are making to develop R2 and our key technologies as well as the continued growth of our sales and service infrastructure and organization.

Claire McDonough: These operating costs were partially offset by our $206 million of positive gross profit. As of March 31st, 2025, we had $7.2 billion of cash, cash equivalence and short-term investment.

Claire McDonough: In addition to this, we expect to receive up to $3.5 billion of incremental capital associated with our joint venture with Volkswagen Group.

Claire McDonough: Up to $6.6 billion loan from the Department of Energy associated with the build out of our Georgia facility and have access to $1.3 billion of availability under our ABL facility that we recently amended and extended through April 8, 2030.

Claire McDonough: Included within the $3.5 billion of incremental capital expected from the Volkswagen Group is a $1 billion investment related to the gross profit milestone we achieved in the first quarter of 2025.

Claire McDonough: Subject to customer closing conditions, Volkswagen Group is expected to invest $1 billion in Rivian common shares at a 33% premium to our stock price based on the volume-weighted average stock price from May 15th to June 27th, 2025.

Claire McDonough: The investment is expected to be funded on June 30th of this year.

Claire McDonough: We're also monitoring potential impacts on our production due to the export restrictions on rare earth materials coming from China.

Claire McDonough: We are actively monitoring these developments and working to mitigate potential risk through a variety of initiatives including strategic sourcing and proactive engagement with policymakers.

Claire McDonough: While we expect tariffs to impact our material and trade duty costs, with respect to batteries, we currently believe we have enough cells in the US for production through 2025 and into early 2026.

RJ Scaringe: In addition, we plan to source our R2-4695 cells from LG, which as RJ said, we expect will be manufactured here in the United States by early 2027.

Speaker Change: Well, uncertainties persist. We remain focused on executing against our key value drivers and our confident the global car park will fully electrify in the long term.

Speaker Change: Our guidance represents management's current view of evolving trade regulations, policies, tariffs, and the overall impact these items may have on consumer sentiment and demand. As a result of these impacts, we have revised our delivery outlook to 40,000 to 46,000 vehicles.

Speaker Change: Due to our strong first quarter results, we're maintaining our outlook range of adjusted EBITDA of negative $1.7 billion to negative $1.9 billion. We also continue to expect to achieve modest positive growth profit for the full year of 2025.

Speaker Change: In addition, due to the expected impact from curious, we are raising our capital expenditure guidance to $1.8 billion to $1.9 billion.

Speaker Change: We remain on track with the expected shutdown to both our consumer and commercial manufacturing lines in our normal plant for approximately one month in the second half of 2025 to prepare for the launch of R2 in normal in the first half of 2026.

Speaker Change: This is the first line of production for our new mid-size platform, and as a result, we intend to operate R2 on a single shift of production for the majority of operations in 2026.

Speaker Change: Thank you to our team for delivering a great quarter. We remain steadfast in our belief that our two will be truly transformative for our growth and profitability. I'd like to turn the call back over to the operator to open the line for Q&A. Thank you.

Speaker Change: For the Q&A section of today's session, we will be utilizing the raised hand feature.

Speaker Change: If you would like to ask a question, click on the raise hand button at the bottom of the screen. Once prompted, please unmute yourself and begin with your question.

Speaker Change: Our first question will come from Dan Levy with Barclays. Please unmute your line and ask your question.

Hi, good evening. Thank you for taking the questions.

Speaker Change: I wanted to first start with a question on batteries and a tariff impact. I appreciate the disclosure that

Speaker Change: You have enough cells to get you through them in early 2026, but...

Proud you can give us a sense. [inaudible]

Speaker Change: thereafter, what your strategy is, especially around LFP. I appreciate that you do have the cells for R2 eventually going to be from the U.S., but what's your strategy around LFP? Maybe you could just confirm, are the LFP cells tariffed?

Speaker Change: as an automotive product at 47.5% or as a non-automotive product at 145%.

Speaker Change: Yeah, thanks, Dan, for the question. Certainly we've been spending a lot of time

Speaker Change: Looking at just the overall landscape around trade, and certainly that has a big impact on-

from Battery Turs, for us.

Speaker Change: As you said, through the end of 2025, we have inventory that provides us resilience to ten increases in tariffs. As we look at 2026, very importantly, with the launch of R2, the 4695 cell that we're using.

Speaker Change: is initially sourced out of Korea but we've been for a while now working very closely with our partner on this which is LG.

to localize that into the United States. And...

Speaker Change: Starting in 2027, those cells will be produced in Arizona, and so that's outstanding for us in terms of long-term cost structure for R2.

Speaker Change: and then as it pertains to our one, both with the 2170 cells that we're using, as well as the LFT cells.

Speaker Change: This is something where we're actively working to address some of the changes in trade and we have the flexibility to be looking at alternatives and to be thinking around how do we evolve our self sourcing strategy for our one as we look at 2026 and beyond. This is what we're going to be looking at in the future.

