Archive · Thu Oct 29 · Plain text · Event page
Rivian Says R2 Conversion Beats Expectations, Plans Positive Auto Gross Profit by Year-End
Executives said the lower-priced R2 SUV is outpacing internal forecasts on orders and test drives, even as memory and commodity costs squeeze margins.
Rivian executives said on the company's third-quarter earnings call that they intend to exit the fourth quarter at an automotive gross profit but do not expect it for the full quarter, as the company ramps production of its lower-priced R2 SUV. They also said conversion of R2 test drives into orders on the premium launch trim has exceeded expectations, and that a cut to 2026 capital spending reflects timing shifts on its Georgia plant.
R2 ramp and margins
Asked whether positive auto gross margin would cover the full fourth quarter, a Rivian finance executive said, "I wouldn't expect the full quarter, but it does set us up really well as we continue to ramp r2." The executive said total automotive gross profit, excluding regulatory credits, was positive on a cash basis in the third quarter and that the company expects that momentum to continue.
The executive said a $120 million cost headwind reflects not yet running a full two-shift operation and includes costs such as expedited freight that are expected to fade. In the second quarter, the executive said, cost of goods sold per unit delivered fell about $12,000, driven largely by the introduction of the R2.
Rivian's chief executive said the company is hunting offsets for higher commodity and memory prices that have emerged since R2 pricing was announced, including packaging and logistics changes, supplier cost reductions and part consolidation. The company is holding to its R2 price range of about $45,000 for the base trim to about $57,000 for the top trim. He said the most important near-term lever is better fixed-cost absorption through higher plant output, and that the ramp can proceed only "as fast as our slowest ramping supplier."
Demand, R1 pricing and capital spending
The CEO said conversion on the R2 launch trim has beaten Rivian's assumptions and that test drives rose significantly sequentially with the R2 available. He said Rivian expects R1 average selling prices to rise after it dropped the standard trim to move the vehicle upmarket as a flagship, and that the R1 is not meant to be a high-volume product.
On the capital spending cut to $1.4 billion to $1.5 billion for the year, the finance executive said it is "strictly" a timing matter, with large equipment purchases and contracts for the Georgia facility shifting by a few weeks between quarters.
Executives said research and development spending should grow at a low double-digit rate from the third to the fourth quarter and grow more significantly in 2027 than in 2026, driven by autonomy software and hardware. They acknowledged some higher pricing for leased compute.
Autonomy and commercial vans
The CEO said take rates for Autonomy Plus, a paid driver-assistance subscription, have exceeded expectations, though the company declined to give a figure. A point-to-point navigation feature enters early access in December, with a broader release across Autonomy Plus subscribers expected in 2027. He said the underlying large driving model also supports the planned 2028 robotaxi launch with Uber, and said Rivian completed its acquisition of Third Dimension, which strengthens its simulation work.
On commercial vans, the CEO said Amazon has sharply stepped up demand this year and that Rivian is in discussions with other potential customers. He declined to address a report of a van wrapped with another retailer's branding. He said the first product from Rivian's joint venture with Volkswagen, the roughly 20,000-euro ID.1, launches next year in Europe.
Bulletins
RIVIAN: VP FINANCE DEREK MULVEY TO BE NAMED INTERIM CFO EFFECTIVE TOMORROW
RIVIAN CEO: R2 ALREADY BEST-SELLING VEHICLE BY VOLUME, OUTSELLING R1 AND EDV IN Q3
RIVIAN CEO: Q3 R1 AND R2 DEMO DRIVES TOPPED 103,000, SURPASSING Q2 RECORD
RIVIAN: AUTONOMY AND AI DAY SET FOR DECEMBER 9; SECOND R2 SHIFT HAS STARTED IN NORMAL
RIVIAN CEO: UBER MILESTONE ON TRACK BY YEAR-END, TO UNLOCK $250 MILLION MORE EQUITY INVESTMENT
RIVIAN: POINT-TO-POINT AUTONOMY LIMITED ROLLOUT LATER THIS YEAR; GENERAL RELEASE IN 2027
RIVIAN Q3 CONSOLIDATED REVENUE $2.155 BILLION
RIVIAN Q3 GROSS PROFIT $176 MILLION, GROSS MARGIN 8%; ADJUSTED EBITDA LOSS $435 MILLION
RIVIAN Q3 PRODUCTION 19,751 VEHICLES, DELIVERIES 19,248; AUTOMOTIVE REVENUE $1.55 BILLION
RIVIAN: Q3 AUTOMOTIVE GROSS LOSS $80 MILLION VS GROSS LOSS $130 MILLION YEAR AGO
RIVIAN: Q3 SOFTWARE AND SERVICES REVENUE $6.5 MILLION
RIVIAN: ENDED Q3 WITH ~$5.5 BILLION CASH; $1 BILLION VW TERM LOAN FUNDED OCT 7 AT 6% FIXED
RIVIAN RAISES FY DELIVERY GUIDANCE TO 67,000-70,000 UNITS FROM 65,000-70,000
RIVIAN: FY ADJ EBITDA LOSS SEEN $1.85B-$1.75B; MIDPOINT $100 MILLION IMPROVEMENT
RIVIAN: LOWERS 2026 CAPEX GUIDANCE BY $300 MILLION AT MIDPOINT TO $1.4B-$1.5B RANGE
RIVIAN CFO: INTENDS TO EXIT Q4 AT AUTOMOTIVE GROSS PROFIT; NOT EXPECTING FULL QUARTER POSITIVE
RIVIAN CFO: $120 MILLION OF INCREMENTAL COST OF REVENUES FROM R2 RAMP VS TWO-SHIFT RATE
RIVIAN CFO: Q3 AUTOMOTIVE GROSS PROFIT EX-REGULATORY CREDITS POSITIVE ON A CASH BASIS
RIVIAN CEO: R2 BASE TRIM STARTING AT $45,000, TOP SPEC TRIM ABOUT $57,000
RIVIAN CEO: AUTONOMY PLUS TAKE RATE HAS EXCEEDED EXPECTATIONS
RIVIAN CEO: FIRST VW JV OUTPUT, ID. ONE ABOUT 20,000 EURO EV FOR EUROPE, LAUNCHES NEXT YEAR
RIVIAN CEO: PLANNING FOR LEVEL FOUR AUTONOMY CAPABILITY IN 2028; POINT-TO-POINT FIRST STEP
RIVIAN CEO: COMPLETED ACQUISITION OF THIRD DIMENSION TO SUPPORT AUTONOMY SIMULATION WORK
RIVIAN: AUTONOMY EARLY ACCESS PROGRAM BEGINS IN DECEMBER; BROADER 2027 RELEASE EYED
RIVIAN CEO: UBER PARTNERSHIP ROBOTAXI DEPLOYMENT PLANNED FOR 2028
RIVIAN CFO: EXPECTS LOW DOUBLE DIGIT Q3-TO-Q4 R&D GROWTH; 2027 R&D TO GROW MORE THAN 2026
RIVIAN CFO: 2026 CAPEX CUT TO $1.4B-$1.5B, MOSTLY TIMING SHIFT IN GEORGIA FACILITY SPEND
RIVIAN: AMAZON VOLUME 'BIG STEP UP' THIS YEAR; TALKING TO OTHER COMMERCIAL VAN CUSTOMERS
RIVIAN CEO: R2 LAUNCH EDITION ORDER CONVERSION TO DATE HAS EXCEEDED EXPECTATIONS
RIVIAN: R2 LINEUP TO SPAN $45,000 TO $57,000 PRICE POINTS ACROSS TRIM, POWERTRAIN VARIANTS
RIVIAN: WON'T DISCLOSE AUTONOMY PLUS ATTACH RATE; EXPECTS HIGHER TAKE RATE WITH POINT-TO-POINT
RIVIAN: EXPECTS R1 AVERAGE SELLING PRICE TO GO UP; REMOVED STANDARD TRIM, MOVING UPMARKET
Posts (36)
Transcript
How do you do?
