Good day, and thank you for standing by, and welcome to Rivian's second quarter 2022 earnings conference call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star one one on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Tim Bei, Vice President of Investor Relations and Strategic Finance. Please go ahead.
Good afternoon, and thank you for joining us for Rivian's second quarter 2022 earnings call. Joining us on today's call, we have RJ Scaringe, our Founder, Chairman, and Chief Executive Officer, and Claire McDonough, our Chief Financial Officer. A copy of today's shareholder letter is available on our investor relations website. Before we begin, I would like to remind you that during the course of this conference call, our comments and responses to your questions reflect management's views as of today only and will include statements related to our business that are forward-looking statements under federal securities laws, including, without limitation, statements regarding our market opportunity, industry trends, business operations, strategy and goals, our second domestic manufacturing facility, our future products, including R2, and our expectations regarding vehicle deliveries.
Actual results may differ materially from those contained in or implied by these forward-looking statements due to risks and uncertainties associated with our business, which are described in our SEC filings and today's shareholder letter. During this call, we will discuss both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures is provided in today's shareholder letter. With that, I'll turn the call over to RJ, who will begin with a few opening remarks.
Thanks, Tim. Hello, everyone, and thanks for joining us today. Just before the call, we published 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'll cover on today's call. The Rivian team delivered strong second quarter results despite the challenging supply chain environment. We produced and delivered over 4,400 vehicles across the R1T, R1S, and EDV 700. We have also recently started production validation builds of our EDV 500, which is a narrower and shorter version of the EDV and well-positioned for markets and applications where smaller form factors are needed. Our key focus remains ramping Normal facility to its full 150,000 units of installed capacity.
While we continue to manage supply chain constraints, we are encouraged by the progress we're making, which is important for us to be able to add a second shift for general assembly towards the end of this quarter. Equally as important is the continued strong demand for our products. As of June 30, we had about 98,000 net preorders and reservations for our R1 vehicles. Our daily preorder rate accelerated in the second quarter compared to the first quarter. As a reminder, these orders are for the United States and Canada only and are net of deliveries and cancellations. In June, we hosted a media event to showcase the capabilities of our R1S in both on and off-road settings. It has been great to see the feedback from various media sources and customers as more of our R1S vehicles get out on the road.
Regarding our commercial business, in July, we host an event in partnership with Amazon to announce the formal rollout of EDVs to locations across the country. Since early 2021, we've been operating pilot deployments to capture direct feedback from drivers. This partnership was critical to the refinement of the EDV products over the last 18 months. In addition to the set of unique features of the van, we developed a comprehensive fleet management system, which we call Fleet OS, that provides end-to-end centralized fleet management, including vehicle distribution, service, telematics, charging, connectivity management, and lifecycle management. As previously discussed, every vehicle delivered to Amazon comes with a Fleet OS subscription, which represents a monthly recurring revenue stream for us. We are now ramping the build-out of our DC fast charging network, the Rivian Adventure Network.
We believe it is critical for our brand to ensure our customers have a seamless charging experience that enables freedom to go anywhere without concern around charging access. In June, we launched our first locations using our DC chargers, which we manufacture in Normal, Illinois. These chargers have been developed from a clean sheet to operate at up to 900 volts, which is important for our future product roadmap. With a number of key sites underway, we are working to rapidly expand our network along popular routes, targeted destination areas, and major highways, initially across the U.S. and Canada. We believe this will be an important point of differentiation for us. We've also started pre-production of validation units for our single motor Enduro drive unit.
Two of these Enduro drive units will be used in a dual motor configuration in the R1 platform, and a single Enduro drive unit will be used for the commercial vans. This is the first of a family of drive units we are developing that will deliver greater efficiency and performance while creating meaningful cost savings. I'm very excited for the dual motor R1. Having spent a lot of time driving this, I can say as a base configuration with over 600 horsepower, it's a very exciting package. I also wanna comment on the Inflation Reduction Act. This just recently passed the Senate and is likely to be signed into law over the next week. We're incredibly happy to see policy that helps drive more rapid adoption of electric vehicles, as well as the important investments in building domestic battery cell production.
