Good afternoon, and thank you for joining us for Rivian's third quarter 2026 earnings call. Today, I am joined by RJ Scaringe, our Founder and CEO, Claire McDonough, our Chief Financial Officer, Javier Varela, our Chief Operations Officer, and Derek Mulvey, our Vice President of Finance, who will be named Interim CFO effective tomorrow. Before we begin, matters discussed on 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 presentation we filed with the SEC today. 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 earnings presentation and press release. Just before the earnings call, we posted our earnings presentation, 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 that we will cover on today's call. Following our prepared remarks, we will be taking questions from sell-side analysts. In the interest of keeping the call to one hour, we would ask these analysts to limit any follow-on questions to one. With that, I will turn the call over to RJ.
Thanks, Chip. Good afternoon, everyone, and thank you for joining us for today's call. We had a great third quarter. We achieved record production volumes in Normal as we continued to ramp R2 manufacturing. We also had record deliveries, with R2 delivering much of that gain. In fact, R2 is already our best-selling vehicle by volume, outselling both R1 and EDV in the third quarter. I am proud of how our team has come together to scale our manufacturing, sales, and service operations. We are also advancing our technology roadmap, and I look forward to showcasing that progress at our Autonomy and AI Day on December 9. Since its launch in June, we have seen all types of potential customers take R2 for a drive. The feedback on R2 has been outstanding.
In the third quarter, we hosted over 103,000 R1 and R2 demo drives, surpassing the record we set in the second quarter. Reservation conversion rates for the Launch Edition R2 remained higher in the quarter than our expectations. We are really excited for the launch of additional variants in the coming months. R2 continues to generate rave reviews and awards from media, and recently won Top Gear's SUV of the Year award for 2027, with more awards to come. Amazon continues to expand its fleet of electric delivery vans across North America. Early this month, we began delivering new variants that are specifically designed to expand route coverage into more rural networks, including an all-wheel drive configuration, as well as a larger battery pack that offers 30% more range. Turning to our manufacturing operations, our team in Normal continues to ramp R2 production.
The second R2 shift has started, and we expect our manufacturing run rate to increase over the coming quarters. In Georgia, construction of our next manufacturing site is progressing well. Regarding our technology roadmap, autonomy remains one of the most important areas of investment at Rivian. We continue to see strong momentum in our Autonomy+ offering, available on every R2 and R1 starting with the 2025 model year, with take rates trending ahead of our expectations. Today, every vehicle with Autonomy+ is capable of hands-free driving on millions of miles of roads. Our next milestone is our Point to Point feature. This means customers can enter an address and their vehicle will follow the route from start to finish, handling city streets, stoplights, highway interchanges, and everything in between, with driver supervision.
A limited rollout of Point to Point is expected to begin later this year with our invitation-only Autonomy Early Access Program, with a general release to all Autonomy+ subscribers in 2027. We believe Point to Point capabilities are going to be an important purchase criteria for customers and is becoming a driver of market share. We continue to make progress on our partnership with Uber. We remain on track and expect to achieve our next milestone by the end of this year, which is expected to unlock an additional $250 million of equity investment from Uber. Additionally, last week, we announced the acquisition of Third Dimension AI to support our autonomy development and our associated closed-loop simulation efforts. With the Rivian Assistant, we have developed a smarter, more customizable AI-defined vehicle experience for all R1 and R2 owners.
In our October OTA, we added Gmail integration to Rivian Assistant, and we look forward to sharing more at our upcoming Autonomy and AI Day. Dressing up our vehicles for Halloween is a highlight to our customers every year. This October, we collaborated with Sony Pictures and Bill Murray to bring the Ghostbusters universe to life on Rivian vehicles with Halloween Mode. This is a perfect demonstration of how the level of deep vertical integration across hardware and software allows us to release immersive features to our customers at speed. Finally, I want to take a moment to thank Claire for all of her contributions at Rivian over the last six years. On a personal level, Claire has been an incredible partner and friend throughout this journey. I know I speak for the whole team when I say we wish you nothing but the best in your next chapter.
I am also excited to work with Derek as he steps into the interim CFO role. In closing, I want to thank our team for their continued execution in the third quarter. We are laying the foundations for a future that we believe will be fully electric, autonomous, and AI-defined. I could not be more excited about the opportunity ahead for Rivian. With that, I will turn the call over to Claire to cover our third quarter results.
Thank you, RJ, and good afternoon, everyone. As many of you saw last month, I decided to step down as Rivian's CFO to head back to the East Coast to be closer to my family and pursue a new opportunity. It has been the highlight of my career to help build Rivian's financial foundation alongside RJ and our teams, and I am stepping away with complete confidence in this company's trajectory, its mission, and the strength of the team that will carry it forward.