Good afternoon.
and thank you for joining us for Rivian's third quarter 2026 earnings call. Today I'm joined by R.J. Scarret.
good afternoon and thank you for joining us for rivian's
Skiringe, our founder and CEO, Claire McDonough, our Chief Financial Officer, and Javier Varella, our Chief Operations.
third quarter twenty twenty six earnings call today i'm joined by rj skarinj our
founder and ceo claire mcdonough our chief financial officer javier
Operations Officer, and Derek Mulvey, our Vice President of Finance, who will be named interim CFO effective tomorrow.
varela our chief operations officer and derek mulvey our vice president of finance
tomorrow. Before we begin, matters discussed on this call, including comments and responses to questions.
who will be named interim cfo effective tomorrow
before we begin matters discussed on this
questions, reflect management's views as of today. We will also be making statements related to our.
call including comments and responses to questions reflect management's views as of
today
our business, operations, and financial performance that may be considered forward-looking statements under Federal Securities.
we will also be making statements related to our business
securities law. Such statements involve risks and uncertainties that could cause actual results to differ materially.
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
materially. These risks and uncertainties are described in our SEC filings and the presentation we filed.
to differ materially
with the SEC today. During this call, we will discuss both GAAP and non-GAP financial measures.
these risks and uncertainties are described in our sec filings and the presentation we
filed with the sec today
measures. A reconciliation of historical non-GAP to GAAP financial measures is provided in our earnings presentation.
during this call will discuss both gaap and non gaap financial
measures a reconciliation of historical non gaap to gaap financial measures is
and press release. Just before the earnings call, we posted our earnings presentation, which includes an overview.
provided in our earnings presentation and press release just before the earnings call
overview of our progress over the recent months. I encourage you to read it for additional details around some of the items that.
we posted our earnings presentation includes an overview of our progress over the recent months
that we will cover on today's call. Following our prepared remarks, we'll be taking questions from cell site analysts.
i encourage you to read it for additional details around some of the items that we will cover on
today's call
analysts. In the interest of keeping the call to one hour, we would ask these analysts to limit any follow-on questions to one.
following our prepared remarks we'll be taking questions from sell side analysts
in the interest of keeping the call to one hour we would
to one. With that, I'll turn the call over to RJ. Thanks, Chip. Good afternoon, everyone, and thank you for.
these analysts to limit any follow on questions to one
with that i'll turn the call over to rj
for joining us for today's call. We had a great third quarter. We achieved record production volumes and normal as we
thanks chip good afternoon and thank you for joining us
for today's call
continued to ramp R2 manufacturing. We also had record deliveries with R2 delivering much of that gain.
had a great third quarter we achieved record production volumes in normal as we continue
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.
in fact r2 is already our best selling vehicle by volume
outselling both r1 and edv in the third quarter
I'm proud of how our team has come together to scale our manufacturing, sales, and service operations. We are also advised.
i'm proud of how our team has come together to scale our manufacturing sales and service operations
advancing our technology roadmap, and I look forward to showcasing that progress at our Autonomy and AI Day on December 9th.
we are also advancing our technology road map and i look
9th. Since its launch in June, we've seen all types of potential customers take R2 for a drive. The feedback
forward to showcasing that progress at our autonomy and ai day on december ninth
since its launch in june we've seen all types of potential customers take r two for a drive
feedback on R2 has been outstanding. In the third quarter, we hosted over 103,000 R1 and R2 demo drives.
the feedback on r two is now outstanding
drives, surpassing the record we set in the second quarter. Reservation conversion rates for the launch edition.
in the third quarter we hosted over one hundred and three thousand r1 and r2 demo drives
surpassing the record we set in the second quarter
edition R2 remained higher in the quarter than our expectations. We are really excited for the launch of additional.
reservation conversion rates have for the launch edition r2 remained higher
in the quarter than our expectations
variants in the coming months. R2 continues to generate rave reviews and awards from media.
we are really excited for the launch of additional variants in the coming months
r two 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.
and recently won top gear's suv of the year award for twenty twenty seven
with more awards to come
Amazon continues to expand its fleet of electric delivery vans across North America. Early this month,
amazon continues to expand its fleet of electric delivery vans across north america
month, we began delivering new variants that are specifically designed to expand route coverage into more rural networks.
earlier this month we began delivering new variants that are specifically designed to
including an all-wheel drive configuration, as well as a larger battery pack that offers 30% more range.
expand route coverage into more rural networks including an all wheel drive configuration
as well as a larger battery pack that offers thirty percent
more range
Turning to our manufacturing operations, our team in Normal continues to ramp our two production. The second
turning to our manufacturing operations our team in normal continues to ramp our two
production
second R2 shift has started, and we expect our manufacturing run rate to increase over the coming quarters.
