Q2 2025 Rivian Automotive Inc Earnings Call
Derek Mulvey: These results are hosted by Rivian. At this time, all participants are in a listen-only mode. After the speaker's presentation, we will conduct a question-and-answer session. I'll now turn the call over to Derek Mulvey, Vice President of Finance.
These results hosted by rivian.
At this time, all participants are in listen-only mode.
After the speaker's presentation, we will conduct a question and answer session.
Operator: Good afternoon, and thank you for joining us for Rivian's second quarter 2025 earnings call. Today, I am joined by RJ Scaringe, our CEO and founder, Q2 Claire McDonough, our Chief Financial Officer, and Javier Varela, our Chief Operations Officer. Before we begin, matters discussed in this call, including comments and responses to questions, reflect management's views as of today. 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. Such statements involve risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are described in our SEC filings and the shareholder letter we filed with the SEC. During this call, we will discuss both GAAP and non-GAAP financial measures. A reconciliation of historical non-GAAP to GAAP financial measures is provided in our shareholder letter.
I'll now turn the call over to Derek molvi Vice President of Finance.
Good afternoon, and thank you for joining us for Ruby. And second quarter 2025 earnings call. Today, I am joined by RJ scaringe, our CEO and founder Clare McDonough. Our Chief Financial Officer and Javier, Varela, our chief operations officer
Before we begin matters discussion is this call and including comments and responses to questions with like Management's views as of today, 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.
Such statements involve risks and uncertainties that could cause actual results to differ materially.
Operator: Just before the earnings call, we published and filed our shareholder letter, which includes an overview of our progress over the recent months. I encourage you to read it for additional details around some of the items we will cover on today's call. With that, I'll turn the call over to RJ, who will begin with a few opening remarks.
These risks and uncertainties are described in our SEC filings and the shareholder letter we filed with the FCC. During this call, we will discuss both gaap and non-gaap financial measures. Our reconciliation of historical non-gaap to gaap financial measures is provided in our shareholder letter.
RJ Scaringe: Thanks, Derek. Hello, everyone, and thanks for joining us today. Over the past few months, we've made tremendous progress in R2 and our technology, including our autonomy platform. As we move closer to the start of production, our confidence in R2 and future variance underscores our long-term vision for scaling our business. We believe the technology and products we're developing will position Rivian as a market share leader. Our long-term view on electrification and the opportunity in front of us remains the same. However, there have been changes in the external operating environment that affect the nature of this transition. While we believe deeply in the long-term value drivers of our business, the policy environment continues to be complex and rapidly evolving. Changes to EV tax credits, regulatory credits, trade regulation, and tariffs are expected to have an impact on the results and the cash flow of our business.
Just before the earnings call, we published and filed our shareholder letter which includes an overview of our progress. Oh, over the recent months, I encourage you to read it for additional details around some of the items. We will cover in today's call with that. I'll turn the call over to RJ. Who will begin with a few opening remarks.
Thanks Derek. Hello everyone, and thanks for joining us today over the past few months, we've made tremendous progress, in R2 and our technology including our autonomy platform.
As we move closer to the start of production, our confidence are to and future variants. Underscores, our long-term vision for scaling, our business.
We believe the technology and products we're developing will position rivian as a market share leader.
Our long-term view on electrification and the opportunity in front of us Remains the Same.
However, there have been changes in the external operating environment.
That affect the nature of this transition.
What we believe deeply in the long term value, drivers of our business, the policy environment continues to be complex and rapidly evolving
RJ Scaringe: We remain focused on developing world-class technology and efficiently scaling our manufacturing capacity in the United States in light of these policy changes. As we look ahead, Rivian shares the administration's excitement in advancing technology development and manufacturing capacity within the United States. With all that said, having spent a lot of time driving R2, I'm more bullish on this vehicle than any product we've developed. I believe the product-market fit is incredible. The packaging, the technology, and overall value proposition set R2 up for meaningful share. R2 is a core focus for our team and a critical step to achieving our objective of delivering millions of vehicles per year. We are currently in the midst of our design validation builds, where we're building R2 vehicles on our pilot line.
Changes to EV tax credits, growth regulatory, credits trade, regulation and tariffs are expected to have an impact on the results and the cash flow of our business.
We remain focused on developing world-class technology and efficiently scaling our manufacturing capacity in the United States in light of these policy changes.
As we look ahead rivian shares, the administration's excitement and advancing technology development and Manufacturing capacity within the United States.
With all that said, having spent a lot of time driving R2, I'm more bullish on this vehicle than any product we've developed.
I believe the product Market fit is incredible, the packaging, the technology and overall value proposition set R2 up for Meaningful share.
R2 is a core Focus for our team and a critical step to achieving our objective of delivering millions of vehicles per year.
RJ Scaringe: These vehicle builds enable us to validate the performance and capabilities of the full vehicle, along with working with our suppliers on their ramp. Importantly, the quality of the build and associated software stability is incredibly high. We strategically invested in early development assets and new vehicles, which allowed us to advance development and supplier validation much earlier in the timeline as compared to R1. We've performed a variety of crash tests and component-level tests, as well as on-road testing with strong results. In preparation for our manufacturing validation builds later this year, we've completed the construction of our new 1.1 million square foot building in Normal, Illinois, which will house R2's general assembly and body shop. Our team is focused on installing and validating the equipment to support the manufacturing validation builds.
We are currently in the midst of our design validation builds, where we're building R2 vehicles on our pilot line.
These vehicle builds enable us to validate the performance and capabilities of the full vehicle, along with working with our suppliers on the ramp.
Importantly, the quality of the build and Associate soft software. Stability is incredibly High.
We strategically invested in early development assets and new vehicles, which allowed us to advance development and supplier validation much earlier in the timeline as compared to R1.
we've performed a variety of crash tests and component level tests as well as on-road testing with strong results,
in preparation of for our manufacturing validation builds later this year,
We've completed the construction of our new 1.1 million square foot building, in Normal Illinois, which will house r2's general assembly and body shop.
RJ Scaringe: In parallel to the progress we're making on R2, we continue to make improvements in AI and autonomy. We see autonomy as becoming increasingly important in a customer's purchase decision. By later this decade, we believe ultimately every new vehicle will need advanced levels of autonomy to be successful. Because of this, the development of our Rivian autonomy platform has been one of our most substantial and important focus areas. Our platform uses the high-quality data coming from our best-in-class onboard sensor set to drive our data flywheel for training our Rivian large driving model. We've already seen positive feedback from customers on some of the growing autonomous capabilities. We launched enhanced highway assist earlier this year and are seeing meaningful uptake in the usage of our autonomy platform.
Our team is focused on installing and validating the equipment to support the manufacturing validation builds.
In parallel to the progress, we're making on our 2. We continue to make improvements in Ai and autonomy,
we see autonomy as becoming increasingly important in a customer's purchase decision.
By later this decade, We Believe ultimately, every new vehicle will need Advanced levels of autonomy to be successful.
Because of this, the development of our rivian economy platform has been 1 of our most substantial and important Focus areas. Our platform uses the high-quality data coming from our best-in-class on board sensor set to drive our data flywheel for training, our rivian large driving model.
We've already seen positive feedback from customers on some of the growing autonomous capabilities.
RJ Scaringe: With our high-quality sensor set and a large amount of data collected from our vehicles every day, we believe we have the right ingredients to quickly establish leadership in the space. We plan to host our autonomy and AI day in December and look forward to sharing the progress we've been making. While we approach some exciting releases across R2 and our autonomy platform, last month we also launched the R1 quad motor, and the feedback has been incredible. We believe the quad elevates our R1 platform, which is already one of the best-selling vehicles in its class. The customers, journalists, and influencers who have had a chance to drive the new quad are seeing the unique combination of on- and off-road performance, advancements made with our Rivian autonomy platform, and software features that allow you to customize dynamics with our rad tuner.
We launched enhanced Highway assist earlier this year and are seeing meaningful update in the usage of our autonomy platform.
With our high-quality sensor set and a large amount of data collected from our vehicles. Every day, we believe we have the right ingredients as quickly established leadership in the space.
We plan to host our autonomy and AI day in December, and look forward to sharing the progress. We've been making.
We believe the quad elevates our R1 platform, which is already 1 of the best selling vehicles in its class.
RJ Scaringe: With the progress demonstrated this quarter, I can't wait for our autonomy and AI day, the launch of R2, and the realizing of our long-term scale potential with our midsize platform. I want to thank our employees, customers, partners, suppliers, communities, and shareholders for their support. With that, I'll pass the call over to Q2.
The customers journalists influencers have had a chance to drive. The new Quad are seeing the unique combination of on and off-road performance. Advancements made with our rivian autonomy, platform and software. Features that allow you to customize Dynamics, with our rad tuner,
with the progress demonstrated this quarter. I can't wait for our autonomy. And AI day, the launch of our 2 and realizing of our long-term scale potential with our midsize platform.
I want to thank our employees customers Partners suppliers communities, and shareholders for their support.
With that, I'll pass the call over to Clare.
Claire McDonough: Thanks, RJ. I want to echo our excitement for the upcoming launch of R2 and our autonomy and AI advancements. It is great to see our vertically integrated technologies go into our design validation build for R2. This is a key driver of the structural cost advantages we expect to achieve on R2 while also delivering fantastic performance and utility. During the second quarter, we produced 5,979 and delivered 10,661 vehicles from our manufacturing facility, which was the primary driver of the $927 million of automotive revenue. We saw a significant decrease in production volume compared to the first quarter as a result of a variety of supply chain-related complexities, partially driven by shifts in trade policy. We believe we now have visibility into these components for the remainder of the year.
Thanks RJ. I want to Echo our excitement for the upcoming launch of our 2 and our autonomy and AI advancements.
It is great to see our vertically integrated Technologies. Go into our design, validation builds for R2. This is a key driver of the structural cost advantages. We expect to achieve on R2 while also delivering fantastic performance in utility
During the second quarter, we produced 5,979 and delivered 10,661 vehicles from our manufacturing facility, which was the primary driver of $927 million in Automotive Revenue.
We saw a significant decrease in production volume compared to the first quarter as a result of a variety of supply chain related complexities, partially driven by shifts in trade policy.
Claire McDonough: Automotive gross profit in the second quarter was negatively impacted by lower production volumes, which resulted in approximately $137 million of fixed costs included in cost of revenues as compared to more normalized volumes. Automotive gross profit losses were $335 million. Our software and services segment reported another strong quarter with $376 million of revenue and $129 million of gross profit. About half of the revenue within software and services was a result of the software and electrical hardware joint venture we created with Volkswagen Group. We also experienced strong growth in gross profit contribution from remarketing, service, accessories, and charging. Our consolidated revenue was $1.3 billion, and gross profit losses were $206 million. Included in this was $185 million of depreciation and $37 million of stock-based compensation expense. Adjusted EBITDA losses for the quarter were $667 million.
We believe we now have visibility into these components for the remainder of the year.
Automotive gross profit in the second quarter was negatively impacted by lower production volumes, which resulted in approximately 137 million of fixed cost included in cost of revenues as compared to more normalized volumes.
Automotive growth profit. Losses were 335 million.
Our software and services segment reported another strong quarter with 376 million of Revenue and 129 million of gross profit.
About half of the revenue within software and services was a result of the software and electrical Hardware. Joint venture, we created with Volkswagen group.
We also experienced strong growth and growth profit contribution, from remarketing, service accessories, and charging.
Our Consolidated Revenue was 1.3 billion dollars and gross profit losses were 206 million.
Included in this was 185 million of depreciation and 37 million of stock-based. Compensation expense.
