Rivian (2Q25 Minutes): Surviving 2025, Can R2 Stage Another 'Counterattack'?

The following are the minutes of the Q2 2025 earnings call for $Rivian Automotive(RIVN.US) compiled by Dolphin Research. For an interpretation of the earnings report, please refer to "Rivian: The Loss Hole Expands, Is It Another 'Darkest Hour'?"

I. Review of Core Financial Information:

II. Detailed Content of the Earnings Call

2.1. Key Information from Management Statements:

1) Business Progress

① Product Portfolio

a. R1 Platform Enhancement: Last month, the company launched the highly acclaimed R1 Quad Motor, enhancing its already popular R1 platform. The new Quad Motor offers a unique combination of on-road and off-road performance, with advancements in Rivian's autonomous driving platform's software capabilities, customizable through the RAD tuner.

b. R2 Development Progress: Significant progress has been made on the R2 and its autonomous driving platform. The company is confident in the R2 and future models, believing they will position Rivian as a market share leader. Design validation prototypes are currently being produced, and R2 vehicles are being manufactured on a pilot production line to verify vehicle performance and capabilities, with supplier collaboration for ramp-up. Manufacturing quality and related software stability are high. Construction of the new 1.1 million square foot building in Normal, Illinois, is complete, with equipment installation and validation underway to support manufacturing validation prototypes. The R2's market positioning is highly aligned, with packaging, technology, and overall value proposition expected to capture significant market share, a key step towards the goal of delivering millions of vehicles annually. The company plans to shut down the Normal plant for about three weeks starting this September to prepare for the R2's planned production in the first half of 2026.

② Vertical Integration and Technological Advantages

a. Vertical Integration Strategy: The company emphasizes the application of vertically integrated technology in the R2 design validation prototypes, a key driver for achieving structural cost advantages while delivering excellent performance and practicality.

b. Autonomous Driving and AI: Autonomous driving is increasingly important in customer purchase decisions, and the development of Rivian's autonomous driving platform is a core focus area. The platform utilizes a best-in-class onboard sensor suite to provide high-quality data, driving a data flywheel to train Rivian's large-scale driving models. Customers have given positive feedback on enhanced highway assist features, with significant increases in usage. The company believes that with high-quality sensor suites and vehicle data collection capabilities, it can quickly establish leadership in this field. An autonomous driving and AI day event is planned for December to share progress.

③ Collaboration with Volkswagen Group

a. Joint Venture Agreement and Investment: The software and electrical hardware joint venture with Volkswagen Group contributed about half of the Software and Services segment's revenue. As of June 30, the company received a $1 billion equity investment from Volkswagen Group, with an effective price per share of $19.42, a 33% premium over the 30-day volume-weighted average price of $14.56.

b. Future Capital: In addition to the $7.5 billion in cash, cash equivalents, and short-term investments reflected on the balance sheet, the company expects to receive up to $2.5 billion in incremental capital from the joint venture transaction, as well as up to $6.6 billion in loans from the Department of Energy related to the Georgia plant construction.

④ Plant Renovation and Production Efficiency Improvement

a. Normal Plant Construction and Planned Shutdown: Construction of the new 1.1 million square foot building in Normal, Illinois, is complete. The company plans to shut down the Normal plant for about three weeks starting this September to prepare for the R2's planned production in the first half of 2026.

⑤ Second-Generation Drive Unit

The company launched the R1 Quad Motor, enhancing the R1 platform.

⑥ Future Outlook

a. Cost Optimization and Long-term Profitability: The company maintains its long-term view on electrification and future opportunities. It focuses on cost optimization and efficient business expansion. It is confident that the R2 and technology development will truly transform growth and profitability. The company also expects that vertically integrated technology on the R2 will bring structural cost advantages.

b. Strategic Focus: The company is focused on developing world-class technology and effectively expanding manufacturing capabilities in the U.S. The R2 is a key step towards the goal of delivering millions of vehicles annually. The company believes that the long-term opportunity for meaningful growth and profitability remains strong.

2) Financial Performance

① Revenue

a. Second Quarter Production and Delivery: The manufacturing plant produced 5,979 vehicles in the second quarter and delivered 10,661 vehicles, contributing primarily to $927 million in automotive revenue.

b. Consolidated Revenue and Production Impact: Consolidated revenue for the second quarter was $1.3 billion. Compared to the first quarter, production significantly decreased, mainly due to various supply chain-related complexities, partly due to changes in trade policies. The company believes it has a clear understanding of component supply for the remainder of the year. The Software and Services segment performed strongly, with revenue of $376 million.