the second r two shift has started and we
expect our manufacturing run rate to increase over the coming quarters
Georgia, construction of our next manufacturing site is progressing well. Regarding our technology roadmap.
in georgia construction of our next manufacturing site is progressing well
roadmap, autonomy remains one of the most important areas of investment at Rivian. We continue to see strong momentum in our autonomy.
regarding our technology road map autonomy remains one of the most important areas of
investment at rivian
Autonomy Plus offering available on every R2 and R1 starting with the 2025 model year.
we continue to see strong momentum in our autonomy plus offering
available on every r2 and r1 starting with the twenty twenty five model year
rates trending ahead of our expectations. Today, every vehicle with Autonomy Plus is capable of hands-free driving.
with take rates trending ahead of our expectations
driving on millions of miles of roads. Our next milestone is our point-to-point feature. This means
today every vehicle with autonomy plus is capable of hands free driving on millions of miles of roads
our next milestone is our point to point feature
customers can enter an address and their vehicle will follow the route from start to finish, handling city streets.
this means customers can enter an address and their vehicle will follow the route
from start to finish
stoplights, highway interchanges, and everything in between with driver supervision.
handling city streets stoplights highway interchanges
and everything in between with driver supervision
limited rollout of point-to-point is expected to begin later this year with our invitation-only autonomy or
a limited rollout of point to point is expected to begin later this year
Early Access Program with a general release to all Autonomy Plus subscribers in 2027.
with our invitation only autonomy early access program
with a generally released to all autonomy plus subscribers in twenty twenty seven
We believe point-to-point capabilities are going to be an important purchase criteria for customers and is becoming a
we believe point to point capabilities are going to be an important purchase criteria for customers
becoming a driver of market share. We continue to make progress on our partnership with Uber. We remain on track and
and is becoming a a driver of market share
we continue to make progress on our partnership with uber
expect to achieve our next milestone by the end of this year, which is expected to unlock an additional $250.
we remain on track and expect to achieve our next milestone by the end of this year
$250 million of equity investment from Uber. Additionally, last week we announced the acquisition
which is expected to unlock an additional two fifty million
dollars of equity investment from uber
additionally last week we announced
acquisition of third-dimensional AI to support our autonomy development and our associated closed-loop simulation efforts.
the acquisition of third dimension ai to support our autonomy
efforts. With the Rivian Assistant, we have developed a smarter, more customizable AI-defined vehicle experience.
and our associated closed loop simulation efforts
with the rivian assistant we have developed a smarter more customizable ai defined
experience for all R1 and R2 owners. In our October OTA, we added Gmail integration.
experience
for all r one and r two owners
Trivian Assistant, and we look forward to sharing more at our upcoming Autonomy and AI day.
in our october ota we added gmail integration
trivium assistant and we look forward to sharing more at our upcoming autonomy and ai
day
up our vehicles for Halloween is a highlight to our customers every year. This October, we collaborated with Sony Pictures.
dressing up our vehicles for halloween is a highlight to our customers every year
Pictures and Bill Murray to bring the Ghostbusters universe to life on Rivian vehicles with Halloween mode.
this october we collaborated with sony pictures and bill murray
to bring the ghostbusters universe to life
mode. This is a perfect demonstration of how the level of deep vertical integration across hardware and software.
on rivian vehicles with halloween mode
this is a perfect demonstration of how the level of deep vertical integration
software allows us to release immersive features to our customers at speed. Finally, I want to take
across hardware and software allows us to release immersive
features to our customers at speed
take a moment to thank Clara for all of her contributions at Rivian over the last six years. On a personal level, Clara has
finally i wanna take a moment to thank clarify
for all of her contributions at rivian over the last six years
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.
on a personal level clara has been an incredible partner and friend throughout this journey
best in your next chapter. I'm also excited to work with Derek as he steps into the interim CFO role.
i know i speak for the whole team when i say we wish you nothing but the best in your next chapter
i'm 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.
in closing i wanna thank our team for their continued execution in the third quarter
believe will be fully electric, autonomous and AI-defined. I could not be more excited about the opportunity ahead for Rivian.
we're 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'll turn the call over to Claire to cover our third quarter results. Thank you.
with that i'll turn the call over to claire
to cover our third quarter results
RJ, and good afternoon, everyone. As many of you saw last month, I decided to step down as Rivian's CFO.
thank you rj and good afternoon everyone
CFO to head back to the East Coast to be closer to my family and pursue a new opportunity. It has been the highlight.
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
highlight of my career to help build Rivian's financial foundation alongside RJ and our teams, and I'm
it has been the highlight of my career to help build rivian's financial foundation along
stepping away with complete confidence in this company's trajectory, its mission, and the strength of the team.
and our teams and i'm stepping away with complete confidence
team that will carry it forward. Turning through the results of the third quarter, our consolidated revenue.
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
revenue was $2.155 billion, a 38% increase over the
our consolidated revenue was two point one five five billion dollars
same quarter last year. Consolidated gross profit was $176 million.
a thirty eight percent increase over the same quarter last year
and our gross profit margin was 8%. Gross profit included $166 million.
consolidated gross profit was one hundred
seventy six million dollars and our gross profit margin was eight percent
$166 million of depreciation and amortization and $28 million of stock.
gross profit included one hundred and sixty
six million dollars of depreciation and amortization and
stock-based compensation expense. Adjusted EBITDA losses for the third quarter were $430.
twenty eight million dollars of stock based compensation expense
$435 million, driven by our $176 million of gross profit.
adjusted ebitda losses for the third quarter were four
thirty five million dollars
profit and increased adjusted operating expenses as we scale our sales, marketing, and service operations.
driven by our one hundred and seventy six million dollars of gross profit
and increased adjusted operating expenses as we scale our sales
operations to support our two volumes and invest in our autonomy roadmap. In the third quarter,
marketing and service operations to support our two volumes and invest in
autonomy road map
we produced 19,751 vehicles at our plant in Normal, Illinois.
in the third quarter we produced
and delivered 19,248 vehicles. Production and delivery results.
nineteen thousand seven hundred and fifty one vehicles at our plant in normal illinois
and delivered nineteen thousand two hundred and forty eight vehicles
for the quarter were in line with our expectations, with R2 becoming our best selling vehicle by volume
production and delivery results for the quarter were in line with
volume in the third quarter. Our $1.55 billion of automotive revenue.
our expectations with r2 becoming our best selling vehicle by volume in
the third quarter
our one point five five billion dollars of automotive revenue
a 36% increase over the same quarter last year, were primarily driven by a 46% increase.
a thirty six percent increase over the same quarter last year
increase in vehicle deliveries and $81 million of regulatory credits.
were primarily driven by a forty six percent increase
in vehicle deliveries and eighty one million dollars of regulatory credits
partially offset by a decline in average selling prices from a higher mix of R2 and commercial value.
partially offset by a decline in average selling prices
van deliveries, while R1 average selling prices increased due to mix improvements.