Claire McDonough: We saw a slight increase in overall operating expenses in the second quarter as compared to the first quarter, driven by the ongoing investments we're making to develop R2 and our key technologies, as well as the continued growth of our sales and service infrastructure and organization. We expect to see increasing operating expenses in the second half of the year as we advance R2 towards production and continue the build-out of our sales and service infrastructure to support R2's volumes. During the second quarter, we also strengthened our balance sheet. On June 30th, we received a $1 billion equity investment from Volkswagen Group at an effective price per share of $19.42, which represents a 33% premium to the $14.56 30 trading day volume-weighted average stock price.
Adjusted Eva doll losses for the quarter were 667 million. We saw a slight increase in overall operating expenses in the second quarter as compared to the first quarter driven by the ongoing Investments. We're making to develop our 2 and our key Technologies as well as the continued growth of our sales and service infrastructure and organization.
We expect to see increasing operating expenses in the second half of the year as we advance our R2 towards production and continue to build out our sales and service infrastructure to support our R2's volumes.
Claire McDonough: During the second quarter, we also refinanced our senior secured notes due October 2026 by issuing $1.25 billion of green secured notes at a rate of 10%, maturing January 2031. In addition to the $7.5 billion of cash and cash equivalents and short-term investments reflected on our balance sheet, we expect to receive up to an additional $2.5 billion of incremental capital associated with our joint venture transaction, as well as an up to $6.6 billion loan from the Department of Energy associated with the build-out of our Georgia facility. Turning to our 2025 guidance, we are maintaining our delivery guidance of 40,000 to 46,000 vehicles and our CapEx guidance of $1.8 to $1.9 billion. As a reminder, we plan to shut down our normal facility for approximately three weeks, starting in September of this year, to prepare for the planned launch of R2 in the first half of 2026.
During the second quarter, we also strengthened our balance sheet on June 30th. We received a 1 billion dollar, Equity investment from Volkswagen group at an effective price per share of $19.42, which represents a 33% premium to the 1456 Cent 30 trading day, volume weighted, average stock price
During the second quarter, we also refinanced our senior secured notes due October 2026 by issuing $1.25 billion of green secured notes at a rate of 10%, maturing January 2031.
In addition to the 7 and a half billion dollars of cash and cash equivalents and short-term Investments reflected on our balance sheet, we expect to receive up to an additional 2.5 billion dollars of incremental Capital associated with our joint venture transaction, as well as an up to 6.6 billion loan from the Department of energy associated with the buildout of our Georgia facility.
Turning to our 2025 guidance. We are maintaining our delivery guidance of 40 to 46,000 vehicles and our capex guidance of 1.8 to 1.9 billion dollars.
Claire McDonough: We anticipate the third quarter to be our peak delivery quarter of the year across both consumer and commercial vehicles. As RJ mentioned, while we believe our long-term opportunity to drive meaningful growth and profitability remains strong, some of the recent policy actions will have an impact on our results and cash flow of our business. This includes increased tariffs, which had a minimal impact during the second quarter, but are expected to have a net impact of a couple thousand dollars per unit for the remainder of 2025. In addition, due to changes in certain regulatory credit programs, we do not expect to earn revenue from these programs for the remainder of 2025. We expect total 2025 regulatory credit sales to be approximately $160 million as compared to our prior outlook of $300 million.
As a reminder, we plan to shut down our normal facility for approximately 3 weeks, starting in September of this year, to prepare for the planned launch of R2 in the first half of 2026.
We anticipate the third quarter to be our Peak delivery quarter of the year across both consumer and commercial vehicles.
Remains strong. Some of the recent policy actions will have an impact on our results, in cash flow of our business.
This includes increased tariffs, which had a minimal impact during the second quarter but are expected to have a net impact of a couple thousand dollars per unit for the remainder of 2025.
Claire McDonough: As a result of the changes in our regulatory credit outlook, in addition to our second quarter results, we expect our gross profit for the full year 2025 to be roughly break-even. We are also increasing our guidance for our adjusted EBITDA loss to $2 to $2.25 billion as a result of the modifications to our gross profit outlook. Our focus remains on cost optimization and efficiently scaling the business. We are actively studying tariff mitigation strategies to best position the company, especially as we look ahead to the Section 232 automotive tariff offset, which ends in April 2027. We remain steadfast in our belief that R2 and our technology development 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.
In addition due to changes in certain regulatory credit programs. We do not expect to earn revenue from these programs. For the remainder of 2025, we expect total 2025 regulatory credit sales to be approximately 160 million as compared to our prior Outlook of 300 million.
As a result of the changes in our regulatory credit Outlook, in addition to our second quarter results, we expect our growth profit for the full year 2025 to be roughly break even
We are also increasing our guidance for our adjusted EBITDA loss to $2 billion to $2.25 billion. This is a result of the modifications to our gross profit outlook.
Our Focus remains on cost optimization and efficiently scaling the business.
We're actively studying tariff, mitigation strategies to best position. The company as
Especially as we look ahead to the section. 232 Automotive tariff offset which ends in April 2027.
We remain steadfast in our belief that R2 and our technology development 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.
Derek Mulvey: For the Q&A section of today's session, we'll be utilizing the Raise Hand feature. If you'd 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. As a reminder for today's call, we will allow one question and one relevant follow-up. We will now pause a moment to assemble the queue. Our first question will come from Dan Levy with Barclays. Your line is open. Please ask your question.
For the Q&A section of today's session will be utilizing the raise hand feature. If you'd 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.
As a reminder for today's call we will allow 1 question and 1 relevant follow-up. We will now pause a moment to assemble the queue.
Our first question will come from Dan Levy with Barclays. Your line is open. Please. Ask your question.
Dan Levy: Hi. Good evening. Thanks for taking the questions. I want to start with a question I think that's probably on everyone's mind, which is just bridging from R1 to R2. And I think the obvious key here is the cost reduction. And you're saying you can cut the cost by more than half. But maybe you can just remind us again about what are the things in R1 that won't recur? And on the flip side, you're talking about things like sourcing and contracts that can help on R2. What is the conviction that you can get the required cost reduction from these items to get appropriate economics on R2?
Hi, uh, good evening. Thanks for uh, taking the questions. Um, I want to start with the question. I think that's probably on everyone's mind, which is just bridging, um, from R1 to R2. And I and I think the obvious key here is the cost reduction and you're saying you can cut the cost by more than half, but maybe you can just remind us again, you know, about what are the things in R1, that won't recur and, you know, on the flip side, you're talking about things like sourcing and contracts that can help on our 2. What is the conviction that you can get the required cost reductions uh from these items to get a
Appropriate economics on R2.
RJ Scaringe: Thanks, Dan, for the question. This is incredibly important and has been an absolute core focus for us as a business as we've been developing R2. And if you think about the cost on the vehicle, there's two major drivers. The first is our bill of material costs. So it's the cost we're paying all of our suppliers for the components going into the vehicle. And the cost of those components reflects how the vehicle is being designed, how the systems are being integrated. And we talk a lot about this, but our success in either consolidating parts or eliminating parts through design is a big enabler here. And we've previously said the bill of material costs on R2 is about half that of R1. And that's not a hope, that's not a wish. That's actually contractually negotiated with suppliers.
Thanks Dan for the question. Uh this is this is incredibly important. And um, there's been an absolute core Focus for us as a business. As we've developing our 2,
And you know, if you think about the cost on the vehicle, there's there's a 2 major drivers. The first is our bill of material costs. So it's the cost, we're paying all of our suppliers for the components going into the vehicle.
And the the cost of those components reflects how the vehicle is being designed, how the systems are being integrated. Uh, and we talk a lot about this, but our success in, in either consolidating parts or eliminating Parts, through design is a big enabler here and
We've uh we previously said, the bill of material costs on R2 is about half that of our 1.
RJ Scaringe: And so we've spent the last two years of development and time negotiating with suppliers to put in place contracts that we both selected suppliers that can scale with us and ramp appropriately, but also can deliver a much lower cost structure. But linked to that, of course, is then how the vehicle assembles. And so the cost it takes us to convert all those parts into a vehicle, or we often call it conversion cost, and then some of the non-bill of material costs, that's logistics, that's warranty accrual, that's some of the other items that feed in. And here, Q2 and I have both spoken about this. Q2, Javier, and I have spoken about this on these calls before, where we're projecting with a lot of confidence that that will be ultimately less than half of what it is on R1.
And that's that's not a hope that's not a wish that's actually contractually negotiated with suppliers. Um, and so we've spent, you know, the last, uh, you know, the last, uh, 2 years development and and time negotiating with suppliers to put in place, contracts, that we both selected suppliers that can scale with us and ramp appropriately, but also can deliver a much lower cost structure.
But linked to. That, of course, is then how the vehicle assembles. And so, the cost it takes us to convert all those parts into a vehicle where we often call conversion costs. And then some of the, the non-dimensional cogs, you know, essentially Logistics, uh, that's warranty acral. That's some of the other items that feed in.
RJ Scaringe: And that's really reflective of an incredibly high focus on ease of assembly, design for manufacturability, leveraging the many, many learnings that were born out of what we went through on R1. So simplified body architecture, simplified closure systems, further simplifications to network architecture and associated wiring harness. And in totality, what that gives us is a vehicle with a much lower cost basis, which supports the dramatically reduced pricing of R2. And of course, it should be said, R2 is a meaningfully smaller vehicle than R1. It does deliver on the brand promise of Rivian, but we've been very thoughtful in some of the content decisions we've made, where it's not as extreme in terms of performance or capability as what you see in R1.
And here, Claire and I both spoke about this—Claire Hobby and I have spoken about this on these calls before—where we're projecting with a lot of confidence that it will ultimately be less than half of what it is on our Q1.
and that's really reflective of
An incredible, you know, incredibly high focus on ease of assembly designed for manufacturability leveraging. The many, many learnings that were born out of uh what we went through on R1. So, simplified body architecture. Simplify closures closure systems for this simplification is the network architecture and Associated, uh, wiring harness
Lower cost basis which supports the the dramatically reduced pricing of R2 and if of course, it should be said, R2 is a meaningfully smaller vehicle than R1. It does deliver.
Javier Varela: And if I may add, RJ, today we have the R2 100% sourced. So it's a fact. We know the prices of our components, and we can confirm this 50% reduction.
On the brand promise of rivian, uh, but it, you know, we've we've been very thoughtful on some of the content decisions we've made where it's not as extreme in terms of performance or capability as what you see in R1.
And if I may add are there.
Today we have a, the R2, 100% source. So it's a fact, we we, we, we, we know the prices of our components and we can confirm these 50% reduction
Dan Levy: OK, great. Thank you. As a follow-up, I think related, you know, a year ago at your investor day, you outlined a path to EBITDA break-even in 2027. We've obviously seen a number of changes since then with a lower regulatory credit environment, as you're talking about, tariffs, the loss of the EV tax credit. So the question is, what are the areas in which you need to pivot the business now to still see that path to eventually reaching EBITDA positive? And how much more does this make licensing deals, other partnerships with automakers on the tech side, more of a necessity to ultimately get to where you need to be on the EBITDA margin side?
Okay, great. Thank you. Um, as a follow-up, I think related, you know uh a year ago at your investor that you outlined a path to, uh, ebit the break, even in 2027, but we obviously seen a number of changes. Since then with, you know, lower regulatory credit environment, as you're talking about terrorists, the, the loss of the EV tax credit. So question is, is what are the areas in which you need to Pivot the business now to still see that path to eventually reaching ebit that positive and how much more does this make?
Licensing deals, other Partnerships with with automakers on the tech side, more of a, a necessity to ultimately, get to where you need to be on the IBA margin side.