Okay, thank you.

Speaker Change: A, that's $3,000, I think that's out there. What period is that, or what vehicle?

Speaker Change: and then D, if you could just talk to broadly how you see the cogs of R2 being impacted, so appreciate the battery commentary, but what other cost considerations are there R2, how dramatic this has changed the cost structure for R2?

Speaker Change: Sure, Dan. We expect the per unit direct impact from tariffs to be a couple thousand dollars for 2025 based off of the currently announced tariffs.

in place.

Speaker Change: and, as you can imagine, we're exploring a number of offsets to those cost increases, including strategic sourcing decisions, as RJ conveyed, related to some of the batteries over the longer term.

Speaker Change: and beyond those strategic sourcing decisions also have the opportunity to explore opportunities for us to see how we're deploying our incentive spend or drive improved mix, which will help.

Speaker Change: Further Offset, some of the impacts from terrorists themselves as well.

Speaker Change: Mabel, I'll invite Javier to jump in as well as we think about our two sourcing where there's certainly more opportunities in the longer term for us to strategically adjust some of our sourcing strategies and approach.

to mitigate some of the longer term impacts. [inaudible]

Yeah, I think you're blessed. [inaudible]

Speaker Change: We are sourcing from the U.S. and the U.S.N.CA-qualified region heavily.

Voders, some flows coming from overseas. [inaudible]

Speaker Change: For those flows, we typically use global suppliers that we have facilities in the three regions in Europe and Asia and in North America.

Speaker Change: and we still have time to relocate or study some of those flows in the next months before the launch of R2.

Great, thank you.

Speaker Change: Our next question will come from Adam Jonas with Morgan Stanley . Please unmute your line and ask your question.

Adam Jonas: Thank you, everybody. So first, RJ, I want to ask you about autonomy. The pressure to compete with Tesla just gets more and more intense as FSD makes for the progress. How are you going to catch them? [inaudible]

Adam Jonas: And that's them technologically with such a small fleet and less computing resources and having a later start on moving to end to end. And can you, how common are you can develop this in house or do you need an external partner to help speed things up?

Speaker Change: Yes, thanks, Adam. I appreciate the question. This is such an enormous focus area for us.

Adam Jonas: As I said, an opening remarks were we couldn't be more excited about this part of the business. It's an area we spent a lot of time on. [inaudible]

Adam Jonas: Getting the plumbing in place, meaning getting the right sensor set with our gen two vehicles at launch, so dramatic improvement in sensors, a lot of onboard inference in terms of the compute level in the vehicle, and then very importantly, that feeding our data flywheel.

Adam Jonas: and as we think about our performance and the need to grow our performance...

Adam Jonas: The data flywheel is really important. It's not just how many vehicles are out there, but also the quality of the data coming off the vehicles. So the very high performance cameras that we have. [inaudible]

Adam Jonas: that have great low light performance, great bright light performance coupled with a multimodality purchase sensors where we have five radars including a front imaging radar in the vehicle.

Adam Jonas: The allow us to make up for some of the fact that we have a smaller fleet, of course the fleet's growing, but make up for that with very high quality data, and then as you alluded to,

Adam Jonas: That training that happens for the offline model, the large perimeter model that's happening through the data that's coming off these vehicles. And so we've seen incredible performance. And so we've seen incredible performance. And so we've seen incredible performance.

Adam Jonas: with just that in place, we've just started to, you know, consumers are just starting to see some of the work that we're doing with the hands-free feature we just launched.

Adam Jonas: But over the next year, as both the fleet size grows, the data fly will I talk about continues to...

to ramp up further and further, and then the efficacy.

Adam Jonas: of this really rich data set where we control the triggering events, so what data we take?

Adam Jonas: and then we control what goes up, meaning we have every vehicle of course has LTE.

Adam Jonas: But the significant majority of our vehicles are also on Wi-Fi, so we can very cost effectively move data from our car park, you know, into the cloud and then therefore use it to train our model. So we're quite bullish on this. I think this data infrastructure I just described is very unique.

Adam Jonas: because we don't have any third-party camera systems or platforms that are in the middle of that that either outfuscate or create abstractions of the data. We have raw data that goes up and allows us to really use that effectively for an end-to-end model with a pure AI-centric approach. Thank you very much.

Adam Jonas: Thanks, RJ. And just a follow-up for Claire. You you called out rare earth supplies specifically and said that you will explore strategic sourcing to mitigate for rare for rare earth. [inaudible]

Speaker Change: which was so critical for the powertrain specifically. What exactly are you doing and can you do any event that China were to? [inaudible]

Adam Jonas: Makesourcing of such materials are the processing upstream that's available. I just want to know exactly what those efforts could be. Thank you.

