I think, oh, that's why we can go-
We can look backwards.
Hope it's backwards, but-
We're upside down.
Okay, great. Thank you, everybody, for joining. My name is Mark Delaney. I cover Rivian for Goldman Sachs. Very pleased to have with us, yet again this year, Claire McDonough, the CFO of Rivian. Thanks for joining.
Thanks for having me.
Well, I thought maybe to kick things off, I'd ask you a little bit more on the company more broadly, and Rivian was ranked number one by Consumer Reports in terms of owners wanting to buy from the company again, and I know it's something you guys think a lot about, so I'd love to get your thoughts around why you think that is.
Sure. So as we think about the brand positioning that we've built and the customer loyalty that we've been able to earn over the course of the last three years, it's largely been enabled by the central thesis that RJ started with, which was we didn't wanna just build the best EV, we wanted to build the best vehicle on the market as a whole. And so that started with the opportunity that we had to really debunk the way people thought about an EV at the time, right?
We were the first to market with an electric truck, for example, and so from a development standpoint, we wanted to create a product that could be the best off-roading vehicle out there, the best on-road in terms of, you know, performance, capability, utility, lots of amazing sort of brand attributes and features, like our embedded, you know, flashlight, that creates that sort of surprise and delight for consumers. But at its core, also create a core technology stack that enables a product to get better and better and better over time.
And so as you think about the engagement that we have with our consumer base, it centers around the opportunity for them to experience new features, new attributes, new driving dynamics, that continue to unlock the power of their product as well. And so I think that is really central to why Rivian has been able to achieve its award-winning status, has right the leading share in the market around intent to repurchase, which is, you know, nine hundred basis points higher than, you know, the next OEM as well.
That's great, and a lot of us, I think, can certainly, you know, see some of those things-
Yeah
... when we have the opportunity to be owners or do test drives. So, that's wonderful. Maybe moving to demand, can you talk a little bit more around what the company is seeing in terms of demand and what gives you confidence in low single digit volume growth for this year?
The demand environment's been a challenging one as a whole, as evidenced by a lot of the comments made by other, you know, OEMs in the space and the high level of incentive spend that we're seeing across the board, and this is a challenge that also exists, you know, within Rivian. Beyond the broader macroeconomic, you know, backdrop that we're playing in as a whole, we also have some acute supply-related challenges. There was some news a couple of weeks back around Rivian having to stop production of our commercial vehicles based off of the supplier challenge that we had in getting parts at speed and at scale that we were looking for. Our teams are working, you know, day in and day out, twenty-four hours, to resolve these challenges and issues.
But it also has you know impacted how we think about the availability of our full you know variants of products right now from a consumer standpoint. So if you go for example on our website and you look for you know an R1T there's very limited supply of R1T given the way that we ramped up production over the course of you know Q2 and into Q3 starting first with our R1S you know standard pack product introducing our Max Pack product and building from there. And our go-to-market teams are essentially focused around: How are we continuing to grow awareness for our brand given the fact that today we're not yet a household name across the country? And how are we getting more and more vehicles?
So your first question, Mark, on, on the brand experience into the product itself, because that is the best, you know, sales pitch that we can have, is just driving and experience the product, you know, for yourself in the market. So we've unlocked sales out of our service centers to unlock, you know, 60 different physical locations for consumers. We've opened a number of new spaces. We opened, you know, Boston just last week, San Diego, Nashville, Austin, Texas, over the last couple of months as well, to continue to expand Rivian's, you know, physical presence across the board as our teams are focused on continuing to drive demand for our product and increase our overall order rate.
When I take some of the comments you just made, challenging macroeconomic backdrop for the entire industry, some of the supply chain issues, I mean, does that change the view that you can grow at single digits or the shape of how the year might look?
So as we've talked a little bit about in Q2, Q3, you know, we anticipate having lower overall delivery volumes, and part of that was driven by the fact that we had depleted a significant portion of our R1 inventory as we sold down a significant portion of our Gen 1 product while we were starting to ramp up production of our gen two products within our Normal facility. And as I mentioned, some of the supply chain challenges that we've had. It impacts the rate in which we're, you know, now building product as a whole, and that plays into the diversity of offering that we can provide to consumers, that sort of feeds back into it. So the teams are focused, as I mentioned, on continuing to drive and increase our order rates, and increase brand awareness as a whole, so that we can, you know, continue to drive towards our outlook.