Turning to the results of the third quarter, our consolidated revenue was $2.155 billion, a 38% increase over the same quarter last year. Consolidated gross profit was $176 million, and our gross profit margin was 8%. Gross profit included $166 million of depreciation and amortization and $28 million of stock-based compensation expense. Adjusted EBITDA losses for the third quarter were $435 million, driven by our $176 million of gross profit and increased adjusted operating expenses as we scale our sales, marketing, and service operations to support our R2 volumes and invest in our autonomy roadmap. In the third quarter, we produced 19,751 vehicles at our plant in Normal, Illinois, and delivered 19,248 vehicles. Production and delivery results for the quarter were in line with our expectations, with R2 becoming our best-selling vehicle by volume in the third quarter.
Our $1.55 billion of automotive revenue, a 36% increase over the same quarter last year, were primarily driven by a 46% increase in vehicle deliveries and $81 million of regulatory credits, partially offset by a decline in average selling prices from a higher mix of R2 and commercial van deliveries, while R1 average selling prices increased due to mix improvements. Automotive gross profit loss was $80 million compared to gross profit loss of $130 million in the same quarter last year, a $50 million improvement due primarily to increases in delivery volumes at an improved per-unit margin, an increase in revenues related to automotive regulatory credits, and an IEEPA tariff refund receivable, partially offset by costs related to the ramp of R2 production.
In the quarter, we recognized approximately $120 million in incremental cost of revenue due to the ramp of R2 production as compared to production at more normalized levels. While current macro and geopolitical factors are creating added complexity, cost, and uncertainty, our team continues to work hard to manage supply chain risks and increasing commodity and memory costs. Our software and services segment reported another strong quarter. During the third quarter, the segment generated $605 million of revenue, a 45% year-over-year increase, primarily due to increases in vehicle electrical architecture and software development services by the joint venture, vehicle repair and maintenance services, and Autonomy+, offset by lower remarketing sales. $354 million, or approximately 60% of software and services revenue, was attributable to our joint venture with Volkswagen Group.
Software and services gross profit was $256 million, a 42% margin, due to better-than-expected mix of revenues from more profitable revenue streams. With that, I will hand the call over to Derek to walk through our business outlook and capital roadmap.
Thanks, Claire. It has been a privilege to work alongside you, and I am excited to step into the interim CFO role and build on the foundation you have established. Turning to our liquidity and balance sheet, we ended the third quarter with approximately $5.5 billion in cash equivalents, and short-term investments. In addition to this balance, on October 7, we announced the funding of our $1 billion 10-year term loan facility with Volkswagen Group at a fixed interest rate of 6%. To date, we have received $5.3 billion of the $5.8 billion in expected capital commitments associated with the joint venture, with the remaining $460 million anticipated in late 2027. Additionally, we expect to achieve our second milestone under the Uber partnership later this year, which will trigger an additional $250 million equity investment.
When factoring in our current liquidity, expected capital from Uber, Volkswagen, and our Department of Energy loan, all of which are subject to certain conditions, our total available liquidity and targeted future capital would be approximately $13 billion. Turning to our outlook, we are improving our full-year delivery guidance from 65,000-70,000 units to 67,000-70,000 units. In its first full quarter of sales, R2 outsold R1 and our commercial vans, and in the fourth quarter, we expect R2 to represent the majority of our total delivery volume. We are making significant strides to drive down our automotive cost per unit, and we are already seeing the benefit of introducing R2 into our Normal production facility.
While new vehicle launch complexities in addition to rising costs of core components have, and we anticipate will continue to impact our profitability, we expect that R2 will help us achieve a positive automotive gross margin exit rate for the year. This would establish a strong foundation for continued margin expansion as R2 ramps through 2027. For full year 2026, we now expect our Adjusted EBITDA losses to be between $1.85 billion and $1.75 billion. At the midpoint, this represents $100 million improvement, driven by favorable regulatory credit revenue, an IEEPA tariff receivable, and our expected increased delivery volume. As RJ outlined, we are making rapid progress in our autonomy roadmap and are excited to launch our Point to Point feature on a limited basis later this year.
We anticipate the pace of our R&D investment in the strategic area to accelerate in the coming years as we advance our Large Driving Model and progress advanced autonomy development across our consumer vehicles and Robotaxi applications. We believe autonomy is a primary product differentiator, market share driver, and long-term value creator. Finally, we are lowering our 2026 capital expenditure guidance by $300 million at the midpoint due to a shift in timing of certain capital spend. This brings a revised 2026 CapEx range to $1.4 billion-$1.5 billion. Looking ahead to 2027, we expect a meaningful year-over-year step-up in CapEx as construction activity ramps in our Georgia manufacturing facility. In closing, I would like to thank our teams across the company for their execution of the third quarter. We remain confident that R2 and our technology roadmap will be truly transformative for the growth and profitability of our business.
With that, I would like to turn the call back over to the operator to open the line for Q&A.
Thank you. For the Q&A section of today's session, we will be utilizing the Raise Hand feature. If you would like to ask a question, click on the Raise Hand button at the bottom of the screen. Once prompted, please unmute yourself and begin with your question. We will now pause for a moment to assemble the queue. Thank you. Our first question comes from George Gianarikas with Canaccord Genuity. Please unmute yourself and ask the question.