Speaker Change: Yeah, this is a complex issue, you call out. It's something we're working on really, really thoroughly and given that a lot of the processing of

Speaker Change: of some of these heavy-rare metals that are used in magnets, which is particularly important for electric vehicle, which is using permanent magnet motors. You know, we're very close to the situation and

Speaker Change: And it's quite dynamic as we think about the overall trade environment. Now, saying that there are an array of different solutions to solve this, and I think importantly for us, as we look out in the longer term, planning for R2.

Speaker Change: Developing around heavy-rare free motors, so using different types of magnets that are more available, and of course no longer term, developing rotor assemblies that don't require rare earth metals.

Speaker Change: and so this has long been talked about as a technical topic. I think we're going to start to see the beginnings of that start to reach commercial deployment and certainly some of these trade challenges are going to accelerate that.

Thanks to our judges.

Speaker Change: Our next question will come from Shreyas Patil. With Wolf Research, please unmute your line and ask your question.

Shreyas Patil: Hey, thanks so much for taking my question. Just to clarify, I think Claire you've mentioned $2,000 per vehicle of tariff causes, I just want to make sure I heard that right. And then, does that incorporate the latest US manufacturing reimbursement program that the administration announced last week?

and it's so is the primary exposure. [inaudible]

as it relates to terrorists.

and then primarily on batteries.

Shreyas Patil: Shreyas, as I mentioned, we expected a couple thousand dollars of impacts per unit for 2025, and that does include the benefits from reimbursement that had been announced as well.

Speaker Change: And then you heard RJ talk a little bit about some of the longer term sourcing opportunities that we have with R2 being sourced out of the US facility with LG and longer term opportunities as we think about bringing more of our battery production on shore.

Speaker Change: Okay, great. And then I was wondering if you could maybe just help us God.

I think through.

some of the remaining material cost opportunities that you see. [inaudible]

Speaker Change: with R1 and then as we kind of transition to R2. I know Sue Laskwater, you had the launch of the Refreshed R1. It looked like Cox put unit further improved.

Speaker Change: into Q1 versus Q4. So I'm just wondering how much of that was material related and where you see additional opportunities, both for this program and then additionally for R2. Thank you very much.

Speaker Change: Sure, in Q1, we saw a $3.3,000 per unit improvement in COGS.

Speaker Change: and that was despite the fact that we had a higher concentration of our one deliveries in Q1 relative to Q4.

Speaker Change: And as you probably recall, our commercial van has a lower material cost associated with it. So to be able to deliver that level of improvement, despite some of the mix. And so to be able to deliver that level of improvement, despite some of the mix.

Speaker Change: was formidable in nature as a whole. And the key driver for us in Q1 was predominantly driven by some of the improvements that we've made in operational efficiency, as well as the fixed cost leverage that we had in the quarter given the higher production volumes would just over 14,600 units produced as a whole.

Speaker Change: and then as we look forward from here, while we certainly will have some increases from from tariffs that we spoke a little bit about, we do still anticipate seeing some raw material savings in the business as a whole as we work through the remaining quarters of 2025.

Okay, great. Thanks.

Speaker Change: Our next question will come from Joseph Spak with UBS, please unmute your line to ask your question.

Thank you, Ron.

Speaker Change: Claire, you mentioned, you know, auto, gross profit, ex-credits and depreciation, was-

Speaker Change: Joseph, and that's obviously a pretty good proxy for cash, close profit, so that's um...

Encouraging.

Hodgson was down quite meaningfully quarter over quarter. [inaudible]

Speaker Change: and it's really actually turned it down for a while. So, I guess I just want to understand what's driving that and how we should think about depreciation going forward because, you know, you guys are still investing so I would have kind of expected it to move the other way.

Speaker Change: Sure. So as you think about the dynamics of Q1, because we produce more vehicles than we delivered in the quarter, we absorbed more of our depreciation into inventory. And so that's one of the key drivers. If you looked on it on an aggregate basis. Thank you.

Speaker Change: including the depreciation that went into inventory that overall number still came down. However, a lot of what you're seeing in terms of the 75 million of cost related depreciation was driven by the absorption of that depreciation expense into inventory itself. Thank you very much for your time.

and then even more so it's on the balance sheet.

Speaker Change: Yeah, it's predominantly on the balance sheet. We'll start to see the appreciation pick that up once we start production of our two next year as well. You'll see.

Speaker Change: More of a steady-state run rate in aggregate, excluding some of these impacts from absorption into imagery, and then we'll see that I'll wrap that up with our two coming online.

Okay, and then...

Speaker Change: Maybe a good segue to the cycling question, which is, you know, you talked about the over-production. You're mentioning this, this couple thousand dollar per vehicle tariff headwind. I mean, it seems like that over-production probably helps you minimize the impact for the year, right? Since there was probably a more minimal tariff impact. [inaudible]

in the quarter, so...