Okay. On the last earnings call, you commented that R1 potential output with the current two-shift operation is 56,000 units per year. Is this the run rate we should expect in 2025?
So as we think about 2025, there's a couple of key items to point out. First of which we'll have a significant level of downtime in the second half of the year to integrate R2 into our facility. Today, we have 150,000 units of capacity within our facility, and in Normal, we'll be increasing that capacity to 215,000 overall units. And so, there's significant work happening in many of our shared shops within the plant in that timeframe to unlock the increased total nameplate capacity of the facility as a whole, as we bring on R2 online
in the first half of 2026. So certainly, certainly, that will have an impact in terms of the overall production output for 2025 as a whole. We're, you know, as we talked a little bit about on our last earnings call, anticipating, you know, continuing to run two shifts of operation on the R1 line, and then a single limited shift of operation on our commercial van line next year.
How quickly could Rivian flex up to the 85,000 potential capacity for R1 if there was sufficient demand, and what might it take to have that kind of a demand environment?
As we think about the opportunity, it's working with collectively with the supply chain. So for us, we would need our supplier partners to continue to invest in their own capacity, labor forces to support a third shift of operations within Rivian. It certainly is available and an option to your question, if demand is available to meet that increased volume. However, as we look at the overall composition of the 215,000 units of installed capacity that we'll have in the future, that will be split between a total maximum capacity of 155,000 units of R2 available volume. We'll have the 85,000 units of potential in R1, and then 65,000 units of potential volume with our commercial van program.
Now, those figures don't add up to 215, and so that gives us the opportunity to flex between our shift patterns between each of the three vehicle lines to optimize for gross profit, optimize for the demand environment that we're seeing at the time, and gives us a lot of financial flexibility as we think about the composition of our performance and production plans.
Okay. Speaking of the commercial platform, what type of use cases beyond last mile package delivery could be supported by that?
There's a lot of great opportunities for us to utilize our commercial van program for other end markets beyond the last mile delivery space as a whole, so we collectively use our vans internally as our mobile service vehicles, and so those vans are equipped with everything from on-the-go tire change equipment to service your vehicle at your home, so that's sort of one example of a different service-level use case, and you can imagine, you know, many others, whether those be in the commercial delivery field, service industries can utilize our commercial vans for a number of different applications as well.
I did see, on my way to the airport this weekend, a R1T being used as a business vehicle, so-
Oh, nice
... multiple ways for corporations to be Rivian users.
Yeah.
And maybe help us understand how long would it be before commercial shipments could be material beyond Amazon?
As we've talked about, 2024 is really a year of pilot, you know, development work with many large-scale commercial fleets as a whole. And as we look ahead, we think about, you know, the sort of second half of '25 as starting to be the early foundation of more significant volumes of commercial van sales opportunities as a whole, as we take those pilot fleets and, you know, convert some of them into larger scale orders. And for us, it's not just about selling someone a vehicle. We're trying to support and service those customers through the end-to-end lifespan of the product itself. So in many cases, there's complexity in building out service-related arrangements with our commercial counterparties.
We're also helping them understand what it will take from an investment in their own charging infrastructure to support bringing EVs into their internal fleet, and helping teach them about a lot of the total cost of ownership advantages that an EV may enable for them over the lifespan of the product, knowing it may have a higher upfront cost, but a much lower cost to operate in its lifespan. So our teams are spending a lot of time with many of these fleet operators to help on that education front as well.
Rivian has a number of opportunities beyond just selling the cars themselves, software, services, regulatory credits. Maybe we can talk a little bit more on some of those other initiatives at the company and help us better understand how material the software and services business is for Rivian today, and what are some of the biggest drivers of that?
