Rivian: The Losses Deepen, Is It Another 'Dark Moment'?

$Rivian Automotive(RIVN.US) released its Q2 2025 earnings report after the U.S. stock market closed on August 5, 2025. Here are the key points:

1) Q2 performance hit rock bottom again, with a significant marginal deterioration in gross margin: From the gross margin performance this quarter, Rivian has once again fallen into a deep loss mode. Although the market had low expectations for Rivian's earnings report due to the negative impact of tariffs on supply chains and the decline in regulatory credits, the actual gross margin was worse than market expectations.

This quarter's overall gross margin plummeted by 32 percentage points quarter-on-quarter to -16%, significantly below the market expectation of -2.2%. Dolphin Research believes this sharp decline in gross margin was mainly driven by the collapse in automotive gross margin.

2) Automotive gross margin plummeted: The automotive gross margin in the report fell from 10% in the previous quarter to -36% this quarter, a drop of 46 percentage points. Excluding the one-time impacts of carbon credits and inventory write-downs, the real automotive business gross margin also performed poorly, declining from -14.8% in Q2 to -33.4% this quarter.

The fundamental reasons for this loss are: 1) A significant drop in production in Q2 led to a substantial increase in per-vehicle amortized costs; 2) Carbon credits had virtually no revenue recognition this quarter, contributing nothing positive to the gross margin; 3) Tariff factors led to an increase in procurement costs, and there was also an inventory write-down this quarter.

3) Net profit and adjusted EBITDA also deteriorated significantly: In terms of bottom-line net profit, this quarter's net profit fell by $570 million quarter-on-quarter to -$1.12 billion, $240 million worse than market expectations. This also led to an adjusted EBITDA (approximately equal to cash burn rate) of -$670 million, $170 million worse than market expectations.

The fundamental reason for this loss remains the significant decline in automotive gross margin this quarter, with overall gross profit at -$200 million, $170 million below market expectations, reflecting the negative impact on Rivian, a new American automotive force, from Trump's domestic policies and tariffs.

4) Further downward adjustment of adjusted EBITDA guidance, with headwinds in the second half of the year: For Rivian, 2025 was already a difficult year lacking catalysts for stock price growth, and the tariff impact combined with Trump's domestic policies reducing subsidies for new energy vehicles only added to the challenges.

Although management maintained the full-year delivery guidance of 40,000-46,000 vehicles (Dolphin Research believes there is significant pressure to achieve this, with potential for further downward adjustments), and capital expenditure guidance remains unchanged, the adjusted EBITDA guidance was further lowered by $300 million compared to the previous quarter to a range of -$2 billion to -$2.25 billion, reflecting the headwinds in the second half of the year.

Dolphin Research's overall view:

Overall, Rivian's performance this quarter has once again hit rock bottom, and from the performance itself, Rivian is a typical "victim" of the negative impact of Trump's reduced support for new energy vehicles and the tariff war, especially for a smaller American new force like Rivian, the impact is greater.

Due to the negative impact of tariffs on supply chains affecting Rivian's Q2 production, combined with the decline in regulatory credits, the market already had low expectations for Rivian's earnings report, so the poor Q2 report was anticipated, but the actual performance was worse than expected.

Although revenue slightly exceeded expectations this time, mainly due to the contribution from the joint venture with Volkswagen to the software business, Rivian's automotive business has once again significantly deteriorated.

This quarter's overall gross margin plummeted by 32 percentage points to -16%, and in terms of bottom-line net profit, this quarter's net profit fell by $570 million quarter-on-quarter to -$1.12 billion, $240 million worse than market expectations, which also led to adjusted EBITDA (approximately equal to cash burn rate) being $170 million worse than market expectations.

Previously, Rivian's stock story revolved around "cost reduction" driving marginal improvement in gross margin and the high growth expectations from the launch of the low-priced R2 model in 2026, so the positive gross margin in the previous two quarters gave the market some confidence. However, from this quarter's gross margin and net margin performance, Rivian has once again fallen into a deep loss mode.

Dolphin Research believes the main factors causing this quarter's gross margin to fall short of expectations can be summarized as:

① Trump's domestic policies reducing subsidies for new energy vehicles: The decline in carbon regulatory credits, with Rivian guiding no regulatory credit recognition in the second half of the year, significantly dragged down this quarter's gross margin as this business is purely gross margin.

② Negative impact of tariff trade: The tariff impact caused supply chain disruptions (production plummeted by 59% quarter-on-quarter to only 6,000 vehicles this quarter), leading to an increase in per-vehicle fixed amortized costs, and the tariff impact on procurement costs (for key battery and motor raw materials rare earth imports from China); management also guided that the impact of tariff uncertainty will be fully reflected in the second half of the year, with an expected net increase in cost per vehicle of several thousand dollars.