② Gross Profit

a. Automotive and Software Gross Profit: Automotive gross profit loss was $335 million. The Software and Services segment gross profit was $129 million.

b. Consolidated Gross Profit Loss and Composition: Consolidated gross profit loss was $206 million, including $185 million in depreciation and $37 million in stock-based compensation expenses. Second-quarter automotive gross profit was negatively impacted by production declines, resulting in approximately $137 million in fixed costs included in costs that would have been amortized under more normal production levels.

c. 2025 Gross Profit Outlook: Regulatory credit sales for 2025 are expected to be approximately $160 million, down from the previous outlook of $300 million. Due to changes in regulatory credit outlook and second-quarter performance, full-year gross profit for 2025 is expected to turn positive. The company is actively exploring tariff mitigation strategies.

③ Cash Flow and Balance Sheet

The balance sheet was strengthened in the second quarter. As of June 30, the company received a $1 billion equity investment from Volkswagen Group. Additionally, it refinanced senior secured notes due October 2026 with $1.25 billion of green guaranteed notes at a 10% interest rate, maturing on January 20, 2031. Cash, cash equivalents, and short-term investments reflected on the balance sheet were $7.5 billion. The company expects to receive up to $2.5 billion in incremental capital from the joint venture transaction, as well as up to $6.6 billion in loans from the Department of Energy related to the Georgia plant construction.

④ Future Outlook

a. 2025 Delivery and Capital Expenditure Guidance: The delivery guidance for 2025 is maintained at 40,000 to 46,000 vehicles. Capital expenditure guidance is $1.8 billion to $1.9 billion.

b. Adjusted EBITDA Loss Guidance: The adjusted EBITDA loss for the second quarter of 2025 was $667 million. The adjusted EBITDA loss guidance has been raised to $2 billion to $2.25 billion, primarily due to changes in gross profit outlook.

c. Business Advancement Pace and Plant Shutdown: The company plans to shut down the Normal plant for about three weeks starting this September to prepare for the R2's planned production in the first half of 2026. The third quarter is expected to be the peak quarter for consumer and commercial vehicle deliveries this year.

d. Policy Environment Impact: The external operating environment is complex and rapidly evolving, with changes in EV tax credits, regulatory credits, trade regulations, and tariffs expected to impact business performance and cash flow. Tariff increases had a minimal impact in the second quarter but are expected to have a net impact of several thousand dollars per vehicle for the remainder of 2025. Due to changes in certain regulatory credit programs, no revenue is expected from these programs for the remainder of 2025.

2.2. Q&A Analyst Questions and Answers

Q: Regarding the transition from R1 to R2, please elaborate on the main factors for reducing R2 costs by more than half, particularly what parts of R1 have been removed or changed in R2? How confident is the company in achieving the necessary cost reductions for R2 through procurement and contract negotiations to ensure its economic viability?

A: Vehicle costs are primarily driven by bill of materials (BOM) costs and conversion costs. The BOM cost for R2 is expected to be half that of R1, determined through contract negotiations with suppliers, not just expectations. R2 is highly focused on design for assembly and manufacturability, learning from R1's lessons, such as simplified body architecture, closed systems, and network architecture and harnesses. Therefore, R2's assembly costs, i.e., conversion costs, as well as non-BOM sales costs like logistics and warranty provisions, are expected to be less than half of R1's. R2 is a much smaller vehicle than R1, with more thoughtful content decisions, and does not match R1's extreme performance or capabilities. R2 is 100% sourced today, and the company is very confident in achieving a 50% cost reduction.

Q: Since the last investor day, how will the company adjust its business operations to achieve the 2027 EBITDA positive target in light of adverse factors such as changes in regulatory credit environment, tariffs, and the cancellation of EV tax credits? To what extent have these changes increased the necessity for technology licensing deals and collaborations with other automakers?

A: The company's goal is to achieve EBITDA positive in 2027 through full-year production of R2 and strong performance in Software and Services. Despite significant adverse impacts from current policy changes, the company is implementing a series of cost efficiency initiatives in its business. R2's low price point significantly expands the target market range, driven by technology the company is developing. The company has established a joint venture and software licensing agreement with Volkswagen Group, progressing well, demonstrating the company's ability to deploy software stacks and related ECUs into large, complex businesses. The company believes there are further opportunities to license software and technology beyond Volkswagen Group. Additionally, the company is heavily investing in the autonomous driving stack, equipped with a world-class sensor suite, driving a strong data training flywheel, and will showcase higher levels of autonomous driving capabilities in the future, which is the company's long-term direction.