... Rivian has a distinct advantage in the opportunity to own, similar to the commercial opportunity we just outlined, own the end-to-end lifespan of the product for commercial and consumer customers as a whole. And so we have the opportunity to engage in everything from, you know, financing and insurance to the remarketing efforts of, you know, your vehicle that you may be trading in to buy a Rivian, as well as in, you know, Q4 of this year, we'll be turning on the first used Rivian vehicle platform internally as well to bring, you know, more customers into the fold of our products and our brand.
And then beyond that, we have many of the software-enabled services, and that first and foremost started with our Fleet OS offering, such that Amazon has a subscription for every commercial van that they sell in the market. And then beyond that, we recently launched our Connect Plus offering, which is an advanced connectivity and infotainment feature set that consumers can pay on an annual subscription or monthly subscription for. And in 2025, we'll be launching some paid features for our autonomy platform as well, which we're excited to bring to market as a whole. So in aggregate, there's meaningful both cost and profit opportunity as we look at the software and services space in aggregate and see meaningful share that Rivian can occupy in fully engaging and creating and optimizing the customer experience for the full lifecycle.
In terms of driver assistance, what type of capability do you think is needed for Rivian to have materially higher monetization? And does the company need to get to eyes-off capability in order to enable that?
As we look at the autonomy space, we see autonomy, over time, becoming a more and more important component of purchase intent for the product. So while there's certainly a significant amount of direct monetization features, we also believe that autonomy creates more of a large-scale margin platform opportunity as you think about consumers' willingness to pay for premium features, you know, in the vehicle and what that can enable for them from an experience perspective. When we look at our roadmap, the Gen 2 truly you know marks the first in-house Rivian autonomy, you know, platform from an end-to-end, you know, standpoint. Our AI-first approach in autonomy, we think, will help enable Rivian the same way we've seen continuous improvement in our software development roadmap.
The same will be true as we look at our autonomy platform and the opportunity that we have to continue to, you know, drive and capture driven miles among the fleet of vehicles that are operating on the road today, and utilize our capabilities, both with in-house, you know, simulations, as well as our fleet, to continue to drive performance and upgrades into the products themselves over time. So we started first and foremost with autonomy on a safety, from a safety standpoint and approach, but our ambition over time is to continue to add features that give consumers, you know, more of that convenience of time back over time as well.
That makes sense. Regulatory credits are also a key source of profit improvement. Can you give more color on how the market for regulatory credits is evolving, not only this year, but over the intermediate to longer term?
On regulatory credits, we've seen the market continue to increase in terms of broad-scale, you know, non-EV-focused OEM demand for credits, as many of those OEMs have leaned away from some of their own, you know, electrification strategies and approaches as well. And so as we look, this becomes an important funding source for the business. As we talked about at our Investor Day, we have, you know, $200 million of reg credits under contract for 2024, and this creates a nice opportunity for Rivian to earn, you know, very high margin attributes on the vehicles that we're selling in market as well, and certainly is a focus for our team.
Maybe talk about the future of product roadmap. R2 was an important launch. It's the company's two-row SUV. Plans to start production is the first half of 2026. Can you tell us more on how development of the R2 is going?
The R2 development is going well. We're, you know, in flight with many of our sourcing efforts with the supply chain, which is an important component to making sure that we're on track from a timing perspective. With the R2 launches, as we talked a little bit about, we're also planning some downtime in the second half of 2025 for us to integrate many of the new in-house shops into our manufacturing facility and plant. And so those efforts are also underway as we are starting to kick off a new building for our body shop and general assembly facility in Normal as well.
Maybe you can talk a little bit more around the demand response to R2. You had a very large number of pre-orders placed within the first twenty-four hours. Anything else you can share on how R2 has tracked in terms of demand?
R2 is, you know. People see R2 out there and just love the product. So the number one question that we both ask ourselves, and you all ask us as well, is: How can we go faster with R2? I was, you know, down in Pebble Beach a few weeks ago for the car show, and we had, you know, R2 and R3X there, and consumers were so excited about what's coming next. And so we've been doing a little bit of a vehicle roadshow with R2 and R3 across the country, driven the excitement that the products are certainly driving across the board. And as we're trying to drive greater levels of awareness for a broader addressable market, they've been, you know, very helpful in enabling and helping that as well.