For the world to quickly shift towards a carbon-free economy, this type of legislation creates the needed tailwinds for both consumers and industry. The commercial segment in particular will benefit from the strong incentives for fleet operators to electrify, and our RCV platform has been developed for a wide range of applications. While many of our R1 configurations won't meet the bill's pricing requirements, our R2 product line and associated cell roadmap are being developed to allow our customers to capture the value of these incentives. We have plenty of work ahead of us, but I couldn't be more excited about the work our teams are doing for the ramp of the R1 EV vehicles, as well as the products, services, and technologies we have in the pipeline.
I wanted to thank our dedicated team members, suppliers, and importantly, our customers and communities for the tremendous support you continue to show us. With that, I'll pass the call over to Claire.
Thanks, RJ. I wanna echo your excitement around the second quarter results and the progress the team is making. During the second quarter, we produced and delivered over 4,400 vehicles, which was the primary driver of the $364 million of revenue we generated. During the quarter, we recorded negative gross profit of $704 million. Simultaneously launching two vehicle platforms and production lines is a complex process with high fixed costs associated with the labor and overhead required to run our large scale plant, which can support 150,000 units of annual capacity. Our gross profit for the quarter was also impacted by the inflation of our materials as well as supply chain challenges, which caused the need for expedited shipping.
In addition, we recorded a $301 million accounting adjustment in the second quarter related to LCNRV. As discussed on prior calls, the LCNRV adjustment writes down the value of certain inventory to the amount we anticipate receiving upon vehicle sale after considering the future costs necessary to ready the inventory for sale. On the research and development side, our team continues to pursue ongoing cost down efforts associated with the R1 and RCV platforms, as well as the development of our next generation vehicle technologies, which we expect to leverage across our current and future vehicle platforms. Our adjusted EBITDA for the second quarter was negative $1.3 billion. Given the economic outlook, we remain focused on optimizing our product roadmap and associated operating expenses and capital expenditures.
We ended the second quarter with over $15 billion of cash and remain confident in our path to launch the R2 vehicle platform with our cash on hand. Now turning to guidance. We are reaffirming our 2022 guidance of 25,000 units of production. The supply chain continues to be the limiting factor in our production rates, but we remain confident in our ability to achieve our target. On the delivery side, in July, we started a larger effort to move from truck to rail for our outbound freight, which should provide additional cost savings as we scale our operations. This transition will cause a larger discrepancy between production and deliveries in the coming quarters as we ramp production.
As a result of the impacts from the ramp of our Normal factory, recent cost pressures associated with the inflation of our materials, the associated LCNRV adjustments, and expedited freight expenses, we are lowering our 2022 Adjusted EBITDA guidance to -$5.45 billion. Importantly, we are lowering our annual capital expenditure guidance from $2.6 billion to $2 billion, primarily due to our more focused product roadmap. In aggregate, we expect our ending cash position for 2022 to be in line with our initial expectations. In closing, I wanna reiterate our confidence in our long-term financial targets. We see a clear path to our approximately 25% gross margin target, high teens EBITDA target, and approximately 10% free cash flow target. With that, let me turn the call back to the operator to open the line for Q&A.
Thank you. As a reminder, to ask a question, you'll need to press star one one on your telephone. Please stand by. We compile the Q&A roster, and we ask that you limit yourself to one question and one follow-up. Again, we ask that you limit yourself to one question and one follow-up. One moment for questions. Our first question comes from Rod Lache from Wolfe Research. Your line is now open.
Hi, everybody. I'd like to just ask two questions. One is, for Claire. You know, a lot has obviously happened financially, over the past year or so, with inflation and supply chain issues. Could you maybe take a minute and maybe just take a step back and talk to us about the bridge to achieving positive gross margin from where we're at right now? That we know that it consists of pricing and cost and volume. If you could give us some thoughts on the components of that and the timing.
Then secondly, RJ, was hoping you could maybe elaborate a little bit on the longer term implications of the Inflation Reduction Act for the competitive landscape and for Rivian specifically, and whether you see a path to achieving the material sourcing requirements that are in there and the value requirements and a little bit more on the commercial side, which sounds like it could be really meaningful up to, I think, $40,000 on certain gross vehicle weight vehicles. Does that sort of change the outlook for Rivian?