Q: Regarding the $6.6 billion loan from the U.S. Department of Energy related to the Georgia plant construction, please confirm whether this loan has been drawn? What is the company's view on the progress and future draw plans for this loan?

A: The $6.6 billion loan from the U.S. Department of Energy related to the Georgia plant construction is essentially a project financing construction loan. The loan draw requires capital to be deployed at the Georgia plant site, but the company has not yet started construction of the plant, so this loan cannot currently be drawn. Looking ahead, the U.S. Department of Energy loan offers very attractive capital costs for Rivian. Therefore, the company does intend to draw this loan when expanding the Georgia manufacturing base to support its development.

Q: The company divested the micromobility division "also Inc." in March this year. Besides the minority stake held by Rivian, what other cooperative relationships exist between Rivian and "also Inc."? As Chairman, how much time are you currently investing in this entity?

A: Rivian had an internal project exploring how to achieve world electrification, including micromobility areas such as two-wheel, three-wheel, and light four-wheel vehicles. The company recognized the significant market opportunity and decided to spin it off, allowing it to access external capital and develop the brand and company trajectory differently from Rivian's product line. Rivian remains a significant shareholder, holding just under 50% of the entity's equity. "also Inc." leverages some of the core technologies built by Rivian. In the future, Rivian and "also Inc." product lines are expected to creatively combine to jointly advance the mission of world electrification. As Chairman, my time investment is not specifically quantified, but ensuring the strategic development of this entity is one of my core responsibilities.

Q: Rivian's COGS per vehicle increased by approximately $22,000 quarter-over-quarter. Please elaborate on the reasons for this and indicate whether these costs are temporary or persistent? If R1 continues to face higher costs, will this change the company's expectations for R2's eventual absolute cost?

A: The main driver of the increase in cost of goods sold (COGS) per unit from the first to the second quarter was the decline in production, leading to insufficient fixed cost leverage, increasing per-unit costs by approximately $14,000. Additionally, higher levels of LCNRV (lower of cost or net realizable value) during the period, as well as some warranty and other related costs, also contributed to the increase in COGS. These are primarily influenced by production fluctuations and supply chain environment, with some temporary nature. The first quarter's per-unit costs did not include tariff-related costs, which will manifest in the second half of the year. R2 will also face tariff impacts. However, R2's core advantage is that the company is considering joint procurement of low-voltage electronics, which will be shared between Rivian and R2 vehicles in the future, potentially bringing incremental cost advantages. Improvements in fixed cost absorption will not only be reflected in R2 but will also extend to R1.

Q: Given the launch of the Quad Motor product line and the positive pricing advantage, while the IRA credit will be canceled in the fourth quarter, how does Rivian view the trend of average selling price (ASP) per vehicle? Does the company need to adjust its pricing strategy to address the potential adverse impact of the IRA credit cancellation?

A: R1 continues to maintain market share leadership in the over $70,000 electric vehicle segment and is also a leader in the high-end SUV market (both electric and non-electric) in California and Washington. Despite competitive incentives, R1 demand remains strong. The third quarter is expected to be the strongest demand quarter of the year, and the company believes that the market IRA subsidy phase-out, R1's market share leadership, and demand will continue. The delivery volume of commercial vans is expected to be higher in the second half of the year than in the first half, which will lower the overall consolidated ASP. However, the ASP of the R1 model is expected to remain strong. The company will continue to closely monitor market performance and adjust strategies as needed to maintain healthy ASP and profit levels.

Q: Given the loss of EV credits and IRA purchase incentives, and the limited financial contribution from the Volkswagen partnership, should we expect the 2027 EBITDA breakeven point to be delayed? Please elaborate on how the company will address these short-term adverse factors to achieve the 2027 EBITDA positive target?

A: The company believes that R2's cost structure provides a distinctly different platform for achieving the target. Despite adverse factors, many positive developments are occurring, such as the ability to jointly procure some electronic components used in R2, some of which will also be applied to Volkswagen Group. The R2 bill of materials is 100% sourced, not just hoped for. The company has plans with suppliers to address adverse factors such as tariffs. The reduction in EV credits is a short-term cash flow impact, but in the long term, the level of competition in the electric vehicle field will inherently decrease. Considering all factors comprehensively, the company still believes that achieving the 2027 EBITDA positive target is a direction worth striving for. Additionally, software and services opportunities will grow significantly, including background IP-related revenue generated by the joint venture, Volkswagen vehicles on the road, and additional gross profit contributions from used car resale, charging networks, service infrastructure, financing, insurance, and future autonomous driving.