Claire McDonough: Thanks, Dan. As you know, our objective is to drive to positive EBITDA as a result of the full-year R2 production and strong software and services performance that are anticipated as we look ahead to 2027. And so as you look at the relative contributing factors there, while there certainly have been meaningful headwinds as we look at some of the policy implications that are in play today, relative to the conversation that we had about a year ago as part of our investor day, we're working across a number of cost efficiency initiatives in the business to drive and scale the business as efficiently as possible. And maybe I'll invite RJ to talk to some of the opportunities as we think about the continued growth and development of our software and services and future opportunities with other potential OEMs as well.
Thanks Dan, as, as you know, our objective is to drive deposit Eva dog. Um, as a result of the full year, R2 production and strong software, and services performance that are anticipated. As we look ahead to 2027.
RJ Scaringe: Yeah, we talk a lot about R2 as being such an important inflection point for us in terms of volume and scale, and of course, along with it, you know, significantly widening the aperture of the dressable market with its lower price point. But a lot of what feeds into that is the technology we're developing. And on the vehicle software side of things, of course, we have a joint venture and software licensing deal that we put together with Volkswagen Group that continues to progress really nicely. And to be able to deploy our software stack and associated topology of ECUs across such a wide range of vehicles in terms of price point, configuration, and market with Volkswagen Group really serves as an outstanding demonstration and really existence proof that we as a company are able to do that into a complex, large existing business.
And so as you look at the relative contributing factors there, well there's certainly have been meaningful headwinds as we look at some of the policy implications that are in play today. Relative to the conversation that we had about a year ago as part of our investor day, we're working across a number of cost efficiency initiatives in the business to drive and scale the business as efficiently as as possible. And maybe I'll invite RJ to, to talk to some of the opportunities, as we think about the continued growth and development of our software and services, and future opportunities with other potential oems as well.
yeah, we talked a lot about R2 is, uh,
being such an important inflection point for us, in terms of volume and scale and of course, along with that, you know, you know, significantly widening the aperture of adjustable Market with its lower price point but a lot of what feeds into that is the technology we're developing and uh you know on the vehicle software side of things, of course we have a joint venture and and software licensing deal that we put
Together with Volkswagen group that continues to progress really nicely.
and to be able to deploy our software stack and Associated topology of of ecus across, such a wide range of vehicles, in terms of price point configuration and Market uh with Volkswagen group really serves as a as an outstanding
RJ Scaringe: And so certainly, we do believe there's opportunities above and beyond the relationship with Volkswagen Group for further licensing of our software and technology. And then beyond that, we also see opportunities emerging with a lot of the work that we're doing in our autonomy stack. And we're investing very heavily into that. As I said in my opening statement, this is an area of the business that we're very excited about. Customers are going to start to see the fruit of a lot of this hard work that's gone in in terms of building a robust data flywheel. We put onto our Gen 2 R1 vehicles a world-class sensor set. We have more megapixels of cameras than any other vehicle on the road in North America.
Uh, demonstration and and really existence proof that we as a company are able to do that in into a complex large existing business. And so certainly, we do believe there's opportunities above and beyond the relationship with Volkswagen group for further licensing.
Of our of our software and Technology. Um, and then beyond that, we also see opportunities emerging with a lot of the work that we're doing in our autonomy stack,
And we're investing very heavily into that. As I said in my opening statement,
RJ Scaringe: We couple that with an outstanding imaging radar, and that's feeding a really powerful data training flywheel that's going to start to really show, demonstrate significant capabilities in terms of higher levels of autonomy. And so we do see that as another avenue for us in the long term. But you know, core to all that is to make sure that the technology we're developing vertically in-house with our teams remains really front of the curve. And if we continue to do that as we have, we do think there's a lot of opportunities there as well.
Uh, this is an area that business that we're very excited about customers are going to start to see the fruit of a lot of this hard work that's gone in. In terms of building a robust data flywheel, we put onto our Gen, 2 R1 Vehicles, a, a world-class sensor set, we have more megapixels of cameras than any other vehicle on the road in North America.
Uh, we we couple that with an outstanding Imaging radar and that's feeding a really powerful data training flywheel. That's
Uh, going to start to really show you demonstrate, you know, significant capabilities in terms of higher levels of autonomy. And so we do see that as another Avenue, uh, for us in the long term. But, you know, core to all that is to make sure that the technology we're developing, you know, verifying house with our teams remains
Really front of the curve. And if we continue to do that as we have, we do think there's there's a lot of opportunities there as well.
Dan Levy: Great. Thank you.
Great. Thank you.
Derek Mulvey: Our next question will come from Adam Jonas with Morgan Stanley. Your line is open.
Dan Levy: Hi. Thanks, everybody. My first question is on the $6.6 billion loan with the Department of Energy that's associated with the build-out of Georgia. Can you confirm, has any of that loan been drawn? And is there a scenario where you would decide not to draw on that loan? Because from the readings of the shareholder letter, I don't see much of an update on CapEx going into that, into the build-out at this point. But just maybe kind of where are we on that and what's your thinking on that loan? And then I have a follow-up.
Our next question will come from Adam Jonas with Morgan Stanley. Your line is open
Hi, thanks everybody. Um, my first question is on the 6.6 billion dollar loan with the Department of energy.
Claire McDonough: Sure. Thanks, Adam. So as it pertains to the Department of Energy loan, it's more of a construction finance project, finance-based loan. And so it does require Rivian to be deploying capital on site in Georgia. We have not yet started construction of the site. And so that precludes us from having the opportunity to draw on that loan as we sit here today. And as we look at the future roadmap, the attractive cost of capital that the Department of Energy loan affords Rivian is something that's quite attractive to us. So we do intend to draw on that loan as we look to expand our manufacturing base in Georgia.
Any of that loan been drawn and is there a, is there a scenario where you would, uh, decide not to draw on that loan? Um, because by the by the, from the readings of the of the shareholder letter, I don't see much of an update on on, uh, capex, uh, going into that, uh, into the build out at this point, but just any kind of where are we on that? And what you're thinking on that loan and then I have a follow-up.
Sure. Thanks Adam. So as it pertains to the Department of energy loan, it's it's more of a construction Finance, project, Finance, base loan and so it does require rubian to be deploying Capital on-site in Georgia. We've not yet started construction of the site and so that precludes us from having the opportunity to, to draw on that loan. Um, as as we sit here today and we, I, as we look at the, the future road map, uh, the attractive cost of capital that the department of energy loan Forge. Rivian is something that's quite attractive to us. So we do intend to uh draw on that loan. As as we look to expand our manufacturing base in in Georgia.
Dan Levy: OK, thanks, Q2. Just as a follow-up, you spun off Also Inc. in March of this year, your micro-mobility unit. You seem to have attracted some pretty serious talent to that unit as well. And I think there's probably more announcements to come there, I would assume. Aside from the minority stake held by Rivian, and maybe you can confirm how big that is, is there any other relationship between Rivian and Also Inc.? And how much time, RJ, are you spending on this entity with your current role as chairman? Thanks.
Okay. Thanks Claire. Um, this is a follow-up. You you spun off also inks in. March of this year, your micro Mobility unit, um, you seem to have attracted some pretty serious talent to that unit as well. And I think there's probably more more announcements to come there. I would assume the size of the minority stake held by rivian and then maybe,
RJ Scaringe: Yeah, thanks, Adam. We had a Skunk Works project within Rivian that was looking at essentially the question of how do we electrify the world? What's necessary? And a natural conclusion of that is, of course, there's markets like the United States and Europe that are very vehicle-centric. But not only within those markets, but beyond those markets, much of the world moves on things that look very different than cars, so two-wheel, three-wheel, even four-wheel quadricycle type products. And so the initial effort that when it was housed within Rivian was to look at ways that we could take this technology base that we developed and apply it into the micro-mobility segment. As we were doing that, we realized the market opportunity was very significant and, in fact, bigger than we had originally anticipated.
Can confirm how big that is? Is there any other relationship between rivian and also uh, Inc? And and how much time RJR you spending on this entity, uh, with your current roles chairman. Thanks. Yeah, thanks, Adam. We we, uh, had a skunkworks project within rivian. That was looking at
And a natural conclusion of that is.
Of course, there's there's markets like the United States and Europe that are very vehicle Centric.
But but not only within those markets, but beyond those markets, much of the world moves on things that look very different than cars. So, 2 wheel, 3 wheel, even 4 wheel, quadricycle type products. And so,
The the initial effort that when it was housed within rivian, was to look at ways that we could take this this technology base that we developed and apply it into into the micro Mobility segment.
RJ Scaringe: It took the decision to move that outside of Rivian, where Rivian is still a significant shareholder, but allow it to secure outside capital and allow its brand trajectory and company trajectory to look at markets differently, positioning differently than the Rivian product line. And what's been really interesting is just the scale of that in terms of what it represents in number of vehicles is really exciting. And so Rivian, as you said, is still a very significant shareholder, just under 50% ownership in this entity. But we continue to have a lot of the technology that Also is using leverages some of the core of what Rivian built. And when you think of the opportunity, I think there's going to be ways that we can be really creative where we see the Rivian product line and the Also product line coming together.
As we were doing that, we realized the market opportunity was was very significant and in fact, bigger than we had originally anticipated.
it took the decision to to, uh,
Move that outside of rivian rivian is still a significant shareholder.
but allow it to secure outside capital and allow its ranch trajectory and company trajectory to
To look at markets differently, positioning differently than the Rivian product line.
and what's been, um,
what's been really interesting is just the scale of that. Uh,
In terms of what it represents the number of vehicles is is really exciting. And so rivian, as you said is still a very significant shareholder.
Uh, you just under 50% ownership in this entity.
But we continue to have a lot of the technology that also is using leverages, some of the core of what rivian built.
and um,
RJ Scaringe: We often think about them as two Avengers who are both fighting for the same mission. If you want to electrify the world, of course, Rivian is part of that. We hope to inspire competition in the vehicle space. But we also, hence the name, we also need to electrify a lot of other things, two, three, four-wheel things. And that's why that company exists.
You know, when you think of the, the, the the the opportunity I think there's there's going to be ways that we can be really creative where we see the rivian product line and the also product line, uh, coming together. We often think about them as to a both fighting on the for the same Mission. Uh, if you, if you want to Electrify the world, of course, rivian's, part of that. We hope to inspire competition in the in the vehicle space.
But um, but we also hence the name. We also need to Electrify a lot of other things, 2 3, 4, real things. And uh and that's that's why that company exists.
Derek Mulvey: Our next question will come from Mark Delaney with Goldman Sachs. Your line is open.
Our next question will come from Mark, Delaney with Goldman Sachs your line is open.
Dan Levy: Yes, good afternoon. Thank you very much for taking the questions. I think Rivian's cost per vehicle went up about $22,000 sequentially. Can you elaborate more on what drove that and to what extent these are temporal relative to sustained costs? And then you spoke about taking costs down by more than 50% with R2 compared to the R1. So I'm hoping to better understand if there are some sustained higher cost levels you're seeing with the R1. Does that change the absolute cost that you expect R2 to come in at?
Yes, good afternoon. Thank you very much for taking the questions. I think rivian's cogs for vehicle went up about 22,000 sequentially. Can you elaborate more on what drove that into what extent? These are temporal relative to sustained costs and then you spoke about taking costs down by more than 50% with R2 compared to the R1. So I'm hoping to better understand if there are some sustained higher cost levels, you're seeing with the R1. Does that change the absolute cost that you expect R2 to come in at?