Speaker Change: I mean, rough math, it seems like it should probably be under a hundred million dollar total impact for the year, is that all park correct? And I guess I just want to understand if that's changed versus the, you know, I think you should be mentioned last quarter a couple hundred million.

Speaker Change: Dollar Impact, undisclosed from what, but related to policy.

Speaker Change: Hijo, as you take a step back and look at the overall policy impact, the several hundred million of impact that we had baked into our original guidance.

Speaker Change: was related to chair-effects, vacation, consumer benefits from EV adoption, regulatory credit. So there was a much broader basket that is currently still the case, as we think about the overall impacts for 2025 as a year.

Speaker Change: However, as we look at the overall tariff impacts to your point, we had produced more vehicles than we delivered in Q1 to help offset some of the loss production in the back half of the year as we shut down our manufacturing facility for roughly a month to integrate.

Speaker Change: R2 into the plant. And so we'll have those vehicles which largely don't have tariff impacts associated with them to sell in subsequent quarters as well.

Okay, thank you.

Speaker Change: Our next question will come from Mark Delaney with Goldman Sachs. Please unmute your line and ask your question.

Mark Delaney: Yes, good afternoon. Thank you for taking my questions. With respect to reducing the full year outlook for deliveries, can you help us better understand is that based on weaker incoming order if Rivian has already been seen or purely an expectation that the market is going to deteriorate going forward as you think about tariff costs and the effects on pricing as well as the broader economy. Thank you very much.

Thanks, Mark. There's a lot of uncertainty. And, um,

Kertres, there's a challenging...

backdrop from a consumer demand point of view. [inaudible]

and what we're seeing is...

Yeah, that the...

Mark Delaney: Interesting, and our flagship product, R1, continues to be strong in that. You know, this is the R1 is the best selling.

Mark Delaney: premium electric truck or electric SUV, cross the whole United States over $70,000.

Mark Delaney: and it's the best selling premium SUV, electric or non-electric in the state of California. And so in terms of how our products are performing relative to

Mark Delaney: and, you know, alternatives in the market that we're doing extremely well, the challenges consumers are more price-sensitive than they typically are, very typically have been, I should say, and are looking for lower priced alternatives. And this is what makes us so excited about R2. [inaudible]

Mark Delaney: and the R2 price point starting at $45,000. You know, if you look at even just in Q1, the average across both R1 and our commercial van, the...

Mark Delaney: Albert Selling Price is $88,000, and that's with the Vans included. We have a very high ASP, which is a great thing on our flagship product.

Mark Delaney: But by virtue of that, the size of that market is just more limited and I think in this environment with the level of uncertainty, it becomes even more constrained in this backdrop. But if we can have a fraction of the success we have with R1 in the much bigger market.

Mark Delaney: that are two operating in, much, much bigger market that are two operating in, and we will be very happy.

Speaker Change: The telephone, hopefully, the new advertising campaign also is a step forward. I did like the one minute advertising campaign that you guys just launched.

Speaker Change: My other question was on regulatory credits. It came very strong in the first quarter. I'm hoping to better understand if the company still expects about 300 million of regulatory credit revenue for 2025, or does the strength that you saw in the first quarter apply some upside to the outlook there. Thanks.

Speaker Change: Thanks, Mark. We still expect to be roughly in and around the 300 million area for the year as a whole, as we look at the broader outlook for rent credit.

Javier Varela, Javier Varela, James Philbin,

Speaker Change: Our next question will come from Philippe Houchois with Jeff Reed, based on the airline and after question.

Yes, good afternoon.

Speaker Change: It's Fidi Pusher, Jeffries. Second follow up on the question from Joe Inventory. I'm surprised the Inventory didn't go up more than the 250 million considering the overproduction with Claire you just said about shifting some of the depreciation into inventory and also the fact you hold more batteries. Did you do any action to actually free up some capital from the inventory? I'm sorry.

Speaker Change: Sure, the dynamics that we saw in the quarter was both a reduction in our raw materials by about $220 million and then we did have a significant increase of roughly $563 million in our finished goods inventory as a whole.

Speaker Change: and part of that was, and maybe I'll have Javier jump in as well, but we're very focused on driving towards more lean manufacturing at principles.

Speaker Change: from a logistics perspective, but Javier is going to comment on some of the initiatives that he has. Yeah indeed. In the last month we have been focusing in accelerating the manufacturing implementation in our operations. Let's go.

focusing on the floor, compacting our processes, improving the workstations. [inaudible]

and Powering the Front Line to...

Poitiniusly Improv,

Speaker Change: The process and particularly in our just in time operations so we are heavily reducing our inventory in incoming material that they somehow not only in the plant but as well the flows that are coming from the suppliers to our plant in the crossdogs or whatever is on the on the trains are. [inaudible]

Speaker Change: Or in the in the tracks. So that's a great contributor to this cash free from I mean in relation to their working capital.