Thanks, Rod. This is Claire speaking. Wanted to hit on your first question in terms of what that path to positive gross profit and positive unit economics looks like for Rivian, in particular. As you called out, right, we've seen unprecedented levels of inflation, especially across our raw material inputs and lithium prices that have gone up, you know, north of 115%, over, you know, since the start of this year in particular, coupled with COVID and other factors that have driven a challenging supply chain and inflationary environment as well as part of that. But as we look out to the future, as I mentioned in my prepared remarks, we have significant confidence in the long-term gross profit margin targets that we've set out for ourselves of approximately 25%.
I'll give you a little bit of that path as we see from today, going from our current state to that future state of positive unit economics. We see 2024 as really that pivotal year for us in driving a step change in terms of the underlying gross margin expectations within the business, as we have a couple of significant factors that are starting to impact our underlying unit economics. You know, first and foremost, it's really driven by us ramping our plants and our productivity within our 150,000 units of installed capacity within Normal that allows us to really leverage all of those fixed overheads and costs associated with our large scale production facility.
Second, it's also our ability to introduce our next generation technologies into our vehicles, first in our R1 products as well as in our EDV. Those are things like insourcing of our motors, the introduction of our LFP pack, which will be introduced first in our commercial vehicles that allow us to really drive a step change in terms of vehicle performance in that timeframe, which enables us to increase, you know, pricing on the vehicles given the fact we'll have vehicles with added range and added performance and capabilities. They also importantly drive significant cost downs within our bill of materials as we look at that roadmap ahead.
Finally, the other core factor as we think about that stepstone from a gross profit perspective is also really the anniversarying or moving beyond those pre-March first pre-orders as well that allow us to move into our current ASPs. As we reiterated our last earnings call, we've seen, you know, $93,000+ ASPs with the pre-orders that we've had post-pricing change.
Thanks, Claire. Rod, I appreciate the question. I think with regards to the Inflation Reduction Act, this is, as I commented earlier, this is a really important step and I think it's great for the acceleration of electrification and really providing a path to carbon neutral economy. Now in terms of what that represents for us, it's certainly a powerful tailwind. As you commented in the commercial space, at the higher GVW class, this would be in the realm of what we call our EDV 900, which is the largest version of our RCV platform. So GVW, gross vehicle weight, above 14,000 pounds. The incentives are quite strong, the consumer facing incentives at over $40,000.
We see this as really helping to drive a rapid transition to electric vehicles in the commercial space. In a similar way, on the consumer side, certainly creating tailwinds around localization of the supply chain, in particular with battery cells. We've designed not just the product, but also the way we think about our supply chain and our battery cell strategy, to really be consistent with the intent of what we've seen in the Inflation Reduction Act. I think this is great news for electrification. It's certainly something we're very excited about. It's gonna have long range implications for the whole industry.
Great. Thank you.
Thank you. One moment for our next question. Our next question comes from John Murphy from Bank of America. Your line is now open.
Good afternoon, good evening, guys. Maybe just to follow up on Rod's question here. I mean, you know, mix seems like it may ultimately be much stronger than you're expecting. I think one of the interesting, you know, comments from one of the reviewers in your shareholder letter, RJ, was that, you know, they compared the R1S to the Range Rover, Mercedes G-Wagen and Urus.
I'm just curious, you know, as you think about the retail side, if there's an opportunity to keep mix incredibly strong, and push maybe to the higher end of the range, and then also, you know, grow the commercial vehicle side of the business, kind of to those credits that Rod was just going over with you, and that sort of mix may be just far superior to anything you were expecting, mix and pricing in the past, and that's really what helps offset the inflation and maybe, you know, you hit your margin targets or maybe something better. I mean, how do you think about these early days of the reviews and what you're actually getting on a mix from a retail and commercial, you know, commercial side?
Yeah. Thanks, John. We've talked about this on the last call. We've certainly been really pleased with the reaction to the product and how excited consumers are. With that, we do believe there's a lot of pricing power embedded in the vehicles and embedded in what we're creating as a brand. With that, the demand that we continue to see growing and accelerating really speaks to that. For us, looking on the consumer side, we're certainly thinking about it in the context of some of our future packages and some of the configurations that we'll offer over time. It is stronger than what we expected, and it does certainly offset some of the, you know, the increased costs we're seeing.