Claire McDonough: Sure. As you think about the drivers of the cost of goods sold per unit from Q1 to Q2, the largest driver, as we mentioned in our prepared remarks, was driven by the lower production volume and therefore the lack of fixed cost leverage that we had absorbing those costs into inventory, so to speak. So that was represented about $14,000 a unit of impact. We also had higher levels of LC and RV in this period, as well as some warranty and other related costs that constituted the other increases in cost per unit for the automotive segment for Q2 relative to Q1. So as we take a step back and look at the Q1 baseline, we do see that as a helpful starting point of demonstrating the opportunity set that we have with R1 with higher levels of production volumes.
Claire McDonough: However, that Q1 cost per unit doesn't include the impact from tariff-related costs, which we mentioned are roughly about a couple thousand dollars a unit that we'll begin to see more so in the second half of this year as well. And so as we look at the R2 cost structure, we do have similar impacts as we think about the tariff impacts on R2 on a go-forward basis. However, one of the core benefits that we have in R2, and hopefully in the future R1 will benefit from as well, is some of the joint venture shared sourcing opportunity as we think about the low-voltage electronics that will be shared between Rivian vehicles and R2 vehicles in the future, which we're in market sourcing currently. And that can produce incremental upside as we think about the cost roadmap for R2.
About, you know, 14, uh, thousand dollars, a unit of of impact. We also had, you know, higher, uh, levels of lcnrv, uh, in this period, as well as some, you know, warranty and and other related costs, uh, that constituted the, the other increases in cogs per unit, for the automotive sector, uh, segment for Q2 relative to q1. So, as we take a step back and look at the q1 Baseline. Uh, we we do see that as a, you know, helpful starting point of demonstrating the opportunity set that we have with our 1 with higher levels of production volumes, um however that q1 uh, cogs per unit, doesn't include the impact from uh tariff related costs which you mentioned are roughly about a couple thousand dollars, a unit that will begin to see uh more so in the second half of of this year as well. And so as we look at the R2 cost structure,
Um, we do have similar impacts as as we think about, uh, the Tariff impacts on R2 on a go forward basis. Um, however, 1 of the core benefits that we have in in our 2, uh, and hopefully in the future will will our 1 will benefit from as well is is some of the uh joint ventures shared sourcing opportunity, as we think about the low voltage electronics that will be shared between you know, rivian vehicles and our 2 vehicles and the the future um which were you know, in Market sourcing at currently and
RJ Scaringe: Yeah, as Q2 said, the production volume output of Q2 going from in Q1 around 14,000 units to Q2 being around 6,000 units, the lack of fixed cost absorption, you can really see it in the numbers. And as we said, that was reflective of a lot of the supply chain environment that we're in and some of the trade-related and export control-related items that we encountered in Q2. But an important point to call out here is that as we launch R2, the benefits of fixed cost absorption, which will be felt not just by R2, but carrying that across R1, we'll also start to see. And this is really important for us as we grow volume in the plant in our Normal, Illinois production facility going into 2026.
And that can produce incremental upside as we think about the COGS roadmap for our Q2.
yeah, as Cliff said the the the production volume output of Q2
going from in q1, uh, you know, around 14,000 units to Q2 being around 6,000 units, you know, the the lack of fixed Ops absorption fixed cost, absorption. You can really see them, the numbers.
And as we said that was reflective of a lot of the uh the supply chain environment that we're in in some of the trade related in uh and and Export control related items that we encountered in in Q2. But an important point to call out here is that as we launched R2
The, the benefits of fixed costs absorption, which will be felt not just by R2, but but carrying that across R1, will also start to see. And this is really important for us as we grow volume in the plant. In our Normal Illinois, production facility, uh, going into 2026.
Dan Levy: Very helpful. Thanks for that. My other question was around the ASPs and hoping to better understand how Rivian is expecting ASPs per vehicle to trend. You launched the quad motor and talked about the positive pricing benefits of that product line. But with the IRA credit set to go away in the fourth quarter, I'm wondering if you think Rivian is going to need to adjust its pricing strategy, and perhaps it may be a headwind. So any more color around how to think about pricing and the puts and takes? Thank you.
Is it very helpful. Thanks for that. My other question was around the ASPs and hoping to better understand how Rivian is expecting ASP.
RJ Scaringe: Yeah, we're tracking really closely how R1 is doing in the market, and it's important to call out it continues to be a market share leader in the segments it operates. It's really a core leader. So if you look at electric vehicle SUVs sold over $70,000 across the United States, it's the market share leader by a significant degree. And uniquely, if you look at California and now the state of Washington for the premium segment EV or non-EV premium segment SUVs, so SUVs over $70,000, it's the market share leader. And so we continue to see that in light of some very aggressive incentives from some of the vehicles that might be cross-shopped with Rivian. And so as we look at the remainder of this quarter, Q3, we do think Q3 will be our strongest quarter of the year.
Yeah, we're we we we're tracking really closely how our 1's doing in the market and it's important to call out. Its it continues to be a market share leader, uh in uh,
In the segments that operates.
It's it's really uh, a core leader. So if you look at electric vehicle SUVs sold over 70,000 dollars, it's it's across the United States. It's the market share Leader by a significant degree, uh, and uniquely. If you look at California and now the state of Washington
for the premium segment, uh, EV or non-ev premium segment SUV, so SUV is over $7,000. Uh, it's the market share leader and so we continue to see that.
Or you know, in light of some very aggressive incentives from some of the vehicles that that might be cross shocked with Arabian.
RJ Scaringe: But we also think that some of the irregular incentives and some of the things we're seeing in terms of the marketplace will subside. And the market, as a result, will continue to see with market share leadership on R1, we'll continue to see demand persist.
And so, as we look at the remainder of this quarter, Q3, we do think Q3 will be our strongest quarter of the year.
but we also think that some of the, uh,
Claire McDonough: One other item I'd just add on is we do anticipate there being higher levels of commercial van deliveries in the second half of the year relative to the first half of the year. So as you look at the overall Rivian blended ASP, you'll see the commercial vans reducing that figure, although we do anticipate there being strong ASPs on the R1 program, as RJ noted.
You know, irregular incentives, and some of the things we're seeing in terms of the marketplace, will will subside and the market. Uh, as a result will continue to see with market share leadership on R1, will continue to see, uh, demand processed.
1 other item. I just add on is we do anticipate there being higher levels of commercial van deliveries in the second half of the Year relative to the first half of the year. So as you look at the overall rivian Blended ASP, um you'll see the commercial Vans, you know, reducing that figure, although we do anticipate there being strong uh asps on the R1 program as RJ noted.
Derek Mulvey: Our next question will come from Daniel Rosa. Your line is open. Please ask your question.
Our next question will come from, Daniel Rosa? Your line is open. Please ask your question.
Speaker 7: Hey, thanks for taking my questions. I'd like to double-click a little bit on Dan's first question on the EBITDA break-even in '27, because it does seem that there are quite a few meaningful headwinds, especially in the near term. And some of the items you talked about seem like they're more long-term opportunities. So I'm just, you know, maybe you could go back and comment a bit on '27 because, you know, we're losing the EV credits. The loss of the IRA and purchase incentives could be almost 10% to 15% of an R2 purchase price. The Volkswagen partnership, if I recall correctly, doesn't have financial upside other than the disclosed amounts that are kind of staked into the guidance. And even more partnerships are highly unlikely to materialize by '27 if you're willing to integrate a full kind of electrical architecture into a new car.
Hey, thanks for taking my questions. Um,
Near-term, and some of the items you talked about.
Seem like they're more long-term opportunities. So I'm just, you know, maybe you could go back and come a little bit on 27 because, you know, we're losing the EV credits.
Um, the um, you know, loss of the IRA and purchase incentives could be almost 10 to 15% of an R2, purchase price, the Volkswagen Partnership. If I recall correctly, doesn't have Financial upside other than the disclosed amounts that are kind of baked into the guidance.
Speaker 7: So I'm wondering here, with those headwinds, soon do we expect the EBITDA break-even to move into later years, given the plan we discussed last year?
And even more Partnerships are highly unlikely to materialize by 27. If you're looking to integrate, a full kind of electrical, um, architecture into a new car. So, I'm, I'm wondering here with those headwinds. Since we expect the ebitda break, even to move into later years, given the plan we discussed last year.
RJ Scaringe: Thanks, Daniel. Q2 and I will speak to this one. I think first and foremost, we did speak a little bit earlier in the call on this, but the R2 cost structure and the way that we've developed the vehicle provides us with a platform, a cost platform that's just materially different than where we've been on R1. And along with that, a number of factors, since we talked about this before, despite some of the headwinds, we've had a number of factors that are actually positive movements for R2. And Q2 referenced this, but first and foremost is the ability to look at joint sourcing of some of the electronic components that are used in R2. And of course, some of those components will be used across the Volkswagen Group as well.
thanks, Danielle, uh, claron, I will speak to this 1, I think, first and foremost with we did speak a little bit earlier on the call on this, but the R2 cost structure and the the way that we've developed the vehicle,
Yeah, provides us with, uh, a platform a cost platform, that's just materially different than where we've been in our on R1 and along with that. A number of factors since we talked about this before, despite some of the headwinds we've, we've had a number of factors that are actually uh positive movements for our 2 and and clear references. But first and foremost is the ability to
Look at the joint sourcing of some of the electronic components that are used in R2. And of course, some of those components will be used across.
RJ Scaringe: We've also, as Javier noted, are now in a position where the bill of materials on R2 is sourced. It's no longer something that we hope we can achieve, but in fact, we've been able to put that together. And as we now look at continuing to grow those relationships with suppliers and thinking about 2027 and beyond, the whole supply base ourselves, everyone has been looking at ways to drive cost efficiencies into the business to address some of these major headwinds that have occurred in terms of tariffs and tariff structure. And by 2027, there's a lot of plans or offsets that are being put in place by us, by our suppliers to address those specific headwinds.
The Volkswagen group as well.
Uh, We've also as Javier noted are now in a position where this the the bill of materials on R2 is sourced. It's it's no longer. Uh, you know, something that we hope we can achieve. But in fact, we've been able to put that together
and,
as we now, look at continuing to grow those relationships with suppliers and thinking about 2027 Beyond,
you know, the whole Supply base ourselves, everyone has been
uh,
Looking at ways to drive cost efficiencies into the business to address 1 of, you know, some of these major headwinds that have occurred in terms of tariffs and tariff structure.
and by 2027, there's a lot of
RJ Scaringe: As you called out, the EV credits environment, which for us was a meaningful source of revenue, where we would sell our excess credits to other manufacturers, that being reduced is a short-term reduction in positive cash. But on the flip side, we also now have an environment, which we believe we'll start to see in 2027, where a lot of the manufacturers who are choosing to earn their own credits by incentivizing sale of electric vehicles, they'll be less incentivized. So I've said this many times, but the long-term level of competition in the EV space is going to be inherently lower. There's less incentives for incumbent manufacturers to make the commitment or the transition to electrification.
Plans or offsets that are being put in place by us by our suppliers to address those specific headwinds.
As you called out the, the EV, uh, credits environment which for us was, was a meaningful source of Revenue, uh, where we would sell our excess credits to other manufacturers, uh, that being reduced. Is it does, you know, is a short-term reduction in in positive cash
But on the flip side, we also now have an environment, which we believe will start to see in 2027 where a lot of the manufacturers who are choosing to earn their own credits by incentivizing sale of electric vehicles. They'll be less incentivized. So the the I've said this many times but the long-term
uh,
RJ Scaringe: And when we look at all those things together, there's, of course, some puts and some takes, but we still believe achieving the 2027 positive EBITDA is the target we need to be driving towards, is what Q2 talked to. We're pushing extremely hard to get there and recognizing that we have time to react to some of these changes.
The level of competition in the EV space is going to be, uh, inherently lower. There's less incentive for incumbent manufacturers to make the commitment or the transition to electrification.