Speaker Change: Right, that's good to hear. Thank you. And then maybe follow up on your autonomy platform. Is that part of the technology you potentially share with Volts again? And particularly on using the Volts again, Volts you market share to acquire more data and the sensors?

Speaker Change: or is that separate? Thanks, Philippe. Yeah, our autonomy platform is entirely separate from our joint venture. The joint venture captures our operating system and software platforms across our zonal ECUs and also includes the zonal ECUs themselves.

Speaker Change: But doesn't include our in-house compute platform or compute stack or the perception stack that we've developed and of course not the foundation model in the work that's going into the software to drive our self-driving platform.

Great, thank you very much.

Speaker Change: Our next question will come from Edison U with George Fanks, please unmute your line and ask your question.

Edison Yu: Hi, thank you for taking our questions. I wanted just to confirm one thing on the comments about tariffs as a relates to R2, is the is the current thinking that if the existing regime, tear off regime stays that. [inaudible]

Speaker Change: We would not be impacted in the timing of the SOP and also the starting price that we're aiming for.

Speaker Change: This is a, you've heard a, say a few times here, this is just a dynamic situation, so I want to make sure we reflect that, but we're not planning changes in our, our $45,000 starting price, this is important for us.

and there's a number of...

Speaker Change: , and . . . . . . . . . . . .

Speaker Change: Good morning, if you will, we have the time to respond to the new policy framework that we're operating within.

Speaker Change: It's very clear the presence and intentions and we're very supportive of that in terms of driving more manufacturing to the United States. We're of course doing that already with our normal plant and with the plant that we're also building in Georgia, but we're also driving that into our supply chain as heavily and aggressively as we can. Thank you very much.

Hooster and Stead, and then follow up on autonomy.

Speaker Change: I wonder if you could share your latest thoughts on the economics of that and. [inaudible]

Speaker Change: It could, you know, I guess there's two elements, there's a cost of getting there and there's the sort of monetization and if there's any kind of more updated numbers, you could share perhaps on, if you know, you know, the pricing, this could ultimately be, would it be similar to FSD, would there be subscription offering something along those lines? Thank you. Thank you.

Speaker Change: I think this is a part of a business that's going to evolve a lot over the next five years and the way we think about it is, first and foremost,

Speaker Change: The increasingly customers are going to want to see higher levels of autonomy. I said this earlier in my opening statements.

Speaker Change: Just around the importance of going from a hands-on, eyes-on approach to hands-off and then very soon hands-off eyes-off which is where you get your time back. You can use the time to be on your phone, reading a book, doing something else. [inaudible]

Speaker Change: with the hands off, eyes off, and then ultimately having that work across any type of road. So urban, highway, and so we see this is really critical from a customer experience point of view.

Speaker Change: and in the way these systems are developed now is so different than what the world looked like just a few years ago with your transformer based encoders and using an end to end training approach where

Speaker Change: We're building truly an AI-centric approach and think about like a foundation model in the LLM world where there's a large parameter model that we understand how the vehicle operates within the physical world and the distilled version that runs in vehicle on our inference platform.

Speaker Change: and so we're very bullish on the technology. We think the changes that have happened in terms of use of transformers is completely shifted how we look at this just in the last couple of years.

Speaker Change: It requires vertical control of the sensor set, meaning it's impossible to design a system that has multiple third parties that are providing sensors or creating any layers of abstraction amongst those sensors.

Speaker Change: And so with all that said, we really believe this is going to be a key buyer driver for customers, not a question, is how's that value get?

Speaker Change: Harvested, so does it show up as...

Speaker Change: An incremental paid feature. Does it show up in vehicle pricing? Does it show up in market share? I think it's yet to be seen. We certainly have lots of hypotheses internally, but ultimately it's going to show up as value to the business in some way. And it's interesting watching. [inaudible]

Speaker Change: The difference in the ecosystem here in the West or in particular in the United States versus the ecosystem that exists in let's say China. And what we're increasingly see happening in China is that the self-driving features and capabilities are being used to drive market share. They're being used to drive sales. They're being used to drive sales. They're being used to drive sales. They're being used to drive sales. [inaudible]

Speaker Change: That is a path it could go, but it really depends on the competitive landscape if there's only one or two brands or one or two companies that have a type of capability. We may see it show up more as a paid, paid feature.

Thank you.

Speaker Change: On next question, we'll come from George Gianarikas with Canacord Genuity. Please unmute your line and ask your question.

Good afternoon. Thank you for taking my questions.

Speaker Change: If there's a debate around how to increase EV adoption, obviously you're bringing the R2 and our 3D market to help

Speaker Change: Some companies in China are introducing faster charging batteries with likely faster battery degradation as well. We obviously need more charging network density. Can you sort of talk to us about any technologies you're trying to bring to market to make that happen maybe you're on batteries.

Speaker Change: to improve EV penetration in the US and the West. Next.

Speaker Change: You know, thanks to the question, George, I love this question. I think it's an important one. I think there's a few big elements here and end.