Hi, everyone. Thank you so much for taking my questions. I just want to ask first on autonomy, how leverageable is your platform to the commercial vehicles over time? Thank you.
Hi, George. The autonomy platform is being built around what we call our Large Driving Model. The Large Driving Model is a foundation model. It is a large parameter model that we are training, and it is very adaptable to different vehicle form factors and applications. That is inclusive of R1, R2, and of course, our commercial vehicles. As we think about the autonomy roadmap and different ways that we can use this to benefit the business, it of course has implications on our consumer business, with the big milestone coming up with our Point to Point features. It also has applications in Robotaxi, of course, as part of our partnership with Uber, with the 2028 launch for that. Then there is a number of applications in the commercial space as part of our Vans program.
Thank you. Maybe just as a financial follow-up, just to make sure we heard that correctly, you mentioned, I think, that auto gross margins should be positive exiting the year. Does that mean we should expect a full quarter of positive auto gross margins or just sort of a run rate in December? Thank you.
Thanks, George. The way we phrased it in the prepared remarks was that we intend to exit the quarter at an automotive gross profit, so I would not expect the full quarter. But it does set us up really well as we continue to ramp R2, and we think about the progression we see through 2027 for the year.
Thank you.
Thank you. Our next question comes from Joseph Spak from UBS. Please unmute yourself and ask your question.
Thank you, and congratulations to both Claire and Derek. Claire, it's great working with you over the years. Derek, again, congrats. First, you mentioned this $120 million of incremental cost of revenues due to the ramp. That's not really cost of good, right? I guess what I'm wondering if you could help us understand is today's realized pricing and mix. What is the R2 contribution margin before those launch efficiencies and the fixed cost absorption? Because then I think we could get a better sense of if we add back some of those inefficiencies, what, for lack of a better term, a mature gross margin would be.
Yeah. Thanks, Joe. The $120 million we quoted really is comparing where our cost structure is today as we think about our conversion costs, our depreciation, in relation to what our two-shift operation should be performing at. That's just really the effect of not having a full rate of production at a two-shift operation today. In addition, that 120 includes some of the things like expedited freight and some other costs that we expect to wind off as we continue to scale. I think when you look at R2 today, in the second quarter, we saw about a $12,000 per unit step down in cost of goods sold per unit delivered. I think the biggest driver of that is introducing R2. One is R2 is a lower-cost product, but two is R2 is benefiting from a scale perspective within Normal.
As we step back and you look at our total automotive gross profit, excluding regulatory credits, on a cash basis, that was positive for the quarter, and we expect that momentum to continue as we scale and ramp R2.
Okay. I guess just the second question maybe building off the first one is, since you announced R2 pricing in March earlier this year, there's been a lot of inflation, whether it's memory, PCB, other electronics, steel, copper. I guess aluminum looks pretty flat. So maybe that matters less today with the Launch Editions, but I was wondering if you could give us any anecdotes as to how you're looking for or have been able to find engineering or manufacturing efficiencies or other offsets to be able to maintain those targeted gross margins for the new vehicle.
Well, thanks, Joe. A big part of our engineering team is working on not only ramping production and achieving all the volume that the Normal production facility is capable of, but also looking at what further improvements we can make to the vehicle. Some of those will be captured in the vehicles produced in Stanton Springs, in our Georgia facility. A number of those are going to be flowing into the vehicle over the coming months and quarters. Of course, as you said, with some of the commodity pricing being a lot higher than what we expected, I think memory is a really important call-out there. We've really been focused to find other mechanisms to offset that and to enable us to still deliver on the various trims that we've talked about. The base trim starting at $45,000 and the top spec trim being at about $57,000.
The team is making great progress in that, and it's really, in terms of examples, it's across the board. It's details within the plant, how we're operating the plant. It's looking at improvements in packaging for logistics, for moving parts from suppliers to our plant. Then it's down to working really closely with our supplier partners on identifying further cost optimizations in the component level, really, that don't impact the performance or the capabilities of the vehicle, that often is part consolidation or part elimination through redesign of the components. The team's really doing an outstanding job of hunting for and looking for those opportunities, and we've got a real full-court press focused on them.
Thank you.
Our next question comes from Mark Delaney with Goldman Sachs. Please unmute yourself and ask your question.
Good afternoon. Thank you for taking the question. Claire, thanks for all your help. Wishing you the best going forward. Derek, congratulations on the expanded responsibilities. I was hoping to better understand what is going on with the R2 ramp, and nice to see the good momentum you just reported and a number of positive comments that you made, that you are seeing with that product. Can you share more on what you think are the key factors that will determine the pace of R2 delivery growth in 4Q and 2027? How much is it about converting on those record number of demo drives and positive media reviews into new R2 orders? Is it more about ramping up the supply chain and manufacturing?