And when we look at all those things together, there's of course some puts and some takes, but...
We still believe uh, you know, achieving the 2027.
Positive, it does; is the target we need to be driving towards, as Claire talked to. We're pushing extremely hard to get there.
Claire McDonough: The other key driver is, as we look at the broader software and services opportunity, this is an area where we do anticipate there being significant growth over the course of the next two years, especially as we recognize greater levels of revenue from some of the background IP consideration, which is associated with the progress occurring within the joint venture and getting Volkswagen vehicles out on the road and into the wild, which is one of the key contributing factors.
And, you know, recognizing that we have time to access some of these changes.
Claire McDonough: As we think about the relative contribution of both the automotive business from a gross profit standpoint, which is driven by R2, and the continued scaling of the normal plant, as well as the software and services opportunity from the joint venture, coupled with the broader opportunities that we have as we continue to scale and grow the car park and achieve additional gross profit and ultimately contribution to our EBITDA target from things like our remarketing program and the sale of used Rivians, from our charging network, from the growth of our service infrastructure, financing, insurance, and in future state, autonomy is another driver of some of that roadmap as well.
The other key driver, um, is as we look at the broader software and services opportunity, this is an area where we do anticipate there being, um, significant growth over the course of the next 2 years. Especially as we recognize greater levels of revenue from some of the background IP considerations, which is associated with the progress occurring within the joint venture and getting Volkswagen vehicles, um, you know, out on the road and, and into the, the wild, uh, which is, is 1 of the key contributing factors as we think,
As well.
Speaker 7: Great. That's very helpful. Thanks. And maybe, RJ, you referenced it a bit when you talked about the competitive environment for the R2. I mean, do you think that even without the IRA credits, that can be kind of still a gross profit break-even car, kind of just the car itself? Or do you need kind of software services and other elements to make that EBITDA kind of work for the car itself?
Great. That's very helpful. Thanks and maybe RJ you, you referenced it a bit when you talked about the competitive environment for the R2.
RJ Scaringe: Now, to be clear, we're absolutely designing the vehicle and have set up the cost structure on R2 to on the vehicle itself to have a healthy positive gross margin.
Um, I mean do you think that even without the IRA credits that can be kind of still a gross profit Break Even car kind of just the car itself or do you need kind of software services and other elements to make that ebta kind of work for the car itself?
No, to be clear, we're we're absolutely designing the vehicle and have set up the cost for sure on our 2.
To 1 on the vehicle itself to have.
Uh, the healthy positive gross margin.
Derek Mulvey: Our next question will come from Joseph Speck with UBS. Your line is open. Please ask your question.
Our next question will come from Joseph's back with UBS.
The line is open, please ask your question.
Speaker 7: Thanks. Good afternoon. May I have you just two quick clarifications and then a bigger picture question? Like you previously on these earnings calls have said you were baking in several hundred million dollars in policy impacts, which I know was vague, but I think was interpreted and suggested as tariffs and some regulatory credit. So I know you deferred regulatory credit to basically not assuming anything in the back half. That seems like it's maybe half the EBITDA reduction. But what exactly got worse on tariffs? And now you see it a couple thousand dollars per vehicle higher. And then just the other clarification on the '27 EBITDA target, which I know came up a couple of times, since I guess the regulatory credits, the one thing you're willing to concede has changed. Like how much was actually baked into '27 for that number?
Uh, thanks. Good afternoon. Um, maybe just a quick clarification and then, um, a bigger picture question. Like, if you previously on these earnings calls have said, um,
you were baking in several hundred million dollars and policy impacts. Which I know it was vague but I think it was interpreted and suggested as tariffs and some regulatory credits. So no, you just lowered the regulatory credit to this. I'm not assuming anything to back half that seems like it's maybe half the the EV down reduction, but what exactly got worse on tariffs and now you see it a couple thousand dollars per vehicle. Um, higher. Um, and
And then just the other congregation on the 27th, I came up a couple of times.
Uh, since I guess the regulatory cards were the one thing you're willing to concede has changed, like how much was actually baked into 27 for that number?
Claire McDonough: Just wanted to clarify on your first question, Joe. The couple thousand dollars a unit on tariffs is consistent with the commentary that we provided last quarter. So there's no change overall in terms of the outlook from a tariff impact on the business as we look at the '25 impact. So the incremental impact, as we mentioned, is real, from a policy standpoint, is really driven by changes in the regulatory credit outlook, where we no longer anticipate we'll be selling or earning revenue from the sale of regulatory credits in the second half of this year, given changes to certain regulatory credit programs that have occurred of late.
Claire McDonough: As we look at the broader guidance, the other impact, as we talked a little bit about in our prepared remarks, was just driven by the Q2 overall performance and some of the supply chain-related complexities that limited our production volume this quarter in particular. As we look at 2027 EBITDA, we're not going to get into specifics in terms of what was in and is now in the overall outlook from a regulatory credit standpoint. We fully acknowledge that the bar has risen given some of the policy-related headwinds that we're now working through as a business. But our objective is to continue to drive towards positive EBITDA through a number of ongoing initiatives to drive cost efficiency into the business and to ensure that we have an efficient ramp of R2.
Just wanted to clarify on your first question. Joe on the couple thousand dollars, a unit on terrorists is consistent with the commentary that we provided last quarter. So there's no change overall, in terms of the, um, the Outlook from a tariff impact on, on the business is, is we look at the, the 25 impact. So that the incremental impact, um, as as we mentioned is real, from a policy standpoint, it's really driven by uh, changes in the regulatory credit Outlook, where we no longer anticipate will be uh selling you know, or earning revenue from the sale of regulatory credits. And this is the second half of of this year, uh, given changes to, you know, certain uh, regulatory credit programs that have occurred of of late.
As we look at, you know, the broader Guidance, the the other impact is as we talked a little bit about in our prepared, remarks was just driven by the Q2 overall performance. Um, and some of the supply chain related complexities, that limited our our production volume, this quarter in particular,
As you look at 2027 ibida. Um we're not going to get into specifics in terms of what was in and is now in uh the overall Outlook from a a regulatory credit standpoint we fully acknowledge that the you know bar has risen given some of the policy related headwinds that we're now working through as a business. But our objective is to continue to drive uh towards positive evaa through a number of ongoing initiatives to drive, you know, cost efficiency into the business and to ensure that we have an efficient ramp of of our 2.
Speaker 7: Thanks for that. The second question, I want to touch back on something Adam brought up earlier, which is the second plan. So you're taking three weeks downtime here in September to get normal capacity to 215K. You're currently producing at, I don't know, probably like below 20% of that utilization right now. So I realize like it's not fair because you have much higher volume hopes for the R2, but I guess like at what level of utilization do we need to see a normal before you really start thinking about commissioning Georgia?
Thanks, thanks for that. Um, the second question, um, I want to touch back on something Adam brought up earlier um,
Uh, which is, you know, the second plan. So, if you're taking 3 weeks, downtime here in September to get normal capacity, to 2 15K, you're currently producing at, I don't know, probably like below, 20% of that utilization right now. So and I realized, like, it's not fair because you have much higher volume pumps for the R2, but I guess, like at what level of utilization,
Do we need to see a normal before you really start thinking about commissioning Georgia?
RJ Scaringe: Joe, it's a great question. When we think about the normal facility, we've talked about this a lot in the past. It's ultimately going to be producing R1, R2, and our commercial van. And as we look at some of the variants on the R2 and R2 platform, what that does with bringing on the Georgia facility is it not only expands capacity, but it allows us to build some of these additional variants and further grow both the addressable market and, importantly, fill in where we see some real volume opportunities. But with regards to Georgia, we are building that across two phases, and we're going to be starting construction on the Georgia facility in terms of the building. Of course, a lot of work has happened on the site and preparing the site in close partnership and in conjunction with the state of Georgia.
It's a Joe, it's a great question. We, we, um, we think about the normal facility. We've talked about this a lot in the past, it's ultimately going to be producing R1 R2, uh, and our commercial van
If we look at some of the variants on the R2 and R2 platform.
Uh, what that does with bringing on the Georgia facilities and not only expands capacity but allows us to build some of these additional variants in further, grow both the adjustable Market uh and importantly fill in.
No, we see some real volume opportunities.
RJ Scaringe: But we're starting going vertical on buildings in the early part of 2026.
Work has happened on the site and we are preparing the site in close partnership, in conjunction with the state of Georgia. We are starting to go vertical on buildings in the early part of 2026.
Derek Mulvey: Our next question will come from Ron with Guggenheim Securities. Your line is open. Please ask your question.
Our next question will come from Ron with Google home security. Your line is open, please ask your question.
Dan Levy: Yeah, good afternoon, and thank you for taking my questions. A bit of a follow-up on some of the policy changes, but has any of the impacts of these policy changes, whether it's emissions or consumer credits, changed how you view the R2 or R3 with respect to whether it's pricing, cost, or how much capacity is needed? And I know that there's some sensitivity around the pre-order number for the R2, but if you'd be willing to share an update, it probably would go a long way in kind of assuaging concerns around the needed capacity with Georgia.
Yeah, good afternoon, and uh, thank you for taking my questions.
Um a bit of a follow-up on some of the policy changes, but has any of the impacts?
Of these policy changes whether its emissions or or consumer credits um change how you view the R2 or R3 with respect to whether the pricing costs or or how much capacity is needed. And I know that there's some sensitivity around the the pre-order number for for the R2. But it, if you'd be willing to share an update, it probably would go a long way in kind of uh,
Assuaging concerns around around the needed capacity with, with Georgia.
RJ Scaringe: Yeah, I mean, we're not going to share the number here, but you know I have said a couple of times, I mean, we're extremely bullish on R2. And a big part of developing a product like this, this is an enormous amount of effort. A lot of iteration has gone into defining what the product is. A lot of work understanding the size, the pricing, the cost structure, the content. But where we've landed in terms of what we'll be starting production on here shortly is something that we feel has an outstanding product-market fit in the heart of the demand curve, meaning price points overlapping with the largest segment, the form factor overlaps with the largest segment, and the feature and content is really, really incredible.
Yeah, I mean I I we're not going to share the the number here but uh but you know I have said a couple times. I mean, we're extremely bullish on R2 and a big part of
Developing a product like this. This is
A considerable amount of effort and many iterations have gone into defining what the product is.
Uh, a lot of work, uh, understanding the size, the pricing, the cost structure the content, but where we've landed in terms of what will be starting production on here? Shortly is something that we feel has an outstanding product Market fit in the heart of
RJ Scaringe: And so what that means in our view is this is going to be cross-shopped across the broadest spectrum of possible variants, most of which actually are ICE vehicles. So customers will be making a consideration that maybe haven't made the jump to electrification, but would like to, but wanted maybe something that was more of an SUV form factor, wanted to spend $45,000 to $50,000, and that hasn't existed in the market. And so we do see the scale of the addressable market as being many, many millions of units. And so with what we're launching in normal, representing 155,000 units of R2 capacity, and then what we'd be bringing on in Georgia for the platform, which, of course, by me saying that, it implies variants of that vehicle, adding another 200 in the first phase, we feel quite confident and bullish on what that represents.
The in the heart of the demand curve, meaning price points over lasting with the largest segment, the form factor overlaps, the largest segment in it. The feature and content is really uh, really incredible and it's what that means.
In in our view is this is going to be cross shocked across the broadest spectrum of possible variants.
Uh, most of which actually are ICE vehicles. So, customers will be making considerations. They may not have made the jump to electrification but would like to, and are looking for something that is more of an SUV form factor. They want to spend $45,000 to $50,000 and that has existed in the market.
And so we we do see, you know the the the scale of the adjustable Market is being, you know, many, many millions of units.