With regards to commercial, in a very similar way, we see the demand for commercial electrification being very strong across all different segments, not just last mile. The platform we have with RCV, the Rivian Commercial Van, is really set up well for that. You know, of course, we're initially focusing on the delivery space, but across cargo, across work van, there's a whole host of applications where we see very strong demand. That's, of course, going to be amplified by the Inflation Reduction Act.
Okay. Then just if I can ask a quick follow-up that's helpful, RJ. On the EBITDA guide, I mean, clearly it looks like there's a pretty meaningful deterioration through the second half versus the first half. I mean, if volume is ramping up, you get some of these fixed costs covered. I mean, is it you know, just simply cost inflation that's eroding the second half versus the first half, or what's the key driver there?
Sure. The key drivers that we've experienced are both our expectation that there'll be higher anticipated cost of goods sold, and that's partially offset by lower operating expenses within the business. I'll unpack a little bit of the higher COGS outlook, which includes both.
Yeah
The fact that we've seen, you know, higher, you know, startup costs or inefficiencies associated with ramping four vehicles across two production lines at our plant in Normal. We've also seen, you know, higher levels of inflation, especially around raw material inflation. Some of those, while we've seen, you know, spikes in terms of where the spot market is for some of those inflationary raw material factors, some of those are also second half impacts that we'll experience just given the contracts that we have with some of our suppliers. Beyond that, we've also experienced increased costs in regard to our expedited freight expenses, which are really the result of the challenging supply chain environment that we've been navigating as well.
One last point on it is also the fact that we do expect to also incur higher levels of LCNRV over the course of the remainder of the year, which are really the result of many of these increases across, you know, our startup costs as well as inflation. For example, every additional dollar of inflation also impacts the LCNRV adjustment that we make on our inventory and firm commitments at the end of each quarter. It really has an amplifying or multiplying effect, given the factors that I walked through that have driven some of this headwind from a cost of goods sold perspective as we look out over the course of the second half of the year.
I do wanna just reiterate the fact that we do still expect that our year-ending, you know, cash balance will be unchanged relative to our initial expectations, given the fact we've also reduced our CapEx guidance, due to our focused product roadmap and the push out of certain CapEx spend to 2023.
That's very helpful. Thank you very much, guys.
Thank you. One moment for our next question. Our next question comes from Mark Delaney from Goldman Sachs. Your line is now open.
Yes, good afternoon. Thank you very much for taking the questions. I was hoping first you could talk a little bit more on the supply chain issues that you're seeing. What are some of the biggest constraints currently? You know, as you speak to adding a third shift, or excuse me, a second shift, later in the third quarter, you know, what needs to happen in order to enable that pickup in production?
Thanks, Mark. Yeah, we've certainly seen some of the supply chain challenges we've talked about in previous calls start to really shift. This was embedded into our overall projections and our guidance and confidence around our guidance for 25,000 vehicles for the year. You know, the second quarter saw a number of challenges in terms of the semiconductor space as well as just overall ramping of the volume within our supply base.
As we look out for the remainder of the year through Q3 and Q4, we have a lot of confidence that both the suppliers are really leaning in with us, but also we see the demonstrated performance to be able to hit the continued ramp, and this is what's enabling us to plan for the second shift to come online here later this quarter.
That's helpful. My second question, as the company announced some targeted cost reductions recently, how much cost do you expect that to save when fully implemented, and when do you think you'll be at that full run rate of savings? Thanks.
From a cost perspective, ultimately, as I mentioned, as I walked through some of the levers of the adjustments to our underlying EBITDA guidance, we do expect there to be an underlying, you know, OpEx savings throughout the course of this year, given the reductions in force that we have made. Most of the payroll savings, we don't expect to really take full effect until 2023. It's also important to note that as we think about our roadmap forward, we're also, you know, investing in a lot of the key areas of growth within the business.
We've really tried to allocate that resource and investment in those critical next generation technologies and the build-out of our customer service and customer support efforts from a transaction perspective as well. In aggregate, you'll see more of a flattening of our operating expenses that will start with a reduction in Q4 and then build up throughout the course of 2023. That it's the changes that we've made and the optimization from an operating expense perspective allows us to continue to invest in these critical areas of the business.
Thank you.
Thank you. One moment for our next question. Our next question comes from Joe Spak from UBS. Your line is now open.