Of course, launching a vehicle is a lot of moving components, and I think often the focus and attention gets directed at the plant, at the manufacturing operations, and of course, that is a huge part of this. I do want to really call out the importance of also ramping the supply base. In the case of R2, we have a number of new suppliers. We took an aggressive approach of reducing our supply chain complexity to have a smaller set of Tier 1 suppliers into the business. We can only ramp as fast as our slowest-ramping supplier. That is not to say there is an acute challenge with a single supplier, but rather, the ramp-up requires each of the suppliers to ramp, and they need to be highly coordinated. That is something we are very focused on. Javier is joining us on the call.
I will invite him to have some comments here as well. Our supply chain team, our overall logistics team, has been working very closely together to make sure that this ramp is smooth.
Yeah, I did. RJ, I have been involved in many launches across all my career, and supply chain is always a complex part of the launch that we already flagged from day one. Bringing up hundreds of suppliers and their Tier 2 and their Tier 3 is an immense task. What we are always doing is identifying where are the suppliers that they need some support, and we have special teams to help them, to support our scale. That is the focus area, scaling our supply chain.
Thank you both for those comments. My other question was on Autonomy+ and better understanding the impact it may be having on the business. Maybe you can give a bit more color on how impactful Autonomy+ was in that 45% year-over-year growth in the software services and other segment. When you talk to people who are buying Rivian vehicles, are they telling you that Autonomy+ is one of the key reasons that they are making that decision? Thank you.
Yes, as we said in the opening remarks, take rate on Autonomy+ has exceeded our expectations, and we are quite encouraged by it. As it stands today, Autonomy+, the core feature within it is what we call Universal Hands-Free, which is a hands-free driving capability that can be used on billions of miles across the U.S. What is coming has us even more excited, and that is our Point to Point capability, and that is where, in addition to being hands-free, the vehicle can navigate entirely to a destination. So you plug the address in and navigate through four-way stops, through complex interchanges, highway on and off ramps. We think that will start to really create new levels of demand and new levels of interest. Today, in the market, there is really only one other product that has that, of course, with Tesla's FSD.
This, for us, is an important capability, we think becomes even more important over the coming quarters, and I would say years, as more and more customers get exposed to this and really think of it as a core purchase criteria for the vehicle.
Thank you. Our next question comes from Dan Levy with Barclays. Please unmute yourself and ask your question.
Great. Thank you for taking the questions. First of all, Claire, congratulations, and Derek, congratulations to both of you on your new roles. I wanted to ask about EDV, yet another quarterly record in terms of Amazon revenue. If you could just, again, help us unpack the upside there, but maybe you could also talk about some of the upside we're seeing potentially with other customers. You've probably seen there's some images that went around of an EDV wrapped with another company out there, Walmart. Maybe you could talk about the potential for uptake with other companies on EDV and if Amazon is finally driving this.
Thanks, Dan. The EDV product, it's exciting to watch. It's something we've really optimized around enabling and really driving an advantage cost structure. We've seen Amazon as they've ramped from the early years of this program up through this year, where they've now got a large fleet deployed. They have lots of data on how the vehicle's performing, and it's creating true and very real structural cost advantages that are leading Amazon to double down to continue to buy more vehicles. As you've heard from us in previous calls, this year, we have seen a significant step up in the level of demand from Amazon. That's a direct reflection of the advantages that our EDV platform provides to their commercial operators.
With that said, we do see other commercial operators as they start to really look at ways to drive more efficiency into the business, starting to look at the EDV, and we're excited for those potential future customers on this program as well.
Great. Thank you. As a follow-up, wanted to ask about the JV with Volkswagen on network architecture and the potential to expand that to others. Maybe you could just talk about how that JV is progressing. Just as the technology goes into your vehicle and their vehicles, what are you potentially going to hear from other automakers that might want to adopt this?
Well, the first real output from the joint venture is going to be launching next year. This is the Volkswagen ID. EVERY1 product. This is a roughly EUR 20,000 EV that Volkswagen's producing for Europe. We're really excited about that. It's a wonderful way to demonstrate the capabilities of our technology outside of the Rivian brand and outside the U.S. market. Importantly, being in Europe, this is a vehicle that's going to be competing directly against not only European manufacturers but also Chinese manufacturers. We're very confident in the capability of the technology and the efficiency or the cost efficiency of being able to deliver a really broad set and impressive set of features in a vehicle at that price point. I've said this before, but we think of that vehicle as really a billboard for the capability. It really demonstrates what can be done.
The technology we've developed, we certainly think about this as having applications not only beyond Rivian, but also beyond this existing joint venture and into other applications with other manufacturers. Our focus to date has been heads down on both the Rivian programs as well as the Volkswagen Group programs, the first of which, as I said, is the ID. EVERY1.
Great. Thank you.
Thank you. Our next question comes from Itay Michaeli with TD Cowen. Please unmute yourself and ask your question.
Great. Thanks. Hi, everybody. Claire, Derek, congrats to you both, and best wishes. Maybe a first question, going back to Autonomy+, and it is becoming a major driver of demand for you. I am curious whether you think consumers are sort of coming to purchase the vehicles with the Point to Point feature in the future in mind, or do you think that when you launch Point to Point, could that be another step function improvement in demand? Maybe similarly for the Gen 3 hardware when that is launched as well.
