Rivian Automotive Inc.'s upcoming R2 pickup and SUV promise to be smaller than their flagship R1 counterparts already in production. But that doesn't mean they will be cheaper right out of the gate.
The R2 platform is scheduled to begin production in 2026 at the company’s under-construction Georgia plant, which will have a production capability of 400,000. For now, CFO Claire McDonough said recently, it’ll start by producing half that, although there’s no news on when it might ramp up to full capacity. By comparison, the company’s plant in Normal, Illinois, could produce 65,000 R1s, although its full capacity is 150,000.
The R2, like the R1, is a platform that will allow multiple models to built onto it. It’s been cheaper to create than Rivian’s first models, but that won’t necessarily translate to price, at least at first. (Rivian’s suggested retail price for an entry-level R1T is $73,000.) Speaking at a Bank of America Securities event earlier this month, McDonough said that’s due to the R2’s scarcity value in its first few years of production and the possibility of selling different trim packages.
“The R2 is going to be a sport and then we’ll have some – to start – some high-priced R2. And then, we have something on the R2 platform that comes in at a lower price point,” McDonough said.
Pricing is just one piece of the journey as McDonough and CEO RJ Scaringe target gross profitability by the end of 2024. Rivian has been pushed in the past about possible price hikes that could help it reach that goal – particularly as next-generation technology updates could let the company “meaningfully increase” its average selling price over time.
“As you think about the R1 base price today […], we think about how does the most premium R2 stretch up towards that level but ensuring that we’re leaving the R1 platform as our true flagship platform in the market that will maintain strong overall ASPs for us,” McDonough said.
Reaching that gross profit goal also will come in part from greater scale at Rivian’s Illinois plant, something the company has struggled with due to supply chain troubles, particularly with semiconductors. In 2022, supply issues caused executives to significantly revise production goals from 50,000 to 25,000, a mark they still missed. This year, they hope to hit 50,000, a goal they say they’re on track to achieve after making 9,395 produced in the first quarter.
Materials cost reductions will also play a part. The company has already started by developing its new Enduro drive unit for its commercial van and R1 lineups, the semiconductors for which are sourced from a different supplier, as well as introducing cheaper-to-produce LFP battery packs and negotiating commercial and supplier agreements.
Rivian stock (Ticker: RIVN) has held steady since McDonough spoke to the BofA conference April 4, although it has lost about 50% of its value over the past six months. The company’s market capitalization is now about $13.7 billion.