Thanks so much, everyone. Was wondering if you could just provide a little bit more color on this second shift that you expect to sort of come on here at the end of this quarter, right? It's not another line, it's a shift. If you have that first shift running at rate, you know, how much more rate does that second shift give you? I imagine it wouldn't be 2x, but some framing would be helpful.
Thanks, Joe. You know, bringing on a second shift is, you know, it involves both making sure the supply chain is capable of supporting it, as we talked about before. It wouldn't make any sense for us to have to hire a whole second shift and then to have the line sit still waiting for parts. First and foremost, we've been very, very much emphasizing supplier readiness to support this and have worked very closely to look at any parts that we think are constrained or may be constrained. But with that, the other big element is, of course, making sure the organization's ready for that. This really ties to the shop floor leadership. Making sure our team leaders, our group leaders are prepared. We've got the training programs in place.
In fact, we had a great leadership offsite. We had all the group leaders from across the plant a couple weeks ago. Really getting the whole organization ready to go to a second shift and making sure we have leaders that have experience running in the first shift, as you said, on a line that's fairly stable, such that when we bring on the second shift, that we get as much output out of the second shift as possible. Now, it's not a binary step. There is a process of ramping the second shift, much like we have with the first shift. In terms of equipment readiness, you know, robotics and automation controls, those items, of course, have already been worked out through the running of the first shift.
We expect the bring on and ramp up of the second shift to be much, very rapid. We've begun hiring for that. The hiring has been underway and it's working. We're working towards bringing that second shift, as I said before, online by the end of this quarter.
Okay. I guess, you know, the second question is relates to FleetOS, which, you know, you detailed in the shareholder letter, somewhat. Is that exclusively what Amazon is using, or are they using a layer of their own software on top of what you provide them? You know, since you know indicated that there's an element of recurring revenue here, is it possible to sort of break out how many EDVs were in the quarter? I know there's been some numbers reported in the press as sort of what you expected for the year, but maybe you could sort of just, you know, clear that up on what you think you could deliver to Amazon for the year.
One of the things that's really exciting about the EDV program is on the surface, you look at and we see the van. You know, this large, very friendly looking commercial van. But what you're not necessarily seeing is the amount of work and effort that went into really deeply integrating the vehicle into Amazon's ecosystem. When you get into the vehicle, you know, what you see on the screen, the way it integrates within the routing platform, took a lot of close partnership and collaboration, a lot of feedback and iteration working with drivers. Now, above and beyond that, of course, FleetOS is a platform we use to effectively utilize and manage the fleet. So that's looking at prognostics around maintenance and service.
You know, of course, you know, looking at the data around how the vehicles are being used, where we can predictively assess issues that may come up. Fleet management in terms of how do we think about aging of the vehicles. Of course, some of the bigger items that really affect day in, day out operations, like charging. This is something that we developed with the benefit of a lot of iteration with Amazon, but also with a lot of visibility to exactly how an electric fleet at scale is going to be used and the benefits that can be derived from centralized deterministic decision-making around how efficiently and effectively the fleets are deployed.
Okay. Any chance at the number of EDVs?
Oh, yeah. We haven't announced the specific number of EDVs that are being built. I would say, as we've talked about, you referenced it publicly, we're really excited to start seeing a lot more of these on the road. We had a launch event several weeks ago in partnership with Amazon. The thing that is perhaps the most motivating to us is just getting a chance to meet with drivers and seeing how excited they are to be in the vehicles and all the little details that you know we worked through and thought about, whether it's the powered bulkhead door, the step height, the grab handles, even the software features I talked about before, our cooled seats.
Each of those features lights up a driver's day and makes their office, so to speak, a more enjoyable and better place to be in. We are very motivated to deliver as many as possible, and certainly Amazon is pushing for that as well. This is a key part of their Climate Pledge. We'll start seeing a lot more of these on the road very soon.
Thank you.
Thank you. One moment for our next question. Our next question comes from Charles Coldicott from Redburn. Your line is now open.
Hi, guys. Thanks for taking my questions. My first one, on production. I wondered if you would be willing to comment on the weekly production rate that you exited Q2 with and give us an idea of where it is today, or at least, maybe also some sort of idea about how we should think about Q3 versus Q4 for the remainder of your production guidance.