I think in a very broad sense, to date, autonomy has not been a major driver for most customers in the United States. That is sort of evidenced by most of the vehicles that are being sold today do not have very much autonomous capability. I do think that we are at the base of a very significant inflection point, though, where we are going to start to see a much broader set of customers start to really look for advanced capabilities.
With that, I think Point to Point is really, in many ways, the unlock for that, where it really becomes, in some ways, like a magical experience where you get into the vehicle and the cognitive load to have to operate the vehicle, and navigate the vehicle is dramatically reduced because you simply have to put in your end destination and the vehicle can handle what happens in between.
This has been, as we have talked about in previous calls, this has been a major focus for us. When I say that is a major focus of resources, both dollars on the R&D side, as well as people. We have designed our architecture inclusive of the sensor set, our compute topology, the way we are developing a system around this neural net-based foundation model, and the whole business to really support both progress around autonomy, but specifically progress towards some of these key milestones or key steps with Point to Point being the first of multiple key steps that ultimately lead to the Level 4 capability that we are planning for 2028.
Terrific, RJ. And a quick follow-up, maybe touch upon just the acquisition of Third Dimension. Does that help you get to Level 4? Does it maybe expand the scope of ODDs? Just curious a bit on what this does post the acquisition.
Yeah, this is an exciting addition to the team. We're really pleased to have completed this acquisition. When you look at development of these higher levels of autonomy and really building them around a model-based approach, so an AI-based approach versus the autonomy 1.0 approach of using a more deterministic rules-based approach, a key part of that is what we call the eval process, how we're evaluating the model. You can do that in an open-loop way by putting it on vehicles and driving those vehicles. It's obviously proven. We've seen that Rivian has done that. Many other companies use that approach, and it'll continue to be used.
But in addition, we want to create closed-loop mechanisms whereby we can test the model in real-life conditions or simulated conditions, and then make lots and lots and lots of iterations on those conditions, to do fault injection, to do unique circumstance injection into the simulations. The acquisition of Third Dimension is supporting the simulation work that we've been building on within the company and the ability to have more rapid, closed-loop simulations that allow us to deploy models more rapidly and then, of course, make progress in advancing the models more rapidly.
That's very helpful. Thank you.
Thank you. Our next question comes from Alex Perry with BofA. Please unmute yourself and ask your question.
Hi, thanks for taking our questions here. I definitely want to echo the congrats to Claire and Derek as well. I guess maybe just following up on Point to Point. With the Autonomy Early Access Program beginning in December, what do you need to see from that group before moving to a broader 2027 release? Is this to gather data and validate the incident profile here? I would love to just get your thoughts on what you need to see there.
Having an early access program is a very common approach for newer technologies to get feedback from a broad spectrum of users. That's everything from the functionality features to the interface and how the features deployed, how they're actualized, what the UI looks like. This early access program allows us to do that. It gives us the opportunity to get really rich and diverse feedback from a broad set of customers in different driving environments and different geographies. That was how it was designed. Of course, as you said, that sets us up to then have the full broad release across all Autonomy+ subscribers in the 2027 timeframe.
Perfect. I wanted to ask about the edge cases that you're trying to solve for here at first. We've heard about pickup drop-off being a little bit of an edge case that's tougher to solve. I would love to just get your. When you're first launching Point to Point, what will the functionality really entail, and then how do you expect it to progress over time?
Yeah, I guess when you think about edge cases, there's a broad spectrum of types of edge cases. The pickup drop-off is particularly important for robotaxi or Level 4 applications. That's beyond what we're. That's, I'd say, even more important when we start to look at deployment of our Uber partnership in 2028. I'm sure many have experienced this. The challenges of, let's say, dropping someone off or picking someone up in a highly urban environment where there's no place for the vehicle to pull off, and you're stopping in lane on a road. Those are challenging situations and challenging as we've even deployed vehicles today. As it pertains to the consumer vehicles and Point to Point, some of those are solved simply through this being a supervised product.
If it's a very complex pickup or drop-off situation, you have the benefit of someone in the driver's seat. This is where really being thoughtful on the UI in that situation is important. What does the vehicle do when it gets to the destination, and how does it indicate to the person in the driver's seat? We're working really hard to make sure all the UI and the thinking about what that interface feels like and experiencing the product is really seamless and easy to use and understand.
Perfect. That's really helpful. Best of luck going forward.
Thank you. Our next question comes from Shreyas Patil with Wolfe Research. Please unmute yourself and ask your question.
Hey, thanks so much for taking my questions. Curious on R&D, I think it was up 7% year-over-year, excluding stock comp. I know that is an important cost item, or I know an important element there is the cost for leasing AI compute capacity for training, and I am curious what you are seeing in terms of pricing and available capacity. We are seeing industry-wide token prices move higher, but just curious what you are seeing on the ground.