... and do you think R2 attention is helping or hurting current R1 sales?
I think it helps R1 sales. I think to a certain degree, there's misconceptions in the market around the price point of our R1. And so given some of the IRA benefits on leasing, I think consumers are surprised that you can lease a standard pack R1 in the, you know, $600 a month range as a whole. And so we're actually seeing, you know, some consumers that are bridging themselves with a, you know, twenty-four-month lease to get to when Rivian will be producing R2s in the market as well.
In June, the company announced a proposed joint venture with VW for your electrical and electronic architecture. Can you give additional color on how that is developing toward a definitive agreement, and what is left to be worked out?
We're continuing to work closely with the Volkswagen Group. As we mentioned on our Q2 earnings call, we anticipate closing the transaction in Q4 of this year, and are continuing to progress on many of the technical milestones associated with the joint venture. Waseem, who's our Chief Software Officer, spoke on our Q2 call about the continued, you know, development work that we're doing to create a more of a drivable demonstration vehicle for Volkswagen Group to take out the core ECUs that they had in their products, mainly from Tier 1s, and replace them with, you know, Rivian zonals to showcase the capability and performance that, you know, Rivian can help unlock for many of their future products as well.
In the past, Rivian had an investment from Ford and an MOU to partner with Mercedes for electric vans. We've also seen lots of proposed partnerships in the auto industry over the years. So as you think about some of these other situations, either that Rivian specifically has been involved with or the industry more holistically, maybe you can help us better understand how that influenced the way you're trying to structure the VW joint venture.
One of the advantages of the Volkswagen technology joint venture that we have is the components of what's included in that, which is our electrical hardware and our software stack. A part of the advantage of focusing on those core technologies is the extensibility and scalability of the way that we built those technologies, which can now be applied to a much larger spectrum of vehicles in the market. So I would characterize that as being quite different relative to some of the, you know, prior partnership opportunities that Rivian has evaluated in the past.
And our engineering teams are really excited about the opportunity we have now to solve for, you know, the full spectrum, from the most, you know, premium vehicles, to the entry-level price points, and how we leverage, you know, our capability set and a shared technology, you know, stack and software stack to flex up and flex down the spectrum as we think about the opportunity at hand in that partnership together with Volkswagen Group.
That, that's helpful. In addition to the $5 billion in funding from VW for the proposed joint venture, Rivian is also expecting incremental benefits through cost savings, operating expense efficiencies, and potentially, revenue synergies. Can you give us any more color, in particular, with some of the expense efficiencies that you may be able to see?
We'll be able to provide more color in Q4 once the definitive agreements are finalized. However, conceptually, the way to think about it is today we have an electrical hardware team, we have a software team, which Rivian pays 100% of the cost of that team that's been developing, you know, for Rivian. Now, the majority of those teams that are focused on these core elements of our products will go into the joint venture and be shared from an actual capital perspective between, you know, both parties. So that creates inherent value as we think about the sharing of this core technology stack, which as I mentioned, can be leveraged and shared across, you know, both vehicle platforms as a whole.
Maybe talking about Europe, Rivian has been selling the commercial vehicle in Europe. Have you been surprised at all by anything you've experienced as you've been selling vehicles internationally?
We've beyond the sales of our commercial vans to Amazon in Europe, which are predominantly in Germany. We've been selling in Canada as well for our R1 products, and so building up, you know, more of that international capability set. And part of this thesis with some of the work with Amazon in Germany was also to create this entry point for us, so that when we're bringing R2s to market, we have more of that inherent, you know, foundation already in place. We're not starting truly from a clean sheet of paper as well. So that certainly plays through plays true as we think about Rivian's, you know, future ambitions to sell R2s into global markets, you know, beyond the North American one as well.
You know, so it sounds like R2 then is the vehicle we should expect first to be sold in Europe for consumers. Any sense of when to think about that timing? I would imagine you'd start delivering in North America first, but how long before we can envision Europe?