Sure, Charles . One of the interesting things if one tries to average our output over the second quarter, it's in some ways misleading 'cause it hides the signal so to speak, in the sense that there was a lot of second quarter where we weren't able to fully utilize our line. We weren't able to even run a full single shift because of component supply. And so as you look at the exit rate, or I think even more importantly, the unconstrained production rate where we had components, you know, component supply to support full utilization of the lines, it was considerably higher than what the average was over the course of the quarter. Knowing the state of the supply chain and knowing the.
Having the confidence around component supply throughout quarter three and into quarter four allows us to have confidence in an expansion in the level of volume we're gonna be delivering this quarter and then certainly into Q4 as we move to fully utilizing two shifts. So ultimately, again, we continue to have confidence in our guidance for the year, and that's borne out of the demonstrated performance in terms of line operations through quarter two and through the deep relationships and confidence we have with our suppliers.
Okay. Thank you. Just on the order intake, so it seems like it accelerated at the end of Q2. Can you talk a bit about maybe why you think that was, perhaps share some detail on particular vehicle trims that were most popular?
For sure. We've been able to spend a good deal of time interacting with customers, and one of the things that we continue to hear back from customers is how often they get asked about their vehicle. You know, if you take a trip to the beach or if you're in a shopping plaza, people are naturally drawn to the vehicle and ask lots of questions and are excited to see it, and that's creating ever greater awareness. The more vehicles that are on the road, the more people are learning about them, hearing about them, and we certainly think that's leading to some of the accelerated demand that we're now witnessing. As was referenced earlier in the call, we're also continuing to see very positive reviews.
You know, journalists, influencers having a chance to get exposure to the vehicle are seeing that this is such a unique combination of extremely high on-road performance, incredibly capable off-road performance, really nice everyday usability, within a package that from a technology point of view and a connectivity point of view is wonderfully fun to use. That's creating echoes, I think, throughout the customer base, where people are hearing about the vehicle and getting very excited about it. Now with that said, and Claire mentioned this, we also see strong preference for some of our highest trims.
Both in terms of the content on the interior of the vehicle, but also our drivetrain configurations. The high trims or for the more expensive trims is very high, in fact, higher than we had expected as well. It's in many ways capturing the really strong pricing power that the vehicles and the brand represent and what gives us a lot of confidence, as we talked about before, around our margin structure long term.
Great. Thanks, guys.
Thank you. One moment for our next question. Our next question comes from George Gianarikas from Canaccord Genuity. Your line is now open.
Oh, hey, everyone. Good evening, and thanks for taking my question. I'd love to hear about what the cars that you have on the road, what kind of data they're sharing with you so far, how the data that you've collected can inform future product design or what it's telling you about your product performance to date. Thanks.
Thanks, George. One of the really exciting things that probably one of the things I think our team enjoys the most is to see how all of our vehicles get used and to hear the stories from customers and to see the everyday use cases and the extreme use cases. So I get emails and notes all the time with pictures of the vehicles at the you know to the top of mountains or you know driving through off-road trails. Then we also see them stuffed full of kids and gear on their way to Disney World.
It is really rewarding for not just myself, but for the full team to see people really using our vehicles as we intended, you know, to both enable but also inspire people to go do the kinds of things they wanna take photographs of. That really is echoing through the organization as we now think about R2 and some of the features that go into it, and how do we make sure we continue to capture the essence of the brand, the desire to or the brand essence of just driving the desire to go explore and to see new things. Now, in terms of the specific data coming off the vehicles, of course, we're using the data off of our self-driving platform to continue to improve and refine features.
We're seeing that, you know, every couple of weeks with our over-the-air updates that provide enhancements on everything from self-driving to new drive modes to we just recently added a pet mode. Soon we're gonna be adding a camp mode. It's a very exciting mode. The feedback loop as well as how we're realizing the vehicles are gonna be used informs a lot of the digital feature set that we continually add to the vehicle over time.
I'd like to ask just one follow-up on that. You know, reportedly, Volkswagen's CEO lost his job because the company wasn't pivoting quickly enough to developing its own internal software. How successful are you guys in continuing to hire the right software talent? And if you could just remind us how much third-party software do you use throughout your vehicle and how much have you developed on your own? Thank you.