Yeah, thanks, Shreyas. We are seeing some increased pricing as we think about leasing compute. With that said, as we think about looking at Q3 this year to Q4, we do expect a low double-digit growth rate in R&D. As we look at next year, we do expect our R&D line to grow more significantly in 2027 than it did in 2026. This is really all driven by our strategic investments in autonomy software, autonomy hardware, and some vehicle technologies. We continue to be efficient in our uses of compute, but we will expect to continue to expand that as we think about next year and the progress we are making on our Large Driving Model.
Okay, thanks. Then maybe on input costs, I think you alluded to that as being a headwind. I am just curious, if you can drill down more specifically on some of the actions you are taking to try and mitigate that, whether it is coming from higher steel or freight logistics, DRAM. Maybe if you just provide a little more color.
Yeah. There are so many components that go into a vehicle. The big categories are, of course, bill of materials. Then you have conversion costs, cost to build the vehicle in the plant, then you have logistics costs. Across each of those categories, we have organized teams of people that are working to identify opportunities. Those opportunities we are identifying, as I described before, range from things that we can deploy in very near term, so these are ideas that can be deployed within weeks, to then ideas that require years of time, meaning significant redesign or selection of new suppliers. This is something in any scenario, we would be fighting and pushing for. I think to the point of your question, this is of even more importance given some of the headwinds that have emerged around raw material costs and memory costs.
But we continue to make progress on that. I think the most important very near-term thing that we're doing is the ramp. Is focusing on getting better fixed cost absorption through getting more output from the plant that's been installed and from the team that's working those lines. So that's everything from getting our suppliers ramped, as you heard from Javier and I earlier, and then making sure that we can very efficiently convert all those components from suppliers into our vehicles in the plant.
Okay, thanks. And maybe if I could just squeeze a last quick one. And apologies if you had mentioned it previously, but the reduction in CapEx for this year, now $1.4 billion-$1.5 billion, just what's driving that? Thanks.
Yeah, sure. The reduction in CapEx is mostly driven by timing, just some timing shift. As we look at our spend related to our Georgia facility, at the moment, it's a very lumpy sequencing of spend as we think about large equipment and purchases and large contracts. So as those move from an invoice or payment perspective or timing perspective by a few weeks, it shifts between quarters. So I'd characterize the move, the lowering of the CapEx, strictly from a timing perspective.
Okay, great. Thanks a lot.
Thank you. Our next question comes from Edison Yu with Deutsche Bank. Please unmute yourself and ask your question.
Great. Congrats, Claire and Derek. First question, we saw some media reporting lately about basically one of your vehicles badged with Walmart on it. Curious if you can comment at all if this is a testing phase or part of some type of enterprise deal.
Yeah. As I mentioned earlier, with our commercial van program, we continue to have discussions with customers outside of Amazon. Of course, our partnership with Amazon continues to progress and advance in extremely positive ways. This year represented a big step-up in volume with them, and is really a reflection of the performance and cost advantages enabled by this platform. We do continue to look for and work with other potential partners as we go forward.
Understood. Follow-up, I wanted to ask about Third Dimension. I think my crude understanding is that it sort of turns video, kind of regular video, into a 3D copy of the world of sorts. Is that kind of a very simplistic understanding of what it does? Following up on that, are there any kind of capabilities out there in addition to this that you think you'd need to complete the autonomy stack?
Sure. I talked about it a little bit before, but the Third Dimension acquisition is something we are really excited about. It bolsters our simulation efforts within the business and helps us create efficient closed-loop mechanisms by which we can validate and improve on our models. These are efforts that, of course, were underway within the business already. This is a great way for us to help accelerate some of that work. As you think about simulation and the importance of simulation, using simulation for validation becomes an even more important element for rapidly iterating on the model architecture and model design.
Thank you. Our next question comes from Tobias Beith with Rothschild & Co Redburn. Please unmute yourself and ask your question.
Hi, good evening. I have just one question, please. Over the next two to three years, what are your priorities for increasing brand awareness or brand equity? How will you measure whether those efforts are translating into customer acquisition and revenue growth?
Well, that is a great question, Toby. We are really excited with the launch of R2 to have a product now that has a much broader and wider aperture for customers. Whereas, of course, R1 was our handshake with the world. It was a great product to introduce the Rivian brand to consumers. By virtue of its price point, by virtue of being our flagship product, its price made it not something that many customers would be considering. With the R2, the price starting at $45,000 and going up through mid to high $50,000s puts it right smack, sort of overlapping with the average price of a new car in the U.S. in the most popular segment, the midsize crossover and SUV segment. That on its own is going to lead to more vehicles on the road, which of course will create more awareness.
But bolstering not just the vehicle and its increased presence on the roads, is we're doing a bunch of really creative ways of getting the brand out there. Maybe the most recent one as a good demonstration of this was what we did for Halloween this year. Of course, we've been doing Halloween Mode since we launched the company. And each year we think of really creative ways to do fun things that bring a lot of excitement to customers. But this year, we partnered with Sony and created a Halloween Mode where we had Ghostbusters integrated into the vehicle. Of course, working closely with Bill Murray to do this was a lot of fun. But these are ways we can really cut across culture, cut across a wide spread of demographics, and create awareness for the brand as you noted.