Q: Considering the competitive environment for R2, can the model itself achieve gross profit breakeven even without IRA credits? Or does achieving the vehicle's EBITDA target require contributions from Software and Services and other elements?

A: The company has clearly stated that R2 was designed with a cost structure aimed at making the vehicle itself have healthy, positive gross profit. This means that the R2 model itself has the ability to achieve gross profit breakeven. The company is committed to creating a model with strong economic benefits at the product level.

Q: Regarding the previously mentioned $700 million policy impact, has there been further deterioration in tariffs, leading to an increase of several thousand dollars in cost per vehicle? Given the changes in regulatory credit outlook, how has the expectation for regulatory credits in the 2027 EBITDA target been adjusted?

A: Regarding tariffs, the cost impact of several thousand dollars per unit is consistent with the comments provided by the company last quarter. Overall, the company's view on the tariff impact on the 2025 business has not changed. The incremental policy impact mainly comes from changes in regulatory credit outlook, and the company expects not to earn or generate revenue from regulatory credit sales in the second half of this year. Additionally, the overall performance in the second quarter and supply chain-related complexities also limited production. The company acknowledges that given the current policy-related adverse factors, the threshold for achieving EBITDA positive in 2027 has increased. However, the company will continue to strive to achieve this goal through a series of cost efficiency initiatives and efficient ramp-up of R2, while recognizing that the company has time to address these changes.

Q: The company plans to shut down for three weeks in September to increase Normal plant capacity to 15,000 units. What capacity utilization rate does the Normal plant need to achieve before the Georgia plant is operational? What are the specific plans for the construction and commissioning of the Georgia plant?

A: The Normal plant will eventually produce R1, EDV, and commercial vans. The commissioning of the Georgia plant will not only expand capacity but also manufacture some variants of the R2 platform, further expanding the target market and filling actual sales opportunities. Regarding the Georgia plant, the company plans to build it in two phases. The first phase of construction, i.e., erecting the building, will begin in early 2026. The Georgia government has conducted extensive preliminary work at the site. The company believes that before the Georgia plant is fully operational, the Normal plant will continue to optimize its capacity utilization to support the production needs of existing models.

Q: Have recent policy changes affected the company's views on R2 or R3 pricing, costs, and required capacity? Given the potential sensitivity of R2's pre-orders, how confident is the company in the R2 capacity planning for the Georgia plant?

A: The company is extremely optimistic about R2. When defining the R2 product, a lot of effort was put into determining size, pricing, cost structure, and content, believing that R2 has excellent product-market fit at the core of the demand curve. R2's price point, form factor overlaps with the largest segment, and its features and content are incredible, with a target market size of millions of units. The Normal plant's R2 capacity is 155,000 units. The Georgia plant will add 200,000 units of capacity for the platform in the first phase, and the company is confident and optimistic about this. The R2 and its platform are designed to support the U.S. and European markets and will be exported to Europe in the future. The company is closely monitoring U.S.-EU trade relations.

Q: Regarding autonomous driving technology, the company has adopted an early sensor fusion approach. What is the core concept of this approach? Why is the company confident that its choice is correct compared to using only cameras or more hardware-intensive methods like LIDAR?

A: The company adopts an AI-centric (or end-to-end) approach in autonomous driving, known as early sensor fusion, which inputs raw data directly into the inference system for a richer understanding of situations and environments. This differs from early systems (like MICA) where each sensor individually identifies and classifies objects before passing the results to the planner. The neural network built by the company, a large model, is trained using a massive data flywheel, with the deployed fleet triggering data feedback. The company believes that the costs of sensors like LIDAR and radar have significantly decreased, providing a richer world perception, which does not render existing models obsolete but rather enhances model accuracy, similar to how wearing glasses improves vision. High-pixel cameras (R1 55MP, R2 65MP) and additional sensor suites with non-overlapping advantages and disadvantages collectively enhance world perception capabilities.

Q: The company's Software and Services revenue (excluding joint ventures) has grown significantly year-over-year. How does the company view its future growth trend and profitability? What role does the Software and Services segment play in the company's expectation to achieve EBITDA positive by the end of 2027?

A: Key drivers of software and services revenue growth in the second quarter include: growth in Rivian's resale program, which covers new car replacements and used Rivian sales, helping to expand the market and maintain residual value; growth and expansion of service infrastructure, leading to increased maintenance fees and revenue; and opening the charging network to other vehicles and integrating NAX. This business segment achieved significant gross margin growth quarter-over-quarter in non-joint venture contributions. Looking ahead to 2027, the joint venture with Volkswagen Group will make a more significant contribution, including increased background IP-related revenue streams. As the fleet size expands and internal services continue to grow, this segment will be an important contributor to the company's future business, particularly in achieving the EBITDA positive target by 2027.