Looking ahead to the second half of 2025, Rivian's overall fundamentals remain in a headwind trend, facing significant pressure to achieve sales targets, and gross margin performance is also expected to be unfavorable:

① IRA subsidies are about to decline, but Rivian has not prepared sufficient inventory to cope with the rush before the decline:

Under the American Beautiful Act, the IRA $7,500 subsidy originally applicable to American electric vehicles will be completely terminated on September 30, 2025 (end of Q3), and the decline in subsidies is expected to have a significant negative impact on Rivian's demand side.

However, Rivian still maintains a delivery expectation of 40,000-46,000 vehicles, meaning the sales target for the second half of the year is 20,000-27,000 vehicles (average quarterly sales of 10,000-13,000), considering that the demand side in Q4 will be significantly negatively impacted by the decline in IRA subsidies, the key sprint stage and window period to complete the annual sales is actually in Q3 (before the subsidy decline).

However, Rivian will continue to shut down the Normal plant for three weeks in Q3 to prepare for the R2 launch, which may prevent the production of enough vehicles to meet the rush during the window period, so Dolphin Research expects significant pressure to achieve this year's sales target, with a high possibility of further downward adjustment in sales guidance.

② Significant decline in regulatory credit revenue:

Like Tesla, Rivian also guided no regulatory credit contribution to revenue in the second half of the year, and the decline in regulatory credits has a more severe negative impact on the gross margin of Rivian, a new American force with already low revenue and deep losses.

③ The negative impact of tariffs remains, and automotive gross margin performance is still expected to be unfavorable:

Management guided that the impact of tariff uncertainty will be fully reflected in the second half of the year, with an expected net increase in cost per vehicle of several thousand dollars. The increase in the proportion of low-priced EDV deliveries in the second half of the year will also lower the overall selling price per vehicle, and combined with the continued shutdown impact, the leverage effect of per-vehicle fixed amortized costs is difficult to release, automotive gross margin performance is still expected to be unfavorable

In terms of guidance, although Rivian maintained its full-year sales guidance and capital expenditure guidance at the same level as the previous quarter, the adjusted EBITDA guidance (approximately equal to cash flow consumption rate) was further lowered by $300 million compared to the previous quarter to a range of -$2 billion to -$2.25 billion, reflecting the headwinds in the second half of the year.

Fortunately, the R2 storyline is still progressing, and it is currently the biggest hope supporting Rivian's stock while the fundamentals are still in a headwind trend. Rivian currently has $7.5 billion in cash flow (the quarter-on-quarter increase is mainly due to the $1 billion equity investment from Volkswagen), and based on this year's estimated real cash flow consumption rate of about $2.3 billion, Rivian's cash flow can support 2-3 years, enough to support the production of the low-priced R2 car next year, so Rivian is still considered a safe target as long as the R2 storyline remains intact, with no short-term bankruptcy risk.

However, from Rivian's current valuation, the 2025 P/S multiple is close to 3 times, although Dolphin Research understands that this valuation is still mainly supported by the high growth expectations from the production of the low-priced R2 model next year. But due to the unfavorable fundamentals of Rivian in the second half of this year (high possibility of sales target decline, gross margin also expected to remain under pressure), lacking upward catalysts, Dolphin Research believes this valuation is still too high, and expects a pullback after this earnings report.

Specifically:

I. The "Tesla Killer" falls into rock bottom again

1. Gross margin plummeted again

From this quarter's gross margin performance, Rivian has once again fallen into a deep loss mode. Although the market had low expectations for Rivian's earnings report due to the negative impact of tariffs on supply chains and the decline in regulatory credits, the actual gross margin was worse than market expectations.

This quarter's overall gross margin plummeted by 32 percentage points to -16%, significantly below the market expectation of -2.2%, and Dolphin Research believes this sharp decline in gross margin was mainly driven by the collapse in automotive gross margin:

① Automotive gross margin plummeted: The automotive gross margin in the report fell from 10% in the previous quarter to -36% this quarter, and since there was virtually no revenue recognition from carbon credits this quarter (which is purely gross margin business), there was no positive contribution to the Q2 gross margin, coupled with an inventory write-down of $25 million this quarter, dragging down the automotive gross margin.

Excluding the one-time impacts of carbon credits and inventory write-downs, the real automotive business gross margin also performed poorly, declining from -14.8% in Q2 to -33.4% this quarter.

② Software business gross margin performed well but couldn't offset the negative drag from the automotive business collapse: This quarter's software business revenue and gross margin performed well, with a software business gross margin of 34.3%, slightly down 1.5 percentage points from 35.8% in the previous quarter, but still couldn't offset the negative drag from the automotive business collapse.

Referring to Rivian's software business before the cooperation with Volkswagen, it was still in a gross loss state, and this quarter's 30%+ software business gross margin was mainly contributed by the cooperation with Volkswagen (half of which came from the software joint venture with Volkswagen).

2. Real automotive gross margin dragged down by significant increase in per-vehicle costs

Looking at Rivian's real automotive business gross margin is relatively complex, especially with various accounting adjustments (inventory LCNRV write-back, one-time cost factors, etc.), and the lack of carbon credit revenue recognition this quarter is also a major operational factor for the gross margin plummet, with Rivian also expecting no carbon credit revenue recognition in the second half of 2025.