Perfect. Thank you so much for your time.
Thank you. Our next question comes from Rajat Gupta with JP Morgan. Please unmute yourself and ask your question. Rajat Gupta, please unmute yourself and ask your question. Our next question comes from Chris Pierce with Needham. Please unmute yourself and ask your question.
Hey, just a quick one too. Can you just talk to the lidar variant of the R2? I believe originally it was supposed to be coming out to consumers this year. I think the term delay might be a bit harsh, but now it's employee only for testing or for purchase. I just want to understand if there was some sort of component delay or just sort of the initial launch variant was better than expected. I'm just curious what drove that decision.
Well, thanks, Chris. On our autonomy platform, I mentioned before the Large Driving Model. The Large Driving Model is something that's going to be deployed across all of our R2 vehicles, including, of course, Launch Edition and then model 2025 R1s with new model 2025 or newer. Importantly, that means Point to Point's going to be available on all those vehicles and the capabilities that that entails, we think are quite exciting. The next hardware generation, which includes our RAP1 processor, which is for each processor, 800 TOPS. We have two of those for 1,600 TOPS in the vehicle. We marry that with an enhanced perception platform that includes camera, radar, and as you pointed out, a lidar sensor. That, as you've said, is going through an employee program late this year and our validation builds and validation process this year.
Into 2027, that vehicle will be available. We're really excited about what LDM, the Large Driving Model represents and what that can bring to everything from, as I said, model year 2025 R1, existing R2, and then future R2.
Okay, perfect. You've talked about order book to purchase conversion, I think, just using conversion broadly. Can you talk about test drive to order book conversion, given how test drives are up so much sequentially with the launch of the R2? What are you seeing there and is it a long wait kind of, maybe long is not the right word, but are people kind of converting from test drives to the order book? At what kind of rate versus the R1 or just any color you can share there?
Maybe the most interesting is we launched with the launch variant, and so that's our premium performance trim. We had certain assumptions around what the conversion for that would be, recognizing it's the most expensive R2. The conversion to date has exceeded our expectations, which is really encouraging. That doesn't take away from how excited we are for the other trims to also come in. It's outstanding to see so many folks excited just to get into an R2 and also be in the launch configuration. With regards to test drives, I'm glad you called it out. This is an important metric for us, and we did see a significant step up in test drives really as a result of having R2 available and the level of excitement from folks to get in and experience the vehicle.
Thank you. Our next question comes from Tom Narayan with RBC. Please unmute yourself and ask your question.
Yes. Thanks for taking the question. Yeah, good luck, Claire. Congrats, Derek. First question is on the R2. You've been selling the kind of higher-end trims, but then next year you're going to have the kind of lower-end trims with a lower battery range. Just curious what you think about consumer demand for those products with the lower battery range, especially in light of, I guess, what model-wise a battery range is relative to price. Then also the impact on margins for that lower trim R2, and then I have a follow-up.
Yeah, as I said, we're excited about all the different trims. There's sort of two big variables to think about in the different configurations. So we have a premium trim and then a standard trim. That's the interior appointments, the rear drop glass that links to that, a few other features within the vehicle, and then there's a propulsion variation. So we have all-wheel drive performance, we have all-wheel drive base, and then we have a rear-wheel drive variant. Then within the rear-wheel drive variant, we have a larger pack and a smaller pack. Really the reason we create all those variants is because we want to make sure we cover the demand curve. So give customers enough choices across performance, range, price point, content, such that we can capture customers from the $45,000 price point all the way up to the $57,000 price point.
From a unit economics point of view, I think we have to recognize that when we launch, as Derek described earlier, the lack of volume and the ramp-up, just because of the nature of ramping on a single shift, ramping suppliers, means that our ability to absorb fixed cost, that's depreciation, that's the labor cost within the plant, is more limited. As we grow volume, the actual cost structure of the vehicle comes down quite considerably, because those fixed elements of costs get absorbed by a lot more volume. So we've been able to very intentionally sequence the nature of launching with a high-priced variant and then bringing in these other trims as our volume grows, such that in the end it supports a healthy positive gross margin for the R2 business.
And of course, given its volume, that really drives the financial performance of Rivian overall.
Got it. My follow-up is on autonomy. I think you said the take rates for hands-free are better than what you have expected. Can you give us a sense of what those take rates could be? We know Tesla FSD is around 75%. Is it in that order of magnitude? Do you see Point to Point with higher pricing than your current autonomy product? Tesla FSD is around $99 a month, which suggests that consumers are willing to pay more for autonomy, at least at that quality.
Well, I said this earlier, and I do think it is an important call-out. We really think of Point to Point as being almost an inflection point in terms of the type of experience you can have with autonomy. Hands-free, as it is today, you can use on any road, effectively any road that has lines, any marked road. So it is millions of miles of roads today, but it is not navigating you off exits onto urban environments, through stoplights and through four-way stops and those sorts of things. The Point to Point does do that.
With Point to Point, it creates this much easier experience where it takes the cognitive load of having to figure out what you are going to do, navigating, thinking, paying attention to which road you are supposed to turn, all those things sort of fade away, and it is a really nice experience. I am driving it every day.