Our vehicle architecture was really designed at its core as being really a software focused or software first platform. The compute platforms or the ECUs across the vehicle, the network architecture, these are developed in-house. Those are everything from the experience module to the autonomous control module to the vehicle dynamics module. These compute platforms developed in-house and of course, the software stacks that sit on top of those are developed in-house. We deeply believe that control of not just the electronics, but also the software that runs across all those platforms is incredibly important in terms of creating differentiated customer experiences and experiences that are enhanced over time. When I say enhanced over time, I'm not measuring time in months or years, but measuring time in weeks.
The vehicle gets better week over week, month after month. It's one of the things we're finding with our early customers that they really love. If they have feedback on something, we can address it. If there's an idea for a feature, we can create it. From the very early days of forming Rivian, we always had a very heavy focus on knowing that vertical integration and control of our electronics and software stack was going to be critical for creating these highly differentiated customer experiences.
Thank you. One moment for our next question. Our next question comes from Alexander Potter from Piper Sandler. Your line is now open.
Great. Thanks, guys. A couple of questions on RCV and FleetOS. First one, you mentioned there's a lot of demand for vans, these types of applications, cargo, outside of e-commerce and last mile delivery. But I'm also interested, you know, the extent to which you actually have the bandwidth to entertain inbound questions or inquiries from big fleets that are outside those initial markets that you're focusing on. Do you have the ability to start talking through, I don't know if it's telco or some of these other commercial van fleets, how you would integrate as closely as you have with Amazon? I mean, it's not something you do overnight. Yeah, I guess that's the first question.
Alex, it's a great question. As you noted, for these very large fleets, the sales cycle, so to speak, takes a long time. Building the relationships, understanding the needs of the fleet, determining what adjustments to the vehicle or specific attributes of the vehicle need to be sort of thought about in the context of how they're used within these larger fleets. It just simply takes time. While our production lines are ramping and we're delivering as many vehicles as we can to Amazon, we've started those long sort of long cycle discussions with some of the very large fleets.
They're certainly making sure that as these larger fleets, you know, beyond the last mile as well, as they start to plan their path of being fully electrified, that we're supporting that planning, but also, of course, embedding ourselves into that planning. As I said, I think the Inflation Reduction Act certainly creates a very large amplification of the demand here and certainly a very strong tailwind for us as we have those discussions.
Okay. Yeah. Inflation Reduction Act, you mentioned that, so that reminded me of the other question I wanted to ask. How feasible is it? You get a lot of people saying that, you know, it's well-intentioned and everybody is sort of on board with the objective, but, you know, it can take whatever, 7, 10 years to get production, refining, mining permitted in the U.S. You know, do we need to break bottlenecks on the, I guess, or cut red tape in order for this bill to actually end up having any impact? Thanks.
Yeah, in terms of battery and domestic battery production, you're right, these are some of these items do take time, whether it's a cell plant or material processing, let's say, lithium hydroxide processing facility. It's important to note that in the commercial space, the requirements for localization are not as aggressive as they are in the consumer space. That's an important distinction for us that the full localization of that supply chain does not have the same tight requirements that we're seeing, that we have in the consumer vehicles. Now, in the consumer vehicle side for R2, this is something that we've been working on for a while and have talked about previously, but really designing a supply chain.
That is addressing some of the geopolitical risks above and beyond what's now, you know, now, sort of being driven by the Inflation Reduction Act. That's been something that's been work underway for quite some time. As we've contemplated and planned for the long-term supply chain for R2, we've always looked at it through the lens of making sure we had domestic supply chain to support the ramp-up of that product.
Very good. Thanks, guys.
Thank you. One moment for our next question. Our next question comes from Emmanuel Rosner from Deutsche Bank. Your line is now open.
Thank you very much. First question is on the EDVs and deliveries to Amazon. I think in the past, you've highlighted at least some full year target around the split in the 25,000 units between R1s and EDVs. Can you just remind us what that is and whether, you know, you're tracking in line with those targets so far? Related to sort of like this Amazon business, can you also remind us of either the pricing or economics of the Fleet OS?