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
automotive gross profit loss was eighty million dollars compared
$130 million in the same quarter last year, a $50 million improvement.
to gross profit loss of one hundred and thirty million dollars in the same quarter
improvement due primarily to increases in delivery volumes at an improved per-unit margin.
last year a fifty million dollars improvement
due primarily to increases in delivery volumes at an improved
an increase in revenues related to automotive regulatory credits, and an IEPA tariff refund.
per unit margin and increase in revenues
receivable, partially offset by costs related to the ramp of R2 production.
related to automotive regulatory credits and an ie
tariff refund receivable
partially offset by costs related to the ramp of r two production
the quarter, we recognized approximately $120 million in incremental cost of revenue.
in the quarter we recognized approximately
revenue due to the ramp of R2 production as compared to production at more normalized levels.
one hundred and twenty million dollars in incremental cost of revenue
due to the ramp of r2 production as compared to production at more
normalized levels
levels. While current macro and geopolitical factors are creating added complexity, cost,
while current macro and geopolitical
factors are creating added complexity
and uncertainty, our team continues to work hard to manage supply chain risks and increasing.
cost and uncertainty our team continues to work hard to manage supply
commodity and memory costs. Our software and services segment reported another strong.
chain risks and increasing commodity and memory costs
quarter. During the third quarter, the segment generated $605 million of revenue.
our software and services segment reported another strong quarter
during the third quarter the segment generated six
revenue, a 45% year-over-year increase, primarily due to increases in vehicle electricity.
five million dollars of revenue
a forty five percent year over year increase
electrical architecture and software development services by the joint venture, vehicle repair.
primarily due to increases in vehicle electrical
and software development services by the joint venture
and maintenance services, and Autonomy Plus, offset by lower remarketing sales.
vehicle repair and maintenance services and autonomy plus
offset by lower remarketing sales
sales. $354 million, or approximately 60%, of software and service.
three hundred and fifty four million dollars or approximately
services revenue was attributable to our joint venture with Volkswagen Group. Software and services growth.
sixty percent of software and services revenue was attributable to our joint venture
venture with volkswagen group
gross profit was $256 million, a 42% margin, due to
software and services gross profit was two fifty six million dollars
a forty two percent margin
better than expected mix of revenues from more profitable revenue streams. With that, I'll hand
due to better than expected mix of revenues from more profitable revenue streams
hand the call over to Derek to walk through our business outlook and capital roadmap. Thanks, Claire.
with that i'll hand the call over to derek to walk through our business outlook
and capital road map
Claire. It's been a privilege to work alongside you, and I'm excited to step into the interim CFO role and build on the foundation you've established.
thanks claire it's been a privilege to work alongside you and i'm
established. Turning to our liquidity and balance sheet, we ended the third quarter with approximately $5.5 billion in cash.
excited to step into the interim cfo role and build on the foundation you've established
turning to our liquidity and balance sheet we ended the third quarter with approximately five point five billion
cash, cash equivalents, and short-term investments. In addition to this balance, on October 7th, we announced the funding.
dollars in cash cash equivalents and short term investments
funding of our $1 billion 10-year term loan facility with Volkswagen Group at a fixed interest rate of 6%.
addition to this balance on october seventh we announced the funding of our one billion dollars
ten year term loan facility with volkswagen group at a fixed interest rate of six percent
To date, we have received $5.3 of the $5.8 billion in expected capital commitments associated with the joint venture.
to date we've received five point three billion of the five point eight billion
venture with the remaining $460 million anticipated in late 2027.
in expected capital commitments associated with the joint venture
with the remaining four sixty million dollars anticipated in late twenty twenty seven
Additionally, we expect to achieve our second milestone under the Uber partnership later this year, which would trigger an additional $250 million.
additionally we expect to achieve our second milestone under the uber partnership
million equity investment. When factoring in our current liquidity, expected capital from Uber, Vols.
later this year which will trigger an additional two fifty million dollars 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
volkswagen and our department of energy loan
targeted future capital would be approximately $13 billion. Turning to our outlook, we are improving our
all of which are subject to certain conditions our total available
liquidity and targeted future capital would be approximately thirteen billion dollars
full-year delivery guidance from 65 to 70,000 units to 67 to 70,000 units.
turning to our outlook we are improving our full year delivery guidance
its first full quarter of sales, R2 outsold R1 and our commercial vans, and in the fourth quarter, we expect R2 to
sixty five thousand to seventy thousand units to sixty seven thousand to seventy thousand units
in its first full quarter of sales r two outsold r one and our commercial vans and
to represent the majority of our total delivery volume. We are making significant strides to drive down our automotive cost.
the fourth quarter we expect r2 to represent the majority of our total delivery volume
cost per unit, and we're already seeing the benefit of introducing R2 into our normal production facility. While new vehicles.
are making significant strides to drive down our automotive cost per unit
we're already seeing the benefit of introducing r2 into our normal production facility
vehicle launch complexities, in addition to rising costs of core components, have, and we anticipate, will continue to impact our profitability.
new vehicle launch complexities in addition to rising costs of core components have and
profitability. We expect that R2 will help us achieve a positive automotive gross margin exit rate for the year.
anticipate will continue to impact our profitability
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.
this would establish a strong foundation for continued margin expansion as r2
full year 2026, we now expect our adjusted EBITDA losses to be between 1.85 and 1.75.
ramps through twenty twenty seven for full year twenty twenty six
$1.75 billion. At the midpoint, this represents a $100 million improvement driven by favorable regulatory credit rates.
we now expect our adjusted ebitda losses to be between one point eight five
and one point seven five billion dollars
at the midpoint this represents one hundred million dollars improvement
credit revenue, an IEPA tariff receivable, and our expected increased delivery volume.
driven by favorable regulatory credit revenue and our ebitdaaf receivable
our expected increased delivery volume
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.
as rj outlined we are making rapid progress in our autonomy road map
basis later this year. We anticipate the pace of our RD investment in the strategic area to accelerate in the coming years.