And so, with what we're launching in, in normal representing 155,000 units of our 2 capacity. And then, what we'd be bringing on in Georgia for the platform, which of course, by me saying that it implies variance of that vehicle, adding another 200 in the first phase.
RJ Scaringe: It's also worth noting that, and we've said this in the past quite a bit, the R2 and the platform are designed to support both the US and European markets. And so not only will we be opening up this vehicle across many more price points in a much bigger addressable market in the United States, but ultimately, this platform is going to support opening up access to a very large market, which is Europe. And so, of course, for a follow-up question, I'm sure what you're thinking now is, you know, what do we think about US-EU trade relations and what is going to happen there? We're watching that very closely. Certainly, there's been some positive movements on that for us, being that we'd be exporting these vehicles from the United States to Europe. But we have to continue to watch that very closely.
We're we feel quite, uh, confident and bullish on on what that represents. It's also worth noting that we've said this uh, in the past, quite a bit, the R2. And, and, and the platform.
Are designed to support both the US and European markets.
And so not only will be opening up this vehicle across many more price points in a much bigger adjustment Market in the United States.
But ultimately, this platform is going to support uh, opening up uh, you know, access to a very large Market which is Europe.
And so, of course, for, you know, the follow-up question, I'm sure what you're thinking now is, uh, you know, what do we think about U.S.-EU trade relations and what is going to happen there? We're watching that very closely.
Dan Levy: Yeah, no, I appreciate that. And then on the technical aspects of your approach to autonomy, excited to see what you have in store for us later this year. But some of your competitors are opting for camera only, as you're well aware. Some are opting for more hardware-heavy approaches with LiDAR or even beyond that in terms of the hardware required. I guess, what gives your team confidence that your early sensor fusion approach to autonomy is the correct one?
Uh, certainly there's been some, you know, positive movements on that for us being that we would be exporting these vehicles from the United States to Europe, but we have to continue to watch that very closely.
Yeah, no, I appreciate that. And then on the technical aspects of your approach to autonomy, I’m excited to see what you have in store for us later this year. Some of your competitors are opting for camera-only solutions, as you're well aware, while others are opting for more hardware-heavy approaches with LiDAR or even...
Beyond that, in terms of the hardware required, I guess, what gives your team confidence that your early sensor fusion approach to autonomy is the correct one?
RJ Scaringe: Yeah, I think it's an important question. I do think that this question of what's the sensor set topology gets more attention than it really should. I think the approach of using an early sensor fusion, which is just a different way of saying an AI-centric approach, meaning if you think of like how systems were developed prior to 2021, and when I say systems, essentially every self-driving platform developed prior to the use of transformer-based encoding, was you would have a set of sensors that may include more than just cameras, but whatever that set of sensors is, each sensor would identify objects, classify those objects, and associate vectors with those objects.
Yeah, it's, um, I think it's an important question. I do think that this question of what the sensor set topology gets more attention than it really should. Uh, I think the approach of using an early sensor fusion, which is just a different way of saying...
Uh, an AI-centric approach. Meaning, if you think of like how systems were developed prior to 2021, and when I say "system," it's essentially...
Every self-driving platform developed prior to, the use of Transformer based encoding was, you would have a set of sensors that may include more than just cameras, uh, but whatever that set of sensors is each sensor.
RJ Scaringe: And all those identified objects and their associated vectors would then be passed to a planner, and you'd make a whole series of rules-based decisions around what the vehicle should do and decisioning around which sensor set to actually follow or trust. In that late fusion process, you had some of the challenges I think you're alluding to of having to decide around what's your primary sensor path and what are the risks and associated challenges with using some of the other sensors. As you move to something that's much more AI-centric, you have to think of it very differently. Think of it as you have an enhanced view of the world, an enhanced view of reality as early as possible. So raw feeds going directly into inference, you can create a better understanding of the situation and the circumstance.
When identifying objects, classify those objects and associate vectors with those objects.
Question is vectors would then be passed to a planner?
Uh, and you'd make a whole series of rules-based decisions around what the vehicle should do.
And decisioning around, which sensor Set, uh, to actually follow or trust.
In that late Fusion process. Uh, you know, had the some of the challenges I think you're alluding to of of of having, you know, to decide around which what's your, what's your primary sensor path? And what are the risks and Associated uh challenges with using some of the other sensors?
As you move to something that's much more AI Centric. You have to think of it very differently, think of it as
uh,
Is you have an enhanced view of the world and enhanced view of reality as early as possible. So raw feeds going directly into inference
RJ Scaringe: And the neural net, the large model that we build around this, then drives ultimately how the vehicle performs. And we do that through the use of a very large data flywheel with our deployed fleet, providing triggered data back to us, which we then build, use to train to build this large parameter model that ultimately determines how the vehicle behaves in these situations. And so I think ultimately that this debate around which sensors are used, I think often it's maybe based on cost structures that are no longer in existence. So LiDARs, radars, these things are not as expensive as they once were.
You can create a better understanding of the situation and the circumstance and the neural net. The large model that we build around this.
then drives ultimately how the vehicle performs and we do that through the use of a very large data flywheel with our deployed Fleet providing, you know, triggered data back into our uh you know, back to us which we then
...build used to train to build this large parameter model that ultimately...
determines how the vehicle behaves in these situations and so,
I think ultimately that this debate around which sensors are used— I think often we, it's maybe based on...
RJ Scaringe: And it allows us to build a much richer understanding of what you can see, what the vehicle sees at the early stage, at a base level, as we start to make decisions through the model, through this large foundation model in terms of what the vehicle should do. You know, and I often draw the analogy to say what's helpful here is it's a creative, meaning if the sensors get better, you don't throw away the model as we once did. You now just, the model has a more precise understanding of the world. And the best example is imagine you learned how to drive without glasses and you had poor vision. And then suddenly I handed you a pair of glasses. It wouldn't be as if everything you knew up until that point was obsolete.
Cost structures that are no longer in existence. Uh, you know, so you know, light light RS, Radars, these these things are not as expensive as they once were.
And it allows to us to build a much richer understanding of what you can see what the vehicle Sees at the earliest stage at at the, uh, at the, at a base level. As we start to make decisions at at through the model, through this, large Foundation model in terms of what the vehicle should do.
You know, and I often draw the analogy, uh, to say it's what's helpful here is it's a creative. Meaning, if the sensors get better, you don't throw away the model as we once. Did you now? Just the model has a, a more precise understanding of the world. And the best example is imagine you learned how to drive without glasses and you had poor vision. And then suddenly I handed you a pair of glasses. It wouldn't be as if
RJ Scaringe: In fact, you would just have a more accurate view of the world and be able to make better decisions through your neural net, through your brain, which has processed how the world behaves and drives. And so it's no different as you increase the quality of the cameras. That's both in terms of breadth of performance, low light to bright light, then also details in the camera. So increasing levels of megapixels, which is important for us. We go from 55 megapixels in R1 to 65 megapixels in R2. But it also pertains to additional sensor set, which allows in another modality that has non-overlapping strengths and weaknesses with a camera set to also have a perception of the world.
Uh, everything you knew up until that point was obsolete. In fact, you would just have a more, uh, accurate view of the world to be able to make better decisions, through your neural, net through your brain, which is processed how the world, behaves and drives.
And so it's no different as you increase the quality of the cameras. That's both in terms of, you know, breadth of performance, low light to high, you know, bright light, and then also, um, details in the camera. So increasing levels of megapixels, which is important for us. We go from 55 megapixels in R1 to...
RJ Scaringe: And so if you were to give me a LiDAR or a radar and bolt it onto my forehead, I would be a better driver as a human, but it wouldn't negate or throw away or make obsolete all of my accumulated knowledge to date.
65 megapixels in R2. Um, but it also pertains to an additional sensor set which allows, uh, in another modality that has non-overlapping strengths and weaknesses with a camera set, to also have a perception of the world. And so if you were to give me a LiDAR or a radar and both onto my forehead, I would be a better driver as a human, but it wouldn't negate or throw away or make obsolete all of my accumulated knowledge to date.
Derek Mulvey: Our next question will come from Emmanuel Rothna with Wolf Research. Your line is open. Please ask your question.
Speaker 7: Great. Thank you so much. So when I look at your software and services revenues, excluding the JV, they were up very sharply versus last year. How should we think about the growth there going forward, the trajectory, your profitability profile for it, and to what extent, I guess, how much of this was embedded in your expectation for positive EBITDA by year in '27?
Our next question will come from a manual. Roth knows which line is open. Please ask your question.
Great. Thank you so much. Um, so when I look at your software and services revenues in excluding the JV, uh, they were up very sharply versus last year. How should we think about the growth there? Um, going forward, the trajectory your profitability profile for it. And to what extent, um, I guess how much of this was embedded in your expectations for positive DBT, by year, end 27?
Claire McDonough: Sure, Emmanuel. As we think about some of the key contributors to the growth and profitability that we saw in Q2 from software and services, one of the drivers of this is the growth of Rivian's remarketing program. So this is both trade-in vehicles for consumers getting into a Rivian for the first time, but also one of the key contributors is the sale of used Rivians. As we think about being able to open the aperture, attract more consumers that can afford an R1 at a variety of different price points, which is a very compelling business for us over the long term and one that's important to Rivian maintaining strong residual values as well. Beyond that, we've continued to see the growth and the expansion of our service infrastructure that's also contributing to the growth in some of our maintenance expenses and revenues in the business.
Claire McDonough: And then beyond that, we're in the process right now of opening up our charging network to additional vehicles and going through the integration of NAX as well, which will allow more and more customers to charge on the Rivian Adventure Network, which will again be another contributing factor for us over the longer term. So as we look at the underlying tailwind of software and services, we saw significant quarter-over-quarter growth in terms of the non-joint venture contributions to the gross profitability of this business segment.
Sure manual is is we think about some of the key contributors to the growth and and profitability that we saw in Q2 from software and services, um, 1 of the drivers of, this is the growth of rivian's remarketing program. So this is both, uh, trade-in vehicles for consumers, getting into a rivian for the first time, but also 1 of the key contributors is that the sale of used rivian's. Um, as we think about being able to open the aperture, attracts more consumers that can afford an R1 at a variety of different price points, which is, is very compelling business for us over the long term and 1. That's important to rivian maintaining strong residual values, as as well beyond that. We've continued to to see the growth and expansion of our service infrastructure. That's also contributing to the growth and in some of our maintenance expenses, uh, and revenues in the business and then beyond that, uh, we're in the process right now of opening up our
Of of naxos as well. Um,
Claire McDonough: And as I mentioned, as we look ahead to 2027, we'll see the joint venture contributing more significantly given increases in background IP-related revenue streams, the growth of the JV as well as they continue to hire and grow to expand the team and organization, as well as the ongoing growth of many of these key internal services that will be servicing a larger car park as a whole. So we see this as a meaningful contributor to the business on a go-forward basis, and especially as we think about the contributions in 2027 as well.
which will allow more and more customers to charge on the the rivian adventure Network, which will again be another contributing factor for us over the the longer term. So it's as we look at the underlying Tailwind of of software and services, uh, we saw, you know significant quarter over quarter growth in terms of the non joint venture, uh, contributions to the gross profitability of, of this business segment. And, as I mentioned is, is we look ahead to 2027? We'll see the joint venture contributing more significantly. Uh given increasing in increases in background, IP related, revenue streams the growth of the JB, as well as that they continue to, to hire and grow, uh, to expand the team and organization as well as the, the ongoing growth of of many of these key internal services.
That will be, you know, servicing a larger car park is a whole. Um, so we see this as a meaningful contributor to the business on a go-forward basis, and especially as we think about the contributions in 2027 as well.