Sure. Emmanuel. As RJ mentioned, we're working hard to build as many EDVs as possible this year. One quick call-out is also the seasonality impacts that we have with Amazon. Q4 is really Amazon's peak holiday period. For us, we're really trying to charge ahead and build as many as we can through the fall to get as many of those vehicles out on the road to service those customers throughout that peak holiday period over the next handful of months overall. We're not providing a specific target at this time in terms of the overall penetration of EDVs that we expect to produce this year.
As RJ mentioned, we're working through some of the supply chain bottlenecks as we speak, to make sure that we're continuously ramping our production output of the EDVs. We've seen really significant progress on the line. Our lines are capable of producing far in excess of the underlying weekly output from a production perspective that we've seen to date. As we've talked about in the past, we're not providing specifics around the Fleet OS pricing that we're providing for Amazon, but we specifically see this as a significant long-term margin accretive piece of our business as we think about the broader service opportunity that Rivian can address.
FleetOS is really that first example of that long-term opportunity, and it's a proposition that we can offer to many other fleet customers as well. I think that's one of the key advantages is just the flexibility that the platform entails for both Amazon, but also importantly for other potential commercial fleet managers as well that we can address with it.
Thank you. My second question is on the CapEx outlook. You've cut this year's planned spending from $2.6 billion to $2 billion. Can you talk about the implications for the outlook beyond this year? I think that as part of last quarter's update, I think this was generally low- to low $2 billion or so, you know, per year through mid-decade. Do you have to catch up on some of the delayed spending from this year, you know, into next year? Is $2 billion the new run rate on a go-forward basis? You know, how should we think about that?
Sure. As we think about the CapEx roadmap for the coming years, we still expect to be spending in that low $2 billion area through 2025, which allows us to continue to invest in the expansion of our plant in Normal, Illinois, where right now we're adding our insourced motor production lines. It also entails us the opportunity to invest in the first 200,000 units of capacity for R2 in Georgia. The timing, some of the timing changes definitely do fluctuate, you know, one year to the next. In total, our expectation remains unchanged around continuing to spend in that low $2 billion area from a CapEx perspective.
That's really been driven by the focused product roadmap that we've set out and we've talked about throughout the course of the last quarter as well.
Okay, thank you.
Thank you. One moment for our next question. Our next question comes from Ryan Brinkman from JP Morgan. Your line is now open.
Hi. Thanks for taking my question. I realize your vehicles have not been on the road all that long, but I'm curious how many miles you estimate your customers may have driven thus far. I think you may have good data around that. You know, how warranty and service claims might be tracking relative to your initial expectations, either in terms of frequency or severity or expense, you know, for that given mileage amount. Then, you know, when the vehicles are subject to service or repair, are they more coming into your service centers? Maybe remind us how many you're up to now, I think over 20. Or are you more frequently sending mechanics out to your customers' homes? You know, how has the customer experience been tracking to date in either case?
Yeah, Ryan, great bunch of questions. Just to sort of start with the service question. We have 24 brick-and-mortar service locations today. These handle the larger service activities. They also handle pre-delivery inspection for us. As you indicated in your question, a lot of our service is actually done through our mobile fleet. We have a fleet of vans and Rivian R1Ts that go to a customer's home or go to a customer's place of business and can service the vehicle there. That will over time make up the vast majority of our service events. Today it's on the order of about 50%, but growing very quickly.
With that said, there are a lot of miles driven on different terrains. We haven't published a number on total number of miles driven. With regard to warranty or service, we also haven't provided guidance on warranty or service numbers. We can say certainly that it's been great to see the vehicles being used across so many different environments. What we've really enjoyed is seeing people take very long road trips. We've had lots of trips going across the country. We actually just got some notes from vehicles that drove from California up to Alaska. There's a lot of really long trips, a lot of really strenuous trips that are being taken in the vehicles, which is fun to see.
Very helpful. Thank you.
Thank you. I am showing no further questions. I would now like to turn the call back over to RJ Scaringe for closing remarks.
All right. Well, thank you everyone for joining the call. We're really excited about the path ahead, the continued ramp of the R1 and product line and of course the EDVs, from Normal facility, as well as the technologies that Claire and I both spoke to today, that we're developing across our propulsion platform, our network architecture, our self-driving, and of course, software, and our full software stack. Looking forward to seeing a lot more of our vehicles on the road and thank you again for the time.
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect. Disconnect.