It is wonderful on my commute in and out of the office. Our view is that that is going to become a big driver of demand, and I think it is unclear how quickly the whole, you can call it the whole U.S. market and the whole automotive market, starts to shift to really wanting this and this being a major purchase criterion. But certainly, we are at the front end of an inflection point, whereas more and more people are exposed to what this can do. We think it is going to become very important. It is precisely because of that for the last few years we have been investing heavily in building this capability, going back to kicking off an in-house silicon program, which ultimately is embodied in our RAP1, to vertical integrating the whole platform.
That is all the perception platform feeding in and running this, what we call this LDM, our Large Driving Model. We are extremely excited about this. We do think it is a really big driver in the long term for market share for us. We think it is going to be important that customers have some choices. As I said, with FSD being out there and soon our Point to Point being out there, we think that is great. We are looking forward to getting it in the hands of our Autonomy+ customers, and we think certainly that that will drive a further increase, I should say, in the take rate on Autonomy+.
Okay. Just to clarify, are you guys not giving us the attach rate for your autonomy product? Is it close to the Tesla level or-
We are not giving the attach rate.
Okay.
Maybe someday we will, but we are not giving it here.
And the pricing, could you guys raise it for Point to Point, you think?
Well, I do think this is an interesting question. In the fullness of time, of course, we think for over the coming years, we do see opportunities for this to continue to grow. But I think the dynamics around this are going to depend a lot on ultimately how the market is behaving overall. This is something today that is purchased as a separate subscription. You could imagine models where this gets embedded into the price of the vehicle. So there is a lot of different ways this is going to be priced. I called it out as inflection point. I would just say autonomy represents a big shift in the overall topology of the auto industry. I think it is going to be a big driver of market share, and it could drive huge changes in market share, shifting between different companies.
I think the models by which we charge for it, monthly subscription, upfront, embedded in vehicle price, there is a whole host of really exciting and interesting opportunities. But like any marketplace, it is going to be market-driven. So we are watching it very closely. But I would say if I were to guide on one thing, I would say it is going to be dynamic. It is not going to be the same for 10 years. It is going to change as the market evolves.
Yeah.
Thank you. Our last question comes from Andrew Percoco with Morgan Stanley. Please unmute yourself and ask your question.
Great. Thanks so much. Good evening, everyone. I will just reiterate all my peers' comments. Claire, it has been great working with you, and I know you have got a good opportunity in front of you, so best of luck. Derek, looking forward to working more with you going forward. Maybe just one follow-up question for me around the R1. It seems like, just based on what you guys have disclosed, the R2 volumes were, I guess, close to nearly double R1, and it is clear it is outselling the R1, which I would assume was the intention with the vehicle. I am curious how you are thinking about positioning the R1 over time. I know you have gotten asked about this before, and obviously, there is clear value in having that vehicle in the portfolio.
From a pricing perspective, do you think that there is an opportunity over time to maybe lower the price point as you start to leverage some of the scale and supply chain benefits from the R2 to make the R1 maybe a little bit more in line with some of the other three-row SUVs we see in the market from a pricing standpoint? Just curious, medium, long-term view on how you are thinking about positioning the product from a pricing standpoint, to maybe leverage some scale and get some incremental volume on the R1 over time. Thank you.
Thanks, Andrew. Derek referenced it in his opening remarks, but just to state it and to make sure it is clear, we actually expect the R1 pricing to go up a bit. Not the pricing, I should say, the average selling price to go up, and it is really strategic. We removed what we call our standard trim for R1 and have intentionally moved the product a bit upmarket, and really doing that because of where R2 sits in terms of pricing. As we think about how it sits within the portfolio, this is a flagship product, so it is the highest-spec trim. It has got over 1,000 horsepower. It is extremely capable on-road, extremely capable off-road. The tri-motor is also incredibly capable. So more than 800 horsepower, extremely capable.
By virtue of the quad, the tri, and the performance dual that we have on that, we very thoughtfully have moved it upmarket to really fill that place as a flagship product. That was intentional, and we are now seeing the results of that, and Derek referenced it in terms of when you look at revenue per unit for the quarter. With that, its objective is not to be a high-volume product. It is not trying to compete in the lower-priced segment of two or three-row vehicles. It is working to be much more of a premium vehicle. As I describe it, the capabilities and the features are set up as such.
Understood. Okay, thanks so much. I will leave it there.
Okay. Well, great, everybody, for joining us on this call, and appreciate the time. Hopefully, as you can see, we are really excited about what is in front of us. We are excited about the continued ramp-up of R2 in looking at the additional volume we will be building in Q4 and then into next year. I think along with that, really excited for what is to come with autonomy. We spent a lot of time today talking about it. I am encouraged by the level of interest that there is around our Point to Point capability and looking forward to showing a lot more about that and talking about that, as well as other aspects of our technology portfolio at our upcoming Autonomy and AI Day. With that, thank you all for joining us, and look forward to our next call.