Speaker Change: One could debate what's the most important or the biggest but in our view there's in the United States in particular there's a pretty extreme lack of great choices and when I say an extreme lack of great choices in particular price points that start below $50,000

Speaker Change: and in order for us to see large scale adoption electrification, we need to have enough selection in terms of brand, the design or the look of the vehicle, the form factor, the segment.

Speaker Change: and if you think about it in terms of consumers coming out of ice vehicles and finding their way into EVs,

Speaker Change: There's hundreds of choices you have in the ice world for products under $50,000, and there's a very, very small number of compelling choices of EVs under $50,000, and there's an even smaller subset of different form factors.

and so...

Speaker Change: as a result of that lack of choice, we've seen significant market share consolidation with Tesla, and it got great products with the Model 3 Model Y in that price category, but the market needs more choices, and this is why we're so excited about R2, we really believe

Javier. This is something that will give consumers an alternative that's...

Speaker Change: and a choice that's really interesting. It's going to help pull more people we believe.

out of internal combustion until electrification.

Speaker Change: You know, I spent a lot of time in the product. I was just just in Arizona driving it. It is absolutely incredible. The dynamics.

Speaker Change: The function, of course for us knowing all the work that we put into, optimizing the way it's manufactured from a call structure point of view. I just couldn't be more excited about what's coming with R2.

Speaker Change: But saying that, there's other elements here, and I think building out charging infrastructures is an important one, you know, for us, you know, within Rivian is what we've done is we have a relationship with Tesla, allows our customers to use the Tesla network, but we're also building out our own network. In fact, we referenced it.

Speaker Change: in our shorter letter, but this is a, our network is...

Speaker Change: There's really only two networks that have the level of uptime.

Speaker Change: that we have, Tussles Network, which is outstanding in our network, which is we have over 700.

700 Chargers, the uptime is...

Higher than 98%

Speaker Change: and so consumer reports actually called out specifically our network as being incredibly performant and you know very easy to use which is great to see. So we're continuing to scale that network. It's an open network so it's also revenue generating which helps build the acceleration of the flywheel of you if you will of that network being expanded.

Speaker Change: and I think the last piece, which actually ties to the question it came up before, is not for technical reasons, but for

Speaker Change: But in some ways by coincidence, autonomy and electrification are often interlinked. And so I do think the growth of a ton of features.

Speaker Change: and what we're going to see as we look out into 2027 and 2028 will help draw more customers into electric vehicles. Certainly, we feel that way about our own products. And so we're quite bullish on what that will represent in terms of driving consumer behavior. [inaudible]

Speaker Change: Thanks, and maybe as a follow-up on the Volkswagen JV, can you tell us if any other OEMs have possibly approached you to collaborate? Thank you.

Speaker Change: Yeah, we've, I mean, Claire and I both referenced it, our second consecutive quarter profitability with the $206 million gross profit for Q1 does unlock an additional $1 billion in financing from Volkswagen Group, so that's...

Speaker Change: That's outstanding, but the relationship there continues to progress really well. Our teams are working very closely together. And even to the previous question.

I think...

Speaker Change: What has us so excited about this from a mission point of view is seeing our technology, our software stack, our our zone release you architecture seeing that deployed across a wide array of different vehicles and brands. [inaudible]

Speaker Change: is ultimately going to give customers choice and is going to help drive more adoption electric vehicles. And in the scale of it, you know, with Volkswagen Group being the second largest. [inaudible]

Vehicle Manufactional World is really enormous, and so...

Speaker Change: At this point, we're very focused on executing a lot of programs across the Volkswagen Group.

We've talked about this before, certainly were.

Speaker Change: Open to and in plan to engage with other OEMs, but at this point we don't have any additional guidance to say other than that we're focused on execution of all these exciting programs with InvokesWing Group. Thank you.

Thanks.

Speaker Change: An expression will come from Ben Kallo with Baird, please unmute your line and ask your question.

Javier Varela, Javier Varela, Javier

Hey guys, bye.

Speaker Change: Have you seen an uptick, just in the man from Emily Gorno, Tesla? And my second question is about

Yeah, the itter, as we...

Talk about consumer choice. [inaudible]

and Tesla's Got.

Speaker Change: You know, incredible set of products with the Model 3 Model Y. The vast majority of their volume is there, and the price point is quite a bit different than our flagship products, so our flagship product, ASP is roughly double Tesla's Model 3 Model Y. And so what you certainly do have some cross-shop, really R2 will be much more of a...

Speaker Change: similar product in terms of pricing, very different in terms of execution.

Speaker Change: and again jumping off the previous points I made around the need for product.

Selection and diversity choices. [inaudible]

Speaker Change: You know, the slate product is a very different consumer than a Rivian product, and...