are excited to launch our point to point feature on a limited basis later this year
coming years as we advance our large driving model and progress advanced autonomy development across our consumer vehicles.
we anticipate the pace of our r and d investment in the strategic area to accelerate in the coming years
as we advance our large driving model and progress
robo-taxi applications. We believe autonomy is a primary product differentiator, market share driver.
advanced autonomy development across our consumer vehicles and robotaxi applications
we believe autonomy is a primary product differentiator
and long-term value creator. Finally, we're lowering our 2026 capital expenditure guidance.
market share driver and long term value creator
guidance by $300 million at the midpoint due to a shift in timing of certain capital spend. This brings a revised 2026.
finally we're lowering our twenty twenty six capital expenditure guidance
three hundred million dollars at the midpoint
due to a shift in timing of certain capital spend
2026 CapEx range to $1.4 to $1.5 billion. Looking ahead to 2027, we expect
this brings our revised twenty twenty six capex range to one point four
a meaningful year-over-year step-up in CapEx as construction activity ramps in our Georgia manufacturing facility.
one point five billion dollars looking ahead to twenty twenty seven
we expect a meaningful year over year step up in capex as construction activity
ramps in our georgia manufacturing facility
closing, I'd like to thank our teams across the company for their execution in the third quarter. We remain confident that R2 and R2.
in closing i'd like to thank our teams across the company for their execution of the third quarter
technology roadmap will be truly transformative for the growth and profitability of our business. With that, I'd like to turn the call back.
we remain confident that r2 and our technology road map will be
back over to the operator to open the line for QA. Thank you.
truly transformative for the growth and profitability of our business with that i'd like to turn the call back
over to the operator to open the line for q and a
For the Q A section of today's session, we will be utilizing the raise hand feature.
thank you for the q and a section of today's session
would like to ask a question, click on the raise hand button at the bottom of the screen. Once prompted,
we will be utilizing the raise hand feature if you would like
ask a question click on the raise hand button at the bottom of the screen
prompted, please unmute yourself and begin with your question. We will now pause for a moment to assemble the queue.
once prompted please unmute yourself and begin with your question
queue. Thank you. Our first question comes from.
we will now pause for a moment to assemble the queue
thank you
our first
question comes from george janarikas with canaccord genuity
please unmute yourself and ask a question
hi everyone
you so much for taking my questions i just wanna
ask first on autonomy how
leverageable is your platform to the commercial vehicles over time
thank you
hi george the the timing platform is
is being built around what we call our large driving model and so large drive model
is a is a foundation model it's a large parameter model that we're training
and it's very adaptable to different vehicle form factors and applications and so that's
inclusive of r one r two
and of course our commercial vehicles and so
we think about the autonomy road map 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
but it also has applications in robotaxi of course is is part of our
partnership with uber with the twenty twenty eight launch for that
and then there's a a number of applications in the commercial space
as part of our advanced program
thank you and maybe just as a a financial
follow-up just to make sure we heard that correctly you mentioned that 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 i the way we phrased in the prepared remarks was that
intend to exit the quarter at an automotive gross profit i wouldn't expect the full quarter
but it does set us up really well as we continue to ramp r2
we think about the progression we see through twenty twenty seven 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 and and derek claire
it's great working with you over the years and derek again congrats
first
you know you you mentioned this hundred and twenty million of incremental cost of revenues
due to the ramp
but
that's not really
you know cost of good right so i i guess what what i'm what i'm
wondering if you could help us
understand is you know today's realized pricing and mix
like what is the r two contribution margin be
you know before those launch efficiencies and the fixed cost absorption because
because because and then i think you get could get a better sense of
know if we add back some of those inefficiencies
what for lack of a better term you know a mature gross margin would be
yeah thanks joe so the the hundred twenty 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 and so that's just really the effect of not
having a full rate of production at a two shift operation today
in addition that one hundred and twenty includes some of 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 our two today in second quarter we saw about a
a twelve thousand dollar per unit step down in cost
of goods sold per unit delivered
and i think that that is the biggest driver of that is introducing r two
one is r two is a lower cost product but two is r two is benefiting from
a scale protected perspective within normal
as we step back and you look at our total automotive gross profit
excluding regulatory 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
and and 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 you know other electronics steel copper
i i i guess aluminum looks
pretty flat so so maybe that matters less today with the launch
additions but i was wondering if you could give us any
anecdotes as to sort of how your
looking for or have been able to find engineering or manufacturing
efficiencies or other offsets to to be able to maintain
those those those targeted gross margins for for the new vehicle
well thanks joe you know big
part of our engineering team is is working anomaly
you know ramping production and and achieving all the volume that
that the normal 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 vehicle is produced in stanton springs in our georgia facility
but a number of those are going to be flowing into the vehicle over the coming months and quarters
and 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 the various trends that we've talked about you know with the base
trim starting at forty five thousand dollars and the and the top spec trim
being at about fifty seven thousand dollars
and so the team is making great progress on that and it's really you know in terms of examples
it's across the board it's it's how we're
you know it's it's details within the plan how we're operating the plant
it's looking at improvements in
packaging for logistics for moving parts from suppliers to our plant
and then it's down to working really closely with our supplier partners
on identifying further cost optimizations in the component level
really that that don't impact the performance or capabilities of the vehicle that are
you know that that's often is part consolidation or
part elimination through you know through redesign of the components
but you know the team's really doing an outstanding job of 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 and derek
congratulations on the expanded responsibilities
i was hoping to
better understand what's going on with the r two ramp and nice to see
the the good momentum you just reported and a number of positive comments that you you made
that you're 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 twenty twenty seven
and how much is it about converting on those record number of demo drives
and positive media reviews into new r two orders or is it more about ramping
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 the the manufacturing operations and of course that's a huge part of this
but i do wanna really call out the importance of also ramping the supply base
and in the case of r two we have a number of new suppliers we took a
an aggressive approach of
reducing our supply chain complexity to have a a smaller
set of tier one suppliers to enter the business
so we can only ramp as fast as our slowest ramping supplier
and that's not to say
there's a there's like an acute challenge with a single supplier but rather
the ramp up requires each of you know
each of the suppliers to ramp and they need to be highly coordinated
and so that's something we're very focused on you know javier is joining us on the call as well but in
some comments here as well but
you know our supply chain team or our
overall
logistics team
been working very closely together to make sure that this ramp is smooth
yeah i need that ajay i i've been importing many lunches