So I would certainly characterize it as R2 was designed for, you know, global markets. The intention is for us to service, you know, not just the North American market, but international markets as well with that mid-size platform. But we'll certainly start, you know, with sales here in North America, and then expand in a, you know, in a manner that allows us to build out the brand appropriately with, you know, each of those international markets, as we think about the continent of Europe.
... Okay. I had some financial questions, if I could. The company's expecting a modest positive gross profit in the Q4 of this year. How are you tracking toward this goal? And as you think about factors like lower material costs, volume, and non-vehicle revenue, how do they get you to that target?
Sure. As we think about the three key drivers of our path to positive gross profit, the first is variable cost improvement. On a variable cost side, we have, you know, contractually driven many of the changes through the shift from our Gen 1 product to Gen 2, where we changed out, you know, roughly half of our material cost in our vehicles to drive to a much lower, you know, cost structure. At our Investor Day, we outlined, you know, some of the pinpoints from our Large Pack Dual- Motor product from Gen 1 to Gen 2, which resulted in about a 20% reduction in our material cost in aggregate. So have line of sight into, you know, the step changes that's happening on that side of the equation.
On the fixed cost element, as I mentioned in your prior question, we're still working through the supply chain impact. So that could impact the fixed cost leverage that we'll be able to achieve, should we not be able to resolve some of this acute issue in the near term. But we're, you know, working hard to do so. And then as we think about the revenue per delivered unit, have visibility, as we outlined in Investor Day, on the impacts from regulatory credits. We'll be unlocking some increases in terms of the sale of used Rivians.
which will also enable more of our early customers to trade in their Gen 1 product for a Gen 2 product, now that we'll be having our Tri-Motor vehicles available in, you know, late Q3 and into Q4 as well. That allows consumers to really step into a product that has outstanding range within, you know, conserve mode, enabling over four hundred miles. But also, you know, zero to sixty times that will sort of surpass our original five motor Gen 1 products as well.
Very good performance.
Yes.
The company also expects a modest positive gross margin in 2025. Maybe talk about how you see profit drivers next year and how that may differ from what you're thinking about for this year and for the Q4.
Sure. As we look to twenty twenty-five from a profit driver standpoint, we'll have our Gen 2 product for the full year, so unlike this year, where we're really only selling our Gen 2 product in Q3 and into Q4, we'll have that available for us from a cost perspective for the entirety of twenty twenty-five, which is a key enabler for the step change we anticipate seeing from a cost perspective. The other components, as we think about tailwinds, are enabled by continued commodity cost dynamics, so from a supply chain perspective, many of our contracts are rearward looking, and so we'll see continued benefits as we've seen some of the commodities come down over the course of this year, that will help create tailwinds for next year as a whole.
There'll also be, you know, some drivers as we think about the launch of our quad motor in, you know, in 2025, that pushes ASP up, you know, a little bit higher as well above our tri-motor offering, and creates sort of that pinnacle of the Rivian R1 portfolio, from an ASP standpoint, importantly, as well. We also anticipate next year we'll have, you know, comparable regulatory credits relative to 2024, that will help drive, you know, meaningful opportunities as well for us.
That's helpful. At the Investor Day, you spoke about trying to reach positive Adjusted EBITDA in 2027. Can you help us better visualize what would need to happen for that to occur in terms of things like how many vehicles a year you might have to sell as one of the key KPIs we should be thinking on?
In the 2027 timeframe, we'll be well-positioned to, you know, more fully ramp up our R2 production within our Normal facility. And so what's, you know, centered around that 2027 outlook of achieving EBITDA positive will be not full capacity of the Normal plant, but, you know, starting to approach, you know, somewhere in the ballpark of that, you know, 200,000 unit a year milestone.
Okay. Software, services, aftermarket, those are some of the higher margin opportunities you have. How do you think about those contributing to the company's 25% gross margin target and getting to that positive EBITDA level?
We see software and services as a key enabler to Rivian achieving its 25% long-term gross profit targets. As we look at the margin differential, we've talked historically about vehicle gross profits in and around the 20% zip code, and then seeing software and services having the opportunity to unlock you know 65% or even you know greater in many of the truly you know software-enabled services opportunity for the business to significantly improve that rate. Albeit they'll be much smaller from an overall revenue standpoint relative to the sale of vehicles.