Speaker Change: I'll always say this, I think it's really important that we have lots of choices and those choices are not all on top of each other in terms of price positioning, customer demographic, vehicle form factors, vehicle positioning. Thank you.

Speaker Change: I'm always pleased and encouraged to see new product concepts, new product ideas emerge and this is one that's certainly not at all playing in the same spaces where Rivian operates today.

Speaker Change: Our next question will come from Ronald, Joseph Kallo from Guggen Security, Stephen, Your Line and Ask Your Question.

Ronald Dusikow: Yeah, RJ, Claire, good afternoon, and thanks for taking my questions.

Ronald Dusikow: Maybe starting on the delivery guidance changes, any detail or high level commentary on if the reduction is primarily from vans or consumer vehicles and

Ronald Dusikow: Is there some supply risk baked into the reduction? I know you talked about rare restrictions, Claire, or is this solely what you're seeing in kind of the current demand backdrop? [inaudible]

We've talked about the just the level of uncertainty around

Ronald Dusikow: You know, how consumers are looking at the market and what that means for us in terms of overall demand backdrop. And I mentioned that just the price sensitivity.

Ronald Dusikow: with our current product set on the consumer side, being our flagship products with high SP.

Ronald Dusikow: We do think our two unlocks a huge amount of demand for us and we'll dramatically grow.

Ronald Dusikow: DeMannibal, I'm reproducing and because I had to improve our fixed costs across all of our normal facility, but as we then look at what does it mean for 2025, the guidance we provided reflects.

Ronald Dusikow: are just a view of how consumers are going to behave over the remainder of this year.

Ronald Dusikow: It also reflects what we expect on the commercial side, inclusive of our partnership with Amazon as a very close partner and working very much hand in hand to continue growing their fleet.

Ronald Dusikow: As we look at this across our supply base, we're absolutely considering.

Ronald Dusikow: Any impacts that the tariff environment will have on our suppliers from a cost point of view, but we're also looking at it from a supplier health point of view and making sure that we do all the work that we can to avoid any supplier options.

Ronald Dusikow: and these are having lived through a number of these already. We are very, we are acutely aware. [inaudible]

Ronald Dusikow: of the challenges of being short one part, you know, the vehicle has thousands of parts, but you can't leave a couple of parts out. And so our supply chain team has been forged through the supply chain crisis of 2022 and 2023.

Ronald Dusikow: and has actually, it's impressively jumped into action with what's happening from an overall trade point of view today. And we feel a lot of that training that happened in 2022, 2023 is proving to be quite fruitful right now.

Speaker Change: Yeah, I appreciate the color there. And then it's exciting to see some of your your R2 content start to trickle out on on social media. It seems like we're getting to the point where you're doing pilot production and it's starting to feel a bit more real. I guess maybe is there an update on retool retooling and production downtime and just for clarification, have you sourced? [inaudible]

Speaker Change: The capital equipment you need for the R2 already, or is that what some of the capital equipment inflation is for this year, just as we think about risk for the R2 launch?

Speaker Change: Yeah, I mean, we are, I am starting to trickle out some content and

Speaker Change: If it's not obvious, we are so excited about it and my excitement sort of bleeds through into some of the pictures we're putting out there, but yeah, we're we're.

Speaker Change: You know, when we look at the R2 program, this is well underway. So we're producing a pilot scale, we'll be called validation builds today, and in fact there's a picture of our pilot line in the Charler letter.

Speaker Change: Those vehicles are critical for not just validating the vehicle itself from an engineering design point of view, but also validating our suppliers and making sure that the processes are robust.

and it's for me it's um...

Speaker Change: He's really a meaningful step forward and it's hard to fully represent this year in words, but just the difference of...

Speaker Change: where the R2 program is today relative to its start of sales in the first half next year, compared to where R1 was at the same point in its launch cadence.

Speaker Change: The level of robustness, the rigor that we have from a testing point of view, the rigor and robustness that we have in terms of supplier bring up and plant bring up is just an interesting credible how much learning has been baked into this program.

Speaker Change: and a big part is, of course, the team that's grown, and that's at all levels, that's our leadership team.

Speaker Change: that's the platform leadership team and it's also seeing next minutes are COO with Javier. And so I'd like to invite Javier just to talk a little about some of the work that we're doing in terms of your question on capital equipment and the build out of the R2 plant. [inaudible]

Speaker Change: Yeah, I was with you last week, driving the car in Arizona, I put the tape.

and, you know, 35 years of experience launching cars.

Speaker Change: Tomative Industry, and I can tell you that the dynamic status that we have in this car is amazing. It was awesome and very fun to drive. We had a really great time.

Speaker Change: When it comes to the prototype builds, they are on the way that design the validation build is how we call it.

Speaker Change: and for the equipment, the building, we are increasing the footprint in normal, so the building that will host...

Body Shop, and Assembly is finished.

and now we start implementing the processes inside.

All the equipment is sourced. [inaudible]

Grrr...