Q: Regarding R2's economic benefits, besides the halving of bill of materials (BOM) costs, how do operational and manufacturing efficiencies impact its gross profit? The Normal plant has a capacity of 155,000 R2 units. How many R2 units does the company expect to sell to reach the gross profit breakeven point?

A: The overall unit economic outlook for R2 shows that its path to positive gross profit will be much faster. This is mainly due to the significantly lower base material cost structure of the R2 vehicle itself. Additionally, R2 will benefit from the existing capacity at the Normal plant, meaning it can efficiently achieve positive gross profit, expected by the end of 2026. The Normal plant will share fixed cost absorption among R1, EDV, and R2, allowing R2 to benefit from existing model fixed cost allocation from day one of production, with a distinctly different profitability path compared to R1. Most of the assets like stamping operations at the Normal plant have already been depreciated, providing inherent fixed cost advantages.

Q: Given the current macroeconomic environment, tariffs, and the cancellation of tax credits, how does the company expect the average selling price (ASP) to change, particularly for the R2 product line? Is the target pricing range for the R2 model still maintained at around $45,000 to $50,000?

A: Looking ahead to the second half of the year, the consolidated average selling price (ASP) of the company's overall business will decrease due to increased van delivery volumes. However, the ASP of the R1 model is expected to show a positive trend by the end of the year, with strong demand for the Quad Motor and Trimotor. For the R2 product line, the frequently mentioned entry price is $45,000, but R2 will offer a range of different variants, including mid-range, top-end, and more advanced versions. The company's goal is to design attractive configurations and packages while maintaining a healthy ASP to support higher profit levels and reflect customer demand. The target pricing range for R2 is still maintained at $45,000 to $50,000.

Q: Please elaborate on the company's vision and technology roadmap for early-stage autonomous driving development, including future feature expansion? Is the company also considering applying autonomous driving technology to EDV (commercial electric vans) or other commercial uses?

A: The company is making a significant shift in autonomous driving, introducing the "AV2" paradigm, designing Gen 2 vehicles with higher computing power and stronger cameras (R1 55MP, R2 65MP). The goal is to build a data platform to train powerful models by collecting trigger event data when vehicles encounter problems or disengage from autonomous mode, continuously enhancing model robustness. This AI-centric, end-to-end approach is considered the winning path, requiring the company to control the perception stack and have a strong data trigger and transmission architecture (such as Wi-Fi connectivity). Future features will expand to broader road conditions, achieving "hands-free" and "eyes on, hands-off" driving. Looking ahead to 2026, the goal is to achieve "hands-off, eyes-off" in specific areas, combined with turn-by-turn navigation. This large model is not only applicable to R1, R2 but also to commercial fields and commercial vans (EDV).

Q: R2 has impressive specifications and an attractive price. In the challenging EV market, what broad marketing strategies or measures will the company take to enhance its market appeal? How will R2 attract non-EV customers?

A: The company is committed to attracting non-electric vehicle (EV) customers. R1's performance has proven this, with the vast majority of customers transitioning from internal combustion engine (ICE) vehicles to purchase R1 as their first EV experience. R1S is a best-selling premium SUV in California and Washington, indicating its product uniqueness and appeal across EV and non-EV markets. R2 is precisely designed to meet core U.S. needs, with an average new car price below $50,000, and the most popular configuration being a two-row SUV. R2 will be launched at the right price point, segment, and size, offering unprecedented performance and capabilities at this price point (including on-road and off-road), as well as innovative features like a front trunk. The company's goal is to make R2 the best SUV in the $45,000 to $55,000 range, attracting a large number of non-EV customers, thereby gaining significant share in the EV and mid-size SUV markets.

Q: Please provide the latest progress on the commercial vehicle business, including whether there are new orders or new collaborations? How is the partnership with Amazon currently progressing?

A: The company has seen non-Amazon vans appearing on the road. The partnership with Amazon remains close and healthy, with Amazon being an excellent partner and a major shareholder of Rivian. The company expects an increase in van deliveries in collaboration with Amazon in the second half of the year. This partnership allows the company to continuously improve and adjust vehicles, ensuring they become an excellent platform in the logistics and commercial delivery field. The company believes that as other fleets begin to electrify, they will also see Rivian's commercial vans as a highly attractive option.

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