From this quarter's real automotive business gross margin (excluding one-time impacts such as carbon credits and inventory write-downs), the real automotive business gross margin also performed poorly, declining from -15% in Q2 to -33.4% this quarter.

Dolphin Research believes the main factors causing this quarter's gross margin to fall short of expectations can be summarized as:

① Trump's domestic policies reducing carbon regulatory credits;

② Tariff impact causing supply chain disruptions (significant production decline) leading to an increase in per-vehicle fixed amortized costs, and the impact on procurement costs;

It can be seen that whether it is the overall subsidy decline for new energy vehicles or the tariff war initiated by Trump, the negative impact on small new forces in the U.S. is still significant.

From the perspective of per-vehicle economics:

1) Per-vehicle revenue: Slight decline due to model structure impact

This quarter's per-vehicle revenue fell by $2,000 quarter-on-quarter to $87,000, mainly due to changes in model structure, with no price cuts by Rivian in Q2.

2) Per-vehicle cost: Significant increase of $14,000 per vehicle! Main reason for automotive gross margin plummet

a. Significant increase in per-vehicle amortized costs:

This quarter's per-vehicle amortized costs rose by $9,000 quarter-on-quarter to $17,000, mainly due to a significant drop in production this quarter, leading to an increase in per-vehicle fixed amortized costs (production this quarter was still affected by supply chain factors, with production plummeting by 59% quarter-on-quarter to only 6,000 vehicles).

b. Per-vehicle variable costs also rose by $6,000 quarter-on-quarter:

This quarter's per-vehicle variable costs rose by $6,000 quarter-on-quarter to $99,000, possibly mainly due to the negative impact of the tariff war on batteries and motors:

Batteries: Although all of Rivian's electric vehicles are produced in the U.S., the most critical component, the battery, is procured from China's Gotion (LFP batteries) and South Korea's Samsung, and high tariffs will increase Rivian's procurement costs.

Motors: Similarly, in terms of motor raw materials, rare earths are also affected by the U.S.-China tariff trade, with restrictions on rare earth exports. Although Rivian is preparing to develop motors without heavy rare earths to reduce dependence on rare earths, research and development still require time, which may lead to short-term cost increases and supply chain shortages.

c. Per-vehicle gross profit continued to decline by $16,000 quarter-on-quarter

This quarter's per-vehicle gross profit fell by $16,000 quarter-on-quarter to -$30,000, and the real automotive business gross margin also performed poorly, declining from -15% in Q2 to -33.4% this quarter.

3. Overall revenue slightly exceeded expectations, driven by software revenue from Volkswagen cooperation

Overall revenue for Q2 was $1.3 billion, with market expectations at $1.28 billion, slightly exceeding expectations, mainly due to the good performance of the software and services business.

This quarter's automotive revenue (including carbon credits) was $930 million, basically flat quarter-on-quarter but down 14% year-on-year, and due to no carbon credit revenue recognition this quarter, automotive revenue overall was mediocre.

However, this quarter's software and services business revenue was $380 million, up $60 million from $320 million in Q1, mainly due to the contribution of about $200 million from the joint venture with Volkswagen, and according to Rivian's outlook, software and services business revenue in 2025 can contribute over $1 billion, still mainly supported by the cooperation with Volkswagen, and the software business, compared to the deeply loss-making automotive business, still has a high gross margin (30%+), providing some buffer when the automotive fundamentals are under pressure in the second half of the year.

4. Net profit and adjusted EBITDA performance below expectations

In terms of bottom-line net profit, this quarter's net profit fell by $570 million quarter-on-quarter to -$1.12 billion, $240 million worse than market expectations, which also led to adjusted EBITDA (approximately equal to cash burn rate) being $170 million worse than market expectations.

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Dolphin Research's in-depth research and tracking comments on Rivian include:

Earnings Reports

August 7, 2024, earnings report commentary "Will "White Knight" Volkswagen become the savior of "Tesla Killer" Rivian?"

August 7, 2024, conference call "With the launch of three-motor and four-motor versions, Rivian's Q4 ASP is expected to continue to rise"

February 22, 2024, earnings report commentary "Both gross margin and sales under pressure, can "Tesla Killer" Rivian survive the life-and-death line?"

February 22, 2024, conference call "Order volume has significantly decreased, but still maintains the plan for positive gross margin in Q4 2024"

November 8, 2023, earnings report commentary "Rivian exceeds expectations again, does the "Tesla Killer" have hope of crossing the life-and-death line?"

November 8, 2023, conference call "Rivian: Continuing efforts for positive gross margin in 2024 (Q3 conference call minutes)"

In-depth

December 6, 2023, in-depth "Rivian: Cybertruck's death sentence? The real fatal flaw is the initial handicap"

December 4, 2023, in-depth "Rivian (Part 1): "Defeated before the battle", is the Tesla killer being killed?"