all across all my my career
and supply chain is always a
complex part of a launch that we already
flagged from from day one bringing up hundreds of suppliers and
their tier two and their tier three is an an immense task
what we are always doing is identifying
where are the suppliers that need some some support and we have
special teams to to help them to support our
our scale that's the focus area
scaling our supply chain
thank you both for those comments my other question was on autonomy plus
and better understanding the impact it may be having on the business
maybe you can give a bit more color on how impactful autonomy plus
was in that forty five percent year over year growth in the software services and other segment and
and when you talk to people who are buying rivian vehicles are they
you that autonomy plus is one of the key reasons that they're making that decision
thank you
yes as we said in opening remarks
autonomy plus take rate on autonomy is on autonomy plus is
exceeded our expectations and we're quite encouraged by it
instance say timing plus the the core feature within it
is what we call universal hands free which is a hands free
driving capability that can be used on you know millions of miles across the united states
what's coming has us even more excited and that's our point to point
and that's where
addition to being hands free the vehicle can navigate entirely
a destination so you plug the address in and
you know navigate through four way stops through complex interchanges
highway on and off ramps
and we think that will start to really create you know
new levels of demand and new levels of interest
today
in the market there's really only one other product that that has that of course
with with tesla's fsd
and so this you know 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
our next question comes from dan levy with barclays
please unmute yourself and ask your question
great thank you for for taking the questions
wanted to ask first of all claire
congratulations and derek congratulations to both of you on
on your new roles
wanted to ask about edv yet another
quarterly record in terms of amazon revenue
if you could just again help us unpack you know the upside there but
maybe you could also talk about some of the upside we're seeing potentially with other customers
you know you've probably seen there's
some some images that went around of of an edv
wrapped with another
company out there walmart you know just maybe you could talk about
the potential for uptake with other
companies on edv and if amazon is finally you know driving this
thanks dan the edb product it's it's exciting to watch it's
it's something
we've really optimized around enabling
and really driving an advantaged cost structure and so we've seen amazon as
as they've
ramped you know from the early years of this program up through this year where they've
now had a large fleet deployed
they have lots of data on how the vehicle is performing
and it's creating like true and and very real structural cost advantages
that you are leading into leading amazon to double down to
to continue to buy more vehicles and so
as you've heard from us in in previous calls
this year we have seen a significant step up in the level of demand for amazon
and that's a you know that's a direct reflection
of the advantages that our edb platform provides to
their commercial operators and so with that said
we you know 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 edd you know we were excited for those
potential
you know 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 to others
maybe you could just talk about how that jv is is progressing
and you know just as the as the technology goes
your vehicle and their vehicles what are you potentially going to hear from
other automakers that might want to adopt this
well the the first
real outcome output from the joint venture
is gonna be launching next year so this is the the volkswagen id one product this is a
a roughly twenty thousand euro
ev that that volkswagen's producing for europe
so we're really excited about that it's it's a wonderful way
to demonstrate the capabilities of our technology
outside of the raveed brand and and outside the us market
know importantly this is you know being in europe this is this is vehicle that's gonna be competing directly
against not only european manufacturers but also chinese manufacturers
and we're very confident in the capability of the technology
and the efficiency or the cost efficiency of being able to deliver
a really you know broad set
and impressive set of features
in a vehicle at that price point
and so i've i've said this before but we think of that vehicle as really a
a billboard for the capability it really demonstrates what can be done
and so the technology we've developed we we certainly
about this as having applications
not only beyond rivian but also beyond this existing joint venture and into other applications
with other manufacturers but our focus today 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
the id one
great thank you
thank you our next question comes from ittai mikhaili with td coven
please unmute yourself and ask your question
great thanks hi everybody claire derek congrats to you both and and best wishes
maybe first question going back to autonomy plus
and it's becoming a a driver a major driver of demand for you
i'm curious whether you think consumers are are
are sort of coming to purchase the vehicles with the point to point
feature in the future in mind or or do you think that when you launch point to
point could that be another step function improvement in demand and maybe similarly for
the the gen three hardware when that's launched as well
i think in in a very broad sense
to date autonomy has not been
a major driver for most customers in the united states
that's
that's sort of evidenced by most of the vehicles that are being sold today do not have
you know very very much autonomous capability
i do think that we're at at the base
of a very significant inflection point though
we're gonna start to see
a much broader set of customers start to really look for
advanced capabilities and i and and with that i think
point to point is 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 and
the cognitive load tough to operate the vehicle
and navigate the vehicle is dramatically reduced because
you simply have to put in your your end destination and the vehicle can handle
what happens in between
and so this has been as we've talked about in previous calls this has been a major focus for us
a major and when i say that that's a major focus of
of resources both dollars on the r and d side as well as those people
we've designed our architecture inclusive of the sensor set
our compute topology
the way we're developing a system around this neural net based foundation model
and 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 of multiple key steps that ultimately lead to
the the level four capability that we're planning for for twenty twenty eight
terrific rj and a quick follow-up maybe touch upon just
the acquisition of of third dimension does that
kinda help you get to level four does it maybe expand the
scope of odds just kinda curious a bit on kinda what this does post the acquisition
yeah this is a it's an exciting addition to the team
we're we're really pleased to have completed this acquisition and
you know when you when you look at development of
these higher levels of autonomy and and really building them around a model based approach
so you know an ai based approach versus
the the autonomy one dot o approach of using a more deterministic rules based approach
a key part of that is what we call the eval
process that you know how we're evaluating the model
and you can do that
an open loop way by putting it on vehicles and driving those vehicles
and that's it's obviously proven we've seen that
you know dot net many other companies use that approach and it'll continue to be used
but in addition we wanna create closed loop mechanisms whereby we can
test the model
real life conditions
or simulated conditions and then make lots and lots and lots of iterations
on those conditions
and to do fault injection to do
unique circumstance injection to into the simulations and so
the 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 and i definitely wanna 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 you know to a broader twenty twenty seven release
is this to gather data and sort of
validate the incident profile here looks
love to just get your thoughts on you know what you need to to see there
having an early access program is
you know it's a very common approach for
newer technologies to get feedback
from a broad spectrum of users
and that's everything from the functionality features to
you know the interface and the the how the feature is deployed or you know how they're
actualized how they're you know what the ui looks like