Speaker Change: The test in the equipment maker is ongoing for shipping it. We typically test and we calibrate the equipment there.

Speaker Change: And related to the downtime you were referring, we'll have that downtime in the second half of the year. And that's to integrate in the paint shop that we currently normal delivers R1 in advance to integrate the R2 in there. So these requires a heavy work in an existing flow requires a downtime. And again, it's underway. There's still work during the weekends to prepare some of the still working in that paint shop.

Speaker Change: but the big transformation will come in in the second half, in that downtime that will be executed as planned.

So overall I'm great the progress in the...

Speaker Change: As excited as everyone to get the car out in the roads and a great team behind, I'd really appreciate it and I would take the opportunity to thank all the teams for the great efforts and capabilities in place.

Speaker Change: Yeah, we're excited for as well. I appreciate all the color. Thanks. Thank you.

Speaker Change: Our last question will come from Ite McCally with TD Cowan, please unmute your line and ask your question.

Speaker Change: Great. Thank you. Good afternoon, everybody. Just had two clarifications back to the autonomy platform. First, are you still in track to launch eyes off in controlled conditions next few, maybe talk about kind of what you need to see to do that? And secondly, with R2, should we think about that, having a standard economy hardware system, or could we see potentially different iterations on that platform, depending on the trend level? Thank you.

Speaker Change: yeah we are we I referenced it a couple times but we just

Speaker Change: Put in place a hands-off eyes-on feature, meaning your eyes are here. You stop to be looking at the road, but your hands can come off the wheel.

for highway application. That's going to broaden.

Speaker Change: to more urban roads as well. But importantly, moving to hands-off eyes off. So what you might call it true level three is something we're very focused on in delivering that in specific environment, starting with highways next year is really key for us. [inaudible]

Speaker Change: Now on the R2 side of things, we do have a slightly enhanced perception stack that's going on R2 relative to R1. R1, R1, R1, R1, R1, R1, R1, R1,

Speaker Change: So, it's a 65 megapixels of cameras, so we've made further improvements in our camera set, relative to our one NFS.

Speaker Change: noteworthy because the R1 camera set today is the highest performing.

Speaker Change: Cameraset that's on any vehicle sold in North America. Now, more megapixels than any other vehicle. The dynamic range on those cameras is just incredible. When I say dynamic range, I mean the performance in very low light conditions or in very bright light conditions.

Speaker Change: and I referenced this one as responding to Adam's question earlier, but...

Speaker Change: that breath of performance with the cameras and then feeding that entirely.

Entirely owned a set of signals. [inaudible]

Speaker Change: into our platform allows us to really accelerate the training with this really high

Speaker Change: Particularly when it's combined with the radar set that's on the vehicle. So we have four corner radars that are traditional.

Speaker Change: Pretty straightforward radars, but the front center radars and imaging radar. [inaudible]

Speaker Change: So it gives us X, Y and Z and that provides a really nice additional modality for which we're training our system and we think about these end-to-end models being trained.

Speaker Change: The more robust the data set, the faster we see progress. And in fact, it's been helpful to see that same phenomenon play out in the LLM space. [inaudible]

Speaker Change: where the quality of data has become increasingly important, so how the data is selected, partitioned, and fed into the model becomes really key. So with all that said, we don't envision having an R2 that doesn't have...

Speaker Change: A very robust autonomy platform built into it because we think it's such a critical part of the customer experience and is. [inaudible]

Speaker Change: You know, as we see what's coming with the feature set, we don't envision our products not having that level of capability.

That's all very helpful. Thank you.

Speaker Change: This includes the question and intercession of the call. I would now like to turn the call back to RJ Scaringe for closing remarks.

RJ Scaringe: Thanks everyone for joining us today. This is a really exciting quarter for us being the second quarter of...

RJ Scaringe: Posagross Margin, and our highest gross margin to date with $206 million. $20 million.

We're excited to continue driving cost efficiency throughout the business.

and even more so to see the effects that...

RJ Scaringe: R2 will have on the business in terms of the increased scale, sharing more of the fixed costs of our normal facility and therefore driving even higher levels of gross margin profitability and ultimately profitability for us to the business.

RJ Scaringe: on driving forward in terms of our economy platform. This is something that it took years of time to implement in our Gen 2 platform in terms of their hardware topology. [inaudible]

RJ Scaringe: and we're now just at the beginnings of seeing this nonlinear growth rate in terms of capability and features.

RJ Scaringe: and we'll continue to talk more about this as I said earlier. We're going to be having an autonomy and AI day in the fall and

RJ Scaringe: In that we'll provide a lot more visibility and details into our technology stack, both the hardware side of things, as well as the software and provide demonstrations of what some of this roadmap looks like, and hopefully everyone can see why we're so excited about this internal effort.

RJ Scaringe: So with that, thanks again for the call and look forward to speaking with everybody next quarter.