Okay. Assuming the $5 billion VW funding comes through as planned from 2024 through 2026, how are you thinking about any additional capital needs that Rivian may have?
We'll continue to be opportunistic as we look at future raises for Rivian over time. But as we mentioned in our Q2 earnings call, the $5 billion of capital from Volkswagen Group, you know, enables Rivian to fund the launch of R2 and Normal build into Georgia, and it enables Rivian a path to free cash flow positive, which is obviously a critical milestone for us for the future.
Speaking of the future, you also have the Georgia facility that you've announced. Maybe help us better understand when Georgia may go into production.
We haven't announced specific timing for Georgia, other than the fact that it will follow R2 in Normal. However, we've, you know, continued to make certain investments that gives us a bit more flexibility in terms of the timelines to turn the Georgia facility online as well. So I would characterize today as we have, you know, flexibility as we think about the exact timeline to turn that facility online for the business.
Got it. We've got a couple minutes left. I did wanna see if anybody in the audience has a question. Otherwise, I can go ahead and ask the last one or two. Oh, yeah, we've got one in the front. If you don't mind just waiting for a microphone. Thank you. It appears that range anxiety is an issue for a lot of consumers, and, you know, a lot of new competitive vehicles are still coming out with a range that begins with a two, not a three. I'm just wondering what your views are, and how much further can you extend the range over the next few years? Thank you.
Range anxiety is certainly a key constraint to EV adoption as a whole, and I think there's two ways that in which you can attack the challenge at hand. One is through availability of highly reliable charging infrastructure across the board. Most consumers charge roughly 90% of all of their use case needs in their home, and so I think that as consumers evaluate the trade-offs of the couple of trips that they're gonna make in a year, the charging network will be, you know, more and more important in their comfort level with that range anxiety as a whole.
Because it's also important that the battery pack itself is the most expensive part of the vehicle, and so the challenge with just increasing battery pack sizes as a whole is the cost element of what that enables and the unfavorability from a mass perspective that it also results in as well, which is a little bit of a countervailing, you know, force as you think about getting consumers to make that trade-off and trying to get EVs down to more parity-level pricing with, you know, ICE vehicles in the market as a whole.
So for us, I think the key enablers, and that's been a big part of why we're continuing to invest in building out the Rivian Adventure Network of charging locations, given the opportunity for Rivian to ensure that we have highly reliable charging for our customers. We've also opened up our Rivian network to have availability to the Tesla Supercharger network, with our NACS adoption opportunity on a go-forward basis, and we're trying to get more and more adapters out to our customers as well, so that they can take advantage of that as a whole.
Yeah, let me just sneak one last question in from the back.
Sure. So, electric vehicles have still fairly low market penetration, about 1%, which means, in my mind, there's a lot of white space to go after. Tesla has a very interesting position in the market, and you have threats from China. What do you see as the potential development of that competitive landscape? Who ends up taking those, you know, 99%, of the market, and what are the driving factors on who's gonna win?
Sure, it's a great question and something that we look at a lot, and when I started the conversation today, I spoke a little bit about the premise that we started Rivian with, which was, imagine a world where every vehicle is electric, and so competing on the fact of being electric is not a point of competitive differentiation. We need to compete with the best product in the market as a whole. That's really the way that we've approached this opportunity as a whole.
To a certain degree, because of some, you know, some of the resistance of people that haven't tried something new, haven't driven an EV yet, it does take us that opportunity to create a product that really allows consumers to say, "I had no idea that an EV could do this, that an EV could truly enable adventure and experiences for me as a whole." And so we've. It's been an essential part of our brand DNA in how we engage and unlock the opportunity of how we communicate and connect with our products in the broader market as a whole, to drive, you know, brand differentiation, to create, you know, a unique swim lane for Rivian, and ultimately, to go after the 90-plus% of consumers that are today buying an ICE vehicle versus an EV, and helping them, you know, think differently and give, you know, EVs a chance as well.
Great. Well, unfortunately, we're gonna have to end it there. Claire, thank you so much for joining us.
Thanks, Mark.