and so 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 you know different geographies
so that's that was how it's designed
of course as you said that that sets us up to then have the full
broad release across all autonomy plus subscribers
in the twenty twenty seven time frame
perfect and then i guess i wanted to ask
about
know how
the the edge cases that you're trying to solve for here
at first you know we've heard about you know pickup drop off
being a little bit of a you know an edge case that's
tougher to solve but love to just get your you know when you're first launching
point to point what what will the functionality
of really entail and then how do you expect it to you know progress over time
yeah i mean there's
we i guess when you think about education there's a broad spectrum of
types of educations
yeah the the pickup drop off is particularly important for
robotaxi or level four applications so it's you know that's a
that's beyond what we're
and that's that's i'd say more even more important
when we start to look at deployment of
our uber partnership in twenty twenty eight
and i'm sure many have experienced this the challenges of let's say
dropping someone off or picking someone up in a in a highly urban environment
where there's no place for the vehicle to pull off and so you're sort of
stopping in lane on a road
those are those are challenging situations and challenging as we've you know even on deploy
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 so the
if it's a very complex
pickup or drop off situation you have the benefit of someone in the driver's seat
and this is where you know really being thoughtful on the ui
that situation is important so what is the vehicle doing it gets to destination and how
and how does it indicate
to the to you know person in the driver's seat
and we're working really hard to make sure all those those
the the ui and the thinking about what that interface feels like and it
experiencing the product is 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 patel with wolfe research
please unmute yourself and ask your question
hey thanks thanks so much for taking
for taking my questions curious on
on r and d i think it was up seven percent year over year excluding stock comp
i know that's an important cost item or i know an important
element there is the cost for leasing ai compute
capacity for training and i'm curious what you're seeing in terms of pricing and
available capacity we are seeing industry wide
token prices move higher but just curious what you're seeing on the ground
yeah thanks for asking
are seeing some increased pricing as we think about leasing compute
with that said as we think about the looking at q3 this year to q4
we do expect a low double digit growth rate in r and d
as we look at next year we do expect
our r and d line to grow more significantly in twenty seven than it did in twenty six
this is really all driven by our strategic investments in autonomy software
autonomy hardware and some vehicle technologies and so
we continue to to be efficient in our uses of compute but it continues to
we'll expect to continue to expand that as we think about next year and the progress we're making on our large driving model
okay thanks
and then maybe on input cost i i think you alluded to
alluded to that as as as being a a headwind
i'm i'm just curious
in in terms of some of the if can drill down more
specifically on some of the actions you're taking
to try and mitigate that
whether it's coming from higher steel
or freight logistics dram
maybe if you just put provide a little more more color
yeah there's you know there's so many components that go into a vehicle
and so you know the the big big categories are of course bill of materials
you know then you have conversion cost you're
you know cost to to build the vehicle the plant and you have logistics
costs and so across each of those categories
we have organized you know
teams of people that are working to
identify opportunities and
the those opportunities we're 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 like significant
redesign or or selection of new suppliers
and so this is something
in any scenario we'd be fighting and pushing for
but i think to the to your to point of your question this is
of even more importance given some of the headwinds that have
that have you know merged around raw material costs
and you know memory costs
but we continue to make progress on that
i think the 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 and so that's everything from getting our supplier
suppliers ramped as you heard from derek and i earlier derek hovering here earlier
and then making sure that we can very efficiently convert all those components from suppliers
into our vehicles in the plan
okay thanks and and maybe if i could just squeeze the last
quick one and and apologies if you had mentioned it previously but the
reduction in capex for this year
now one point four to one point five billion just what's driving that
thanks yeah sure yes the reduction in capex is mostly
driven by timing just some timing shift as we look at our our spend related to our georgia
facility
at the moment it's it's a very lumpy sequencing of spend as we think about large equipment and purchases and large
large contracts and so
as those move from an invoice or payment perspective or timing perspective by a few weeks it's just
between quarters so i'd characterize the move the 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 and congrats claire derek
first question
we saw some media reporting lily about
basically
of your vehicles
badge with walmart on it curious if you can comment at all if this is
you know testing phase or part of some type of you know
enterprise
enterprise deal
yeah as i mentioned earlier as we've
we with our commercial band program we continue to have discussions with
customers outside of amazon of course our our partnership with amazon is
you know continues to progress and advance in extremely positive ways
this year represented a big step up in volume with them and it is really a reflection of
performance
and cost advantages enabled by this this platform
so we do you know we do continue to look for
and work with other potential partners as as we go forward
understood
follow-up i wanted to ask about
third dimension i think my crude understanding is that
it it sort of turns video
kind of regular video into like a three d copy of the world of sorts
is that kind of
a very simplistic understanding of of what it does and then
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 yeah i've talked about it a little bit before but the third dimension acquisition was
something we're really excited about it bolsters
our simulation efforts within the business and and helps us create
efficient closed loop mechanisms by which we can validate
and and improve on our models
and these are efforts that of course were underway within the business already this is a this
a great way for us to help accelerate some of that work and
as you think about simulation and the importance of simulation
this becomes of even you know
using simulation for validation becomes an even more important element
for rapidly iterating on the model architecture model design
thank you our next
question comes from tobias baif with robot and co redburn
please unmute yourself and ask your question
hi
i have just one question please
over the next two to three years what are your priorities
for increasing brand awareness or brand equity
and and how will you measure whether those efforts are translating
into customer acquisition and revenue growth
well that's a great question toby we
we're really excited with the the launch of r2 to have a product now that has
a much broader
and wider aperture
for customers whereas you know of course r one was our handshake with the world it was a it's a
great product to introduce the european brand
you know to consumers but
virtue of its price point by virtue of being our flagship product
you know its price made it not something that many customers would be considering
and so with the r two the your price starting at forty five and going up
through mid to high fifties
puts it right smack
sort of overlapping with the average price of a new car in the united states
in the most popular segment the midsize crossover and suv segment
and so that on its own is gonna lead to more vehicles on the road which which
of course will create more awareness
but bolstering not just the vehicle and its you know increased presence on the roads
is we're we're doing a bunch of really creative ways of getting the brand out there
maybe the most recent one as a good
demonstration this is what we did for halloween this year
course we've we've been doing halloween mode
since we launched the company and each year we think of really creative ways to do
do fun things that bring a lot of excitement to customers but
this year we we partnered with sony and created a halloween mode where
we had ghostbusters integrated to the vehicle