Speaker 7: Understood. And then coming back to the earlier question of the R2 economics, so RJ, you were mentioning how the BOM would be about half of R1, but then there's also operational and manufacturing efficiency. How should we think about the gross break-even point for that vehicle? You're putting in 155,000 units of capacity into normal. You'll be leveraging a lot of the fixed cost space already within that facility. How many R2s do you need to sell to sort of like get a combination of both these costs, sort of like getting you to break even?
On the south. Um, and then coming back to the earlier question of the R2 economics. Um, so RJ, you were mentioning, huh, you know, the BOM would be about half of our 1, but then there's also operational and manufacturing efficiency. Um, how should we think about the gross break-even point for that vehicle? Uh, you're putting in.
Claire McDonough: So as we look at the overall outlook for the R2 unit economics, we see a much faster path to positive gross profit on the vehicle itself. And that's primarily driven by the fact that the vehicle has a much lower underlying material cost structure associated with it that RJ walked through. But beyond that, R2 is also benefiting from the volumes that are already existing within the normal plant as well that allows us to efficiently get to positive gross profit on the R2 program. We think as we exit 2026, it can be at that level. And then we'll be looking to expand that as we add a third shift of operation into the plant and continue to reduce the cost structure over time.
155,000 units of capacity into normal. You'll be leveraging a lot of the fixed cost base already within that facility. How many R2s do you need to sell to sort of get a combination of both these costs or like getting you to break even?
so as we look at the, the overall outlook for the R2 uh unit economics. Uh we see a much faster path to uh to Positive Growth profit on the vehicle itself. And that's primarily driven by the fact that, uh, the vehicle has a, a much lower underlying material cost structure associated with it, that that RJ walk through.
RJ Scaringe: One of the big strategic reasons we made the decision to launch R2 out of our normal facility is the shared fixed cost absorption that we'll now have between R1 EDV and R2. And as Q2 said, out of the gate on day one of production of saleable units of R2, we'll already have the benefit of all the fixed cost absorption that R1 and the commercial vans are picking up. And so it just has a fundamentally different path to profitability than what we saw with R1. Above and beyond that, some of those assets that R2 is going to be utilizing, like our stamping operation, those have already been in use for a while and have already, much of that has been depreciated. So there's just inherent overall fixed cost advantages to being in normal.
But beyond that R2 is also benefiting from the the volumes that are already existing within the normal plant is as well. Um, that allows us to to efficiently, get to, uh, Positive Growth profit on, uh, the R2 program. Uh, we think, you know, as we exit, you know, 2026, it can be, you know, at that level. And then we'll be looking to expand that as we add a third shift of operations into the plant. I continue to reduce the the cost structure over time, you know, 1 of the, 1 of the big
Strategic reasons. We made the decision to launch our two out of our normal facility.
Is the shared fixed cost absorption? That will now have between R1 EDV and R2. And as Claire said, you know, out of the gate on day 1 of production, on scalable units of R2, we'll already have the benefit of all the fixed cost absorption. You know that R1 and the commercial vans are picking up, and so it just has a fundamentally different path to profitability than what we saw with R1.
Uh, above and beyond that, some of those assets that that R2 is going to be utilizing like our stamping operation, you know, those have already, you know, been in use for a while and they've already uh, you know, much of that has been depreciated. So there's there's just inherent overall. Uh,
You know, fixed cost advantages to being a normal.
Derek Mulvey: Our next question will come from Andre Shepard with Cantor Fitzgerald. Your line is open. Please ask your question.
Our next question will come from Andre Shepard with Cantor Fitzgerald. Your line is open; please ask your question.
Dan Levy: Hi, everyone. Can you hear me okay?
Claire McDonough: Yes.
Hi, everyone. Can you hear me okay?
Dan Levy: Wonderful. Well, thank you so much for taking our questions. Good afternoon and congratulations on the quarter. By the way, I think this is our first time making it to the Q&A, so bucket list for us. I think a lot of our questions have been asked, but RJ was hoping to come back to ASPs. You know, just given the macro environment, tariffs, removal of tax credit, do you expect any changes to ASPs, particularly off the R2 line? Should we be still targeting around 45, 50,000? Any color there would be helpful. Thanks.
Yeah.
Wonderful. Well, thank you so much for taking our questions. Good afternoon, and congratulations on the quarter.
By the way, I think this is our first time making it to the Q&A, so it's a bucket list item for us.
Um, I think a lot of our questions have been asked, but RJ was hoping to come back to ASPS, you know, just given the macro environment, tariff removal, and tax credit.
Do you expect any changes to ASP, particularly of the R2 line?
Should we still be targeting around, you know, 45, 50? Uh, any color there would be helpful. Thanks.
RJ Scaringe: Yeah, so if you look at ASPs through the course of this year and then into R2, Q2 references before, but on a consolidated basis for the whole business in the second half of the year, we are going to be selling more vans. So that will have the effect on a full consolidated basis of pulling our average selling price down for the whole business. But it's important to pull that apart. So the R1, we've now launched our quad. The demand in that has been strong. We also have our tri-motor. The demand in that has been very strong, particularly as a percentage or take rate, if you will, across the whole fleet. And so we do see positive movement on ASP for R1 through the end of the year, which is really encouraging.
Yes, so if you're looking at ASP through the course this year, then into R2, you know, clear references before, but on a...
But it's important to to pull that apart. So the, the R1 we've now launched our quad, the demand on that has been been strong. We also have our Tri motor demand and has been been, you know, very strong, particularly as, as a percentage or take rate if you will AC the whole Fleet.
And so, we do see positive movement on ASP for R1 through the end of the year.
RJ Scaringe: And translating that into what we see with R2, R2 has a range of different variants. And so we often talk about the entry price or the starting price being at 45, but there's a middle spec variant. There's a top spec variant. There's what we'll be launching with, which would be a more premium version of the vehicle. And so a big question for us and a big target for us, I should say, is to be making sure we're designing those configurations of those packages in ways that make them highly desirable, but help us to maintain a healthy ASP that, of course, is supportive of greater margin levels and is reflective of what customers are looking for. And so that's something we're looking at very closely.
Uh, which is really encouraging.
And translating that into what we see with R2. R2 has a, a
A range of different variants. And so we often talk about the entry price, the starting price, being at $45.
But there's a middle spec variant. There's a top spec variant, there's what will be launching with which will be, you know, a more premium version of the vehicle. Uh and so a big question for us and a big
Target for us, I should say, is to be making sure we're designing those configurations of those packages in ways that make them highly desirable, but help us to maintain a healthy ASP. That, of course, is supportive of...
RJ Scaringe: It's a mix, like the combination of variant mix that we'll ultimately end up with is going to depend a lot on the specific situations that we'll see as we're producing that vehicle, so in 2026 and 2027. But as it stands today, if we were to use R1 as a reference point, we see a positive mix shift in the second half of this year relative to the first half of this year.
Of greater margin levels, uh, and is reflective of what customers are looking for. And so that's something we're looking at very closely. It's, you know, mix.
yeah, yeah, like the combination of
Of the variant mix that will ultimately end up with is going to depend a lot on the specific situations that we'll see.
You know, as we're producing that vehicle in 2026 and 2027, but as it stands today, if we were to use R1 as a reference point, we see a positive mix shift in the second half of this year relative to the first half of this year.
Dan Levy: Got it. That's super helpful. I really appreciate all that color. Maybe just as a quick follow-up, I know we touched on autonomy and the different technologies and use cases. I'm just wondering if you can maybe give us your vision in terms of kind of the initial ramp-up of that developing, any granularity that you might be able to provide. And then also, here's a question. Are you considering autonomy for the EDVs potentially? Just curious if you're considering maybe commercial self-driving as well. Thank you.
Got it. That's super helpful. I really appreciate all that color. Um, maybe just as a quick follow-up. I know we touched on autonomy.
RJ Scaringe: Andreas, this is by a significant degree one of our biggest focus areas. And I alluded to this and talked to this before, but just to be very explicit, the approach that we're utilizing on autonomy represents a significant shift, a significant step. You often hear it called like AV 2.0 relative to what was done prior to like 2021, 2022. And so what we launched with on R1 with our Gen 1 vehicle is a completely different topology, different sensor set, different compute stack, completely different software architecture to what we now have in our Gen 2. And so what we designed our Gen 2 vehicle with was a much higher level of compute. So that's inference on vehicle, much more capable cameras. We brought all that perception stack, the camera set in-house.
Uh, and the different technologies and use cases. I'm just wondering if you can maybe give us your vision in terms of kind of the initial ramp-up of that developing. Any granularity that you might be able to provide? And then also, here's a question: Are you considering autonomy for the EDVs potentially? Just curious if you're considering maybe commercial self-driving as well. Thank you.
Andres, this is, um, by a significant degree, one of our biggest focus areas.
To.
I, I, I alluded to this and talked about this before, but just to be very explicit, the approach that we're utilizing on autonomy is.
Represents a significant shift, a significant step you often hear it called, like AV 2.0, relative to what was done.
Prior to 2021 and 2022, what we launched with on R1 with our Gen 1 vehicle is a completely different topology, different sensor set, different compute stack, and a completely different software architecture than what we now have in our Gen 2.
RJ Scaringe: Of course, we designed the compute platform to support that really rich camera set that I talked about earlier. In the case of R1, that's 55 megapixels of camera with cameras with outstanding breadth of performance. And really, the goal of that, which launched a little more than a year ago now with the Gen 2 vehicles, was to create a data platform to train a very capable model. And that very capable model, of course, gets better as the fleet size grows. And when we say train, I want to be specific here. It's not just having vehicles with lots of sensors and a lot of inference on board. The way that we trigger what data gets sent back to us. So what are the triggering events? Of course, it's, you know, when the vehicle encounters an issue, when it disengages from its autonomous driving mode.
And so what we designed our Gen 2 vehicle with was a much higher level of compute, so that's inference on the vehicle. We have much more capable cameras. We brought all that perception stack, the camera set, in-house.
Uh, of course, we designed the compute platform to support that really rich camera set that I talked about earlier. In the case of our 1, that's 55 megapixels, a camera with outstanding breadth of performance.
And really, the goal of that, which launched a little more than a year ago now with the Gen 2 vehicles, was to create a data platform to train a very capable model, and that very capable model, of course, gets better as the fleet size grows.
And when we say "train," I want to be specific here; it's not just having vehicles with lots of sensors and a lot of inference on board. The way that we trigger what data gets sent back to us...
So, what are the triggering events? Of course, it's.
RJ Scaringe: But importantly, when you're not in autonomous driving mode, what's triggered? What are we doing to find interesting situations that fill in and add robustness to this large model we're building? And so we've really spent a lot of time defining a whole array of different triggering events that allow us to pull data off of our deployed fleet, use it to build robustness into the model, and then redeploy that model and the distilled version back out to the vehicles. And that's what customers are starting to see in terms of improved feature set. And we are deeply of the belief that this approach of an AI-centric approach, what you may often hear called like an end-to-end approach where you're training based upon the behaviors of the vehicles, is the approach that's going to win. But it does require you to control the perception stack.
You know, you know, when the vehicle encounters, an issue when it disengages from its autonomous driving mode. But importantly, when you're not an autonomous driving mode, what what's triggered, what what are we doing? To find interesting situations that fill in an add robustness to to this large model we're building. And so, we've really spent a lot of time defining a, a, a whole array of different triggering events that allows us to pull data off off of our deployed Fleet, use it to build robustness into the model and then redeploy that model in the distilled version back down to back out to the vehicles and that's what customers are starting to see in terms of improved feature set.
and,
We are deeply of the belief that this approach is an AI-centric approach. What you may often hear called an end-to-end approach for your training is based upon the behaviors of the vehicles.
