Path to Positive Gross Profit
Q: How will you achieve positive gross profit by Q4?
A: Rivian's path to positive gross profit is driven by improvements in variable cost reduction, predominantly through material cost reductions. In Q1, they saw material cost improvements for each of their vehicles—the R1T, R1S, and EDV—and expect a step change in R1 material costs due to engineering-driven design changes and negotiated cost-focused material changes with suppliers. They also anticipate commodity tailwinds in the second half of 2024 and benefits from R2 sourcing on ongoing commercial cost reductions. Semi-fixed costs will improve with tooling upgrades at the Normal plant, enabling a roughly 30% increase in line rate, reducing per-unit labor and overhead costs. Depreciation expenses are expected to decline by Q4 as original tooling becomes fully depreciated. Additionally, increased sales of regulatory credits, software and services revenue, and remarketing sales will boost revenue per delivered unit. Rivian has a detailed roadmap and remains confident in achieving positive gross profit in Q4 of this year.

COGS Reduction for R2
Q: How will you reduce COGS sufficiently for R2 profitability?
A: Rivian plans to materially improve its cost of goods sold (COGS) by implementing changes that enhance process flow and increase production rates by 30%. They've integrated numerous cost-focused changes, such as consolidating or eliminating parts and redesigning components using different materials or processes—some areas of the body structure saw cost reductions exceeding 50%. For R2, which has a fundamentally different architecture with less extreme requirements than R1, every part and system is evaluated for necessity and potential consolidation. Strategies include using high-pressure die casting, multifunctional parts (like utilizing the top of the battery pack as the vehicle floor), simplified door systems, and minimizing the number of ECUs to optimize harness design. They are leveraging learnings from R1 to achieve aggressive but necessary COGS targets.

Vertical Integration Strategy
Q: Is Rivian reconsidering its level of vertical integration?
A: Rivian remains committed to vertical integration, especially in controlling the electrical and network architecture and associated software. By owning all ECUs and software, they can consolidate functions across vehicle zones, leading to cost savings measured in thousands of dollars and significant simplification of the vehicle harness. This approach enables deep over-the-air updates that introduce real features and improvements, enhancing the ownership experience. The benefits of this investment will be realized with R2, as it leverages the network architecture, ECU topology, and cost-down changes from R1. Vertical integration also extends to high-voltage systems like batteries, battery packs, modules, drive units, and inverters, where Rivian sees significant structural cost advantages by developing these technologies in-house.

Production Capacity and Ramp-up
Q: What are your production capacity plans and potential ramp-up risks?
A: Rivian is building capacity towards 215,000 units in aggregate at the Normal plant, with flexibility among vehicle lines: 85,000 units for R1, 65,000 units for commercial vans, and 155,000 units for R2. They have the ability to adjust volumes within this total capacity. Currently, R1 volumes are set at 56,000 units based on a 2-shift operation. Following recent retooling, there is a planned ramp-up, ensuring suppliers ramp at the same rate. Investments are being made to prepare the plant for R2, aiming for a seamless and capital-efficient launch. While the plant doesn't immediately resume full production rates, Rivian is excited about improvements in efficiency, material flow, and reductions in COGS.

Capital Savings from Normal Plant
Q: How much capital savings result from launching R2 at the Normal plant?
A: Rivian will receive upfront cash from the State of Illinois totaling approximately $100 million this year, which is incremental to the $2.25 billion in capital savings communicated when they revealed R2. Both Georgia's and Illinois's incentive packages include payroll and tax incentives, but the immediate benefit is the upfront cash from Illinois.

Delivery Growth Confidence
Q: What gives you confidence in delivery growth this year?
A: Rivian's confidence stems from early results of go-to-market initiatives, including the launch of leasing. Q1 marked the introduction of leasing for R1S, now expanded to 32 states and expected to reach over 40 states in the coming quarters. They've conducted over 20,000 test drives this quarter, getting more customers into the driver's seat—a compelling tactic for generating demand. The introduction of the Standard Pack has stretched the bottom end of the entry price point for the R1 product. Additionally, the launches of R2, R3, and R3X have significantly boosted brand awareness and generated interest in Rivian as a whole.

Execution Risks in Retooling
Q: What challenges did you face during retooling and relaunch?
A: Retooling involved precise execution in integrating new equipment and processes, including hundreds of new or modified robots, to increase the line rate by 30%. Coordinating activities within the plant and across the supply chain—bringing on new suppliers and updating part designs—was complex. The efforts aimed to enhance efficiency and reduce COGS. Rivian is enthusiastic about the plant running again, with changes addressing previous challenges and improving cost structures, contributing to their roadmap toward positive gross margins.

Managing Vehicle Portfolio
Q: How will you manage your expanding vehicle portfolio?
A: The R1 platform serves as Rivian's flagship product but doesn't access the largest market due to its price point. The midsize platform, underpinning R2 and R3, is crucial for reaching a broader market, with R2 launching in the first half of 2026. Rivian focuses heavily on software to continually enhance their vehicles; they've delivered over 30 over-the-air updates to the R1 platform since launch. This approach fosters a vibrant customer community and creates excitement as vehicles improve every few weeks. By emphasizing timeless design, they require fewer significant exterior changes while continually upgrading hardware and software under the surface.