RJ Scaringe: It requires you to have a very robust data triggering architecture. It requires a very robust data movement architecture, meaning your vehicles are ideally connected to Wi-Fi, which allows much lower cost movement of lots of data. And so the incentive structures we've put in place around having customers on Connect Plus and having them Wi-Fi connected helps drive that. But that feeds our offline training that's occurring, of course, on lots and lots of GPUs, which then continues to get better and better. And so that set of ingredients we think very few manufacturers have. We're investing tremendously into it. And what we'll start to see in terms of customer-facing features is, first and foremost, we'll see the vehicles be able to operate under a much wider range of roads. So today, we limit our feature to a highway feature. In the not-too-distant future, we'll go map-free.
Uh, architecture requires a very robust data movement architecture. Meaning your vehicles are ideally connected to Wi-Fi, which allows for much lower cost movement of lots of data.
So, the incentive structures we've put in place around having customers on Connect Plus, and having them Wi-Fi connected, helps drive that. But that feeds our offline training that's occurring on.
You know, of course, on lots and lots of GPUs, which then continues to get better and better. And so that set of ingredients, we think very few manufacturers have. We're investing tremendously into it, and what we'll start to see in terms of customer-facing features is first and foremost, we'll see the vehicles.
RJ Scaringe: And we say that, but what we really mean is it can operate essentially anywhere. And we've already gone hands-free in certain conditions on highways. We'll broaden that to be more conditions, so eyes-on, hands-off. And of course, the next step as we look into 2026 is identifying specific areas where you'll go hands-off, eyes-off. And so where you'll truly get your time back, where you can be looking away from the road, not an active participant in any way in the operation of the vehicle, and coupling that with a turn-by-turn capability. So you get into your car, you can imagine the future state where the car, then you give it the address and it takes care of getting there. And so that is our, as we think about what's the roadmap for the next couple of years, that's what we're driving towards.
Be able to operate, uh, under a much wider range of Roads. So today, we we limit our feature to a highway feature, uh, in the not too distant future. We'll go map free and what we we say that, but what we really mean is it, it can operate essentially anywhere.
And we've already gone hands-free in certain conditions on highways. We'll broaden that to be more conditions: so eyes on, hands off.
And of course, the next step as we look to 2026 is identifying specific areas where you'll go hands-off, eyes-off.
And so, we'll try to get your time back where you can be looking away from the road, uh, not an active, uh, participant anyway in the operation of the vehicle.
And coupling that with a turn-by-turn capability. So you get into your car, you can imagine the future state where the car, then you give it the address and it takes care of getting there.
and so that is our
RJ Scaringe: Core to that is this building of a large model. Of course, that model has applications beyond just R1, R2, and beyond, as you referenced, those applications in the commercial space and with our commercial vans. And so we're very, very excited about what this represents in terms of the business opportunity it creates, but also the customer experience it forms.
As we think about what's the roadmap for the next couple of years, that's what we're driving towards.
Core to that is the building of a large model. Of course, that model has applications beyond just R1 and R2, and beyond, as you referenced, those applications in the commercial space and with our commercial brands.
And so, we're very, very excited about what this represents in terms of...
The business opportunity it creates, but also the customer experience it forms.
Derek Mulvey: Our last question will come from George Janarikis with Canaccord Ingenuity. Your line is open. Please ask your question.
Dan Levy: Hi, everyone. Thank you for taking my questions. You sort of alluded to this in a previous answer, but I'm curious, you know, with the impressive specs of the R2 and the compelling price, you know, you are admittedly launching it into a challenging market for EVs. Can you just sort of illuminate us as to maybe broad marketing strategies or anything you plan to do to boost the market appeal of the product? Thank you.
Our last question will come from George Janerika. The Canaccord Genuity line is open; please ask your question.
Hi, everyone. Thank you for taking my questions.
Sort of alluded to this, uh, in a previous answer. But I'm curious to, you know, with the impressive specs of the R2 and the compelling price.
RJ Scaringe: One of the most important things we've talked about since way before even launched R1 is that it's really important for us as a company, if we're committed to our mission of driving an increase in electrification, is that we attract non-EV customers. And we now have the benefit of seeing how that's played out with R1, where a meaningful majority of our customers are moving out of an ICE vehicle and into their R1 as their first-time EV experience. And what enabled that is that the product and the attributes that the product delivers on are unique relative, not just to EVs, but are unique and exciting relative to all other options. And I referenced this earlier in the call, but the R1S is the best-selling premium SUV in California and the state of Washington. I didn't say the best-selling premium electric SUV, just the best-selling premium SUV.
You know, you are admittedly launching it into a challenging market for EVs. Could you sort of illuminate us as to maybe broad marketing strategies or anything you plan to do to boost the market appeal of the product? Thank you.
One of the most important things we've talked about since way before we even launched our R1.
It's really important for us as a company.
If we're committed to our mission of driving an increase in electrification, we aim to attract non-EV customers.
And you know, we now have the benefit of seeing how that’s played out with R1, where.
You know, a meaningful majority of our customers are.
Moving out of an ICE vehicle and into their R1, as their first-time EV experience.
And you know what enabled that is? That the product and the attributes that the product delivers on.
RJ Scaringe: And so it's attracting all different types of buyers. And so as we look at now, as I said, the heart of the demand in the United States, the average selling price of a new car in the United States is just under $50,000. The most popular vehicle configuration is a two-row SUV. The R2 is right there, right in the right price point, the right segment, the right size, and it's delivering a level of performance that's not seen by any of the alternatives you have, certainly in the ICE space there today. It's delivering a level of capability, meaning both on-road and off-road capability that's also not seen in that price point.
Are unique relative to not just EVS but are unique and exciting relative to all other options. And I referenced this earlier on the call, but the r1s is the the best selling premium SUV in California and the state of Washington, I didn't say the best selling premium electric SUV, just the best selling premium SUV.
And so it's it's attracting all different types of buyers. And so, as we look at, now, as I said the, the the heart of the demand, uh, in the United States, you know, the average selling price of a new car. In the United States is just under $50,000
The most popular vehicle configuration is a 2-row SUV.
The R2 is right there, right? And then the right price point, the right segment, the right size, and it's delivering a level of performance that's not seen by any of the alternatives you have, certainly in the ICE space, there today.
RJ Scaringe: And it has entirely new features, like things like a front trunk or some of the dynamics of the vehicle, but given the low center of gravity, that just are not seen in the SUV space, you know, they call it the $50,000 ICE SUV space or $40,000 to $50,000 ICE SUV space. And so we do see it as a very large market, and our hope and what we're driving towards is to continue being able to draw a lot of non-EV customers into this, not simply because it's an EV, but rather because it's the best choice they have.And
Derek Mulvey: that's how our engineers are thinking about the product, making it the best choice, the best SUV that you can buy. you know, between, let's call it, you know, 45 to $55,000. And that's ultimately how we'll drive significant market share, both in the EV space, but also we look at it as through the lens of driving significant market share just in the, you know, the midsize SUV space.
maybe, uh, but rather because it's the best choice they have,
and that's how our Engineers are thinking about the product making it, the best choice, the best SUV that you can buy, uh, you know, between let's call it, you know, 45 to 55,000 and and that's ultimately how we'll drive significant market, share both in EV space. But also we we look at it as through the lens of driving significant market share just in the you know, the the midsize I should be spaced.
Operator: Thank you. And maybe as a brief follow-up, any news to share on commercial vehicle momentum, any additional wins or traction there? Thank you.
Thank you. And maybe as a brief follow-up, any news to share on Commercial Vehicle?
momentum, any additional wins or
raw attraction there. Thank you.
Derek Mulvey: There's been a few vehicle settings that have that are different than different than the Amazon vehicles. But, you know, I think the most important thing here, and Claire referenced it, I said it as well. You know, we continue to work very, very closely with Amazon. They're an outstanding partner. Of course, they're a major shareholder in Rivian as well. And we are seeing more deliveries of our vans with them through the second half of this year. The partnership continues to be very healthy, a great close relationship with the users of the vehicles, the drivers of the vehicles, and the operators of the vehicles. And that continues to allow us to make improvements and tweaks to the vehicle such that, you know, we hoped to achieve this a few years ago when we were developing the vehicle. We can now say this with confidence.
There have been a few vehicle settings that are...
Different from, uh, different from the Amazon vehicles. But, you know, I think the most important thing here in cleric reference that I said as well, you know, we continue to work very, very closely with Amazon. They're an outstanding partner; of course, they're a major shareholder, nerfing as well.
And we are seeing uh, more deliveries of our vans, with with them uh, through the second half of this year.
The partnership continues to be very healthy, uh, great.
Derek Mulvey: It is the best platform for logistics and commercial delivery, bar none. It's an outstanding product. And so to be able to harden that product and refine it in conjunction and partnership with Amazon has been great. And, you know, we do think as other fleets start to electrify, they'll see this as a great choice.
Close relationship with the users of the vehicles. The drivers of the vehicles and The Operators of vehicles and that continues to allow us to make improvements and tweaks to the vehicle. Such that, you know, I, we, we hope to achieve this a few years ago when we were developing the vehicle, we can now say this with confidence, it is the it's the best platform for Logistics and Commercial delivery. Uh Bar. None it's it's not standing product and so to be able to harden that product and and refine it in conjunction and partnership with Amazon has been great and um, you know, we we do think as other fleets start to Electrify, they'll see this as a great choice.
RJ Scaringe: This concludes the Q&A section of the call. I would now like to turn the call back to RJ Scaringe for closing remarks.
Includes the Q&A section of the call.
I would now like to turn the call back to RJ Scaringe for closing remarks.
Derek Mulvey: Thanks, everyone, for joining us today. Hopefully, you're hearing just the enormous excitement that we have for R2, the state of the program and the health of the program in terms of its cost structure, its development status, the close work that we're doing with the suppliers is Javier and I both spoke to. These are fully engaged suppliers that are working with us in the development of the vehicle. You're also, if you're living in the Bay Area or Southern California, you're probably starting to see these camouflage vehicles out on the roads. It's certainly exciting, but we're really focused on getting the vehicles ready for a very smooth and very healthy launch of the product. And along with that, the focus that we have on building out our autonomy and self-driving platform, we'll see that make continued big steps forward on the R1 vehicle.
Thanks everyone for joining us today. Uh, hopefully, you're hearing the enormous excitement that we have for our Q2.
Uh, the state of the program and the health of the program in terms of its cost structure and development status. The close work that we're doing with the suppliers is Javier, who spoke to these are fully engaged suppliers that are working with us in the development of the vehicle.
Uh, if you're living in the Bay Area or Southern California, you're probably starting to see these camouflage vehicles out on the roads. It's certainly exciting, but we're really focused on getting the vehicles ready for a very smooth and healthy launch of the product.
Derek Mulvey: And as we launch R2, with the further enhancement to our perception stack, we'll see again, really leadership in the R2 vehicle around our self-driving platform. And so those are core efforts for us. And really, we think create an outstanding future state for us. And we are very, very bullish on R2. We're very, very bullish because of that on the outlook for the business. And we appreciate everybody's support and everybody joining this call.
And along with that, the focus that we have on, on building out, our our autonomy and self-driving platform, uh, we'll see that may continue, uh, big steps forward on the R1 vehicle and as we launch our 2, uh, with the further enhancement to our perception stack. We'll see again really leadership in the R2 vehicle around our self-driving platform and so those are those are core efforts for us and really, we think create, uh, an outstanding future state for us and
Uh, we are very, very bullish on R2. We're very, very bullish on the outlook for the business.
And we appreciate everybody's support and everybody joining this call.