of course working close with bill murray to 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 as as you noted
perfect thank you so much for your time
thank you
our next question comes from rajat gupta with jpmorgan
unmute yourself and ask your question
rajat gupta
please unmute yourself and ask your question
our next question comes from chris pearce
with needham please unmute yourself and ask your question
hey just a quick one
to
can you just kinda talk to the lidar variant of the r two i i believe originally it was
supposed to be coming out to consumers this year i i think that
term delay might be a bit harsh but now it's employee only for testing
for purchase i just kinda wanna understand if there was some sort of component delay or just sorta are
the bay the initial launch variant was better than expected i'm just kinda curious what drove that decision
well thanks chris on on our autonomy platform
i mentioned before the large driving model
and so large driving model is something that's gonna be deployed across
all of our r two vehicles in
of course launch edition and then model twenty twenty five
our one year
r ones with new model twenty twenty five
or newer
and so importantly that means point to point is gonna be available on all those vehicles and
the capabilities that that entails we think are quite quite quite exciting
the
yeah the the next hardware generation which includes our rap1 processor which is for each
processor to be eight hundred tops we have two of those for sixteen hundred 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 said is going through employee like an employee program
late this year and a validation builds validation process this year
and then into twenty twenty seven that vehicle will be available
but we're we're we're really excited about what ldm the large drive model represents and what that
can bring to
everything from as i said model year twenty twenty five r one
existing r two and then future r two
okay perfect and then you've talked about
order book to purchase conversion i think just kinda using conversion broadly can you
can you talk about test drive to order book conversion given how
drives are up so much sequentially with the launch of the r two like what's you know is it that
i guess just sort of what are you seeing there and is it is it a long wait kind of
maybe long is not the right word but are are people kinda converting from test drives
to the order book at what kind of rate versus the r one or just any color you can share there
yeah the the maybe the most interesting is we launched with the launch variant
and so that's
you know premium performance trim
and we had certain assumptions around what the conversion for that would be
recognizing it's the the most expensive r two
and 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
but but it's it's you know outstanding to see so many folks excited just
to get into an r two and also be
be in the launch configuration
with regards to
drives i'm glad you called it out this is an important
metric for us and we did see a significant step up in in test drives
really as a result of having r2 available
the level of excitement from folks to get in and experience the vehicle
our next question comes from tom narayan with rbc
please unmute yourself and ask your question
ah yes thanks for taking the question yeah good luck claire congrats derek
first question is on the r two i know you've been selling the kind of higher end
trims
but then next year you're gonna have the kinda lower end trims with
in a lower battery range just curious what you think about
consumer consumer demand for for the for that for those
specs with with the lower battery range especially in light of i guess what model wise about
ranges relative to price
and then also the impact on margins
for for that lower end lower trim r two and then i have a follow-up
yes as i said we're we're excited about
all the different trends there's 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
that's the like the interior appointments of the rear drop glass
that 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
and then we have a rear wheel drive variant
and then within the rear wheel drive variant we have a larger pack and a smaller pack
and so
really the reason we create all those variants
is or i should is because we wanna make sure we
you know cover the demand curve so cover
give customers enough choices across performance range price
point content
such that we can
we can capture customers from that forty five thousand dollar price point all the way up to the
the fifty seven thousand dollar price point
and the the
the from a unit economics point of view i think that's recognized that when we launch
as derek described earlier
the lack of volume and the ramp up
just because the nature of ramping on a single shift ramping suppliers
means that our ability to absorb fixed costs that's depreciation that's the labor cost within the
plant
is more limited and as we grow volume
the actual cost structure of the vehicle comes down quite considerably because those those
fixed elements of cost
absorbed by a lot more volume
and so we've been able to
you know very intentionally sequence
the the nature of
launching with a high priced variant and then
bringing in these other trends as our volume grows
such that in the end it supports a healthy
positive gross margin for the r2 business and of course that given its wine that really drives
the the financial performance of of ruby overall
got it that's
and then my follow-up is on autonomy
i think you said the take rates for hands free are better than what you've expected
mean can you give us a sense of what
what those take rates could be i mean we have a tesla fsds around seventy five percent
i mean is it in that order of magnitude
and then you know do you see point to point
with higher pricing than your current
autonomy product you know tesla fsds are on ninety nine dollars a month which suggests that
consumers are willing to pay more
for autonomy know at least at that quality
well
i i said this earlier and i do think it's an important call out
we really think of point to point as being
almost an inflection point in terms of the high
experience you can have with autonomy
you know hands free as it as it is today is you can use it on any road
effectively any road that has lines any marked road so it's millions of miles of roads today
but it's not navigating you
you know off exits onto you know onto you know
urban environments through stoplights since you know
know through four way stops and those sorts of things
the point to point does do that and with point to point it it
it's
it creates this
much easier experience where it takes the cognitive load of having
figure out what you're gonna do navigating thinking pain you know
paying attention to which road you're supposed to turn all those things sort of fade away
and it is a really nice experience i mean it's i'm driving it every day it's it's wonderful in my community and
out of the office
and so our view is that that is going to become a big driver of demand
and
i think it's unclear how quickly the whole and call it the whole us market and the whole
whole automotive market starts to shift to really wanting this and this being a major
purchase criteria but certainly
we're at the front end of an inflection point whereas more and more people are
exposed to what this can do
we think it's gonna become very important
and it's it's precisely because of that
that you know for the last few years we've been investing heavily in
in building this capability going back to kicking off an in house silicon program
you know which ultimately is is you know bodied in our rap one
to vertically integrating the the whole platform so that's
you know all the perception platform feeding in
and running this what we call this ldm or large driving model
so we're you know we're
extremely excited about this we do think it's a really big
driver in the long term for market share for us we think it's gonna be important that customers have
some choices
as i said with
with fst being out there and soon our point to point being out there we think that's that's great
and we're you know we're
we're we're looking forward to getting it in the hands of our autonomy plus customers and and we think certainly
that will drive
an increase a further increase i should say
in the take rate on autonomy plus
okay just to clarify is i mean
guess you guys are not giving us the the attach rate
for for your autonomy product is it close to
the tesla level or
you know we're not we're not giving the attach rate maybe someday we will but we're not giving it here
and the pricing could it be could you guys raise it for
point to point you think
what do you think this is this is a
interesting question i
in the fullness of time of course we think this is
you know for over the coming years we do see opportunities for this to continue to grow
but i think the dynamics around this
are gonna depend on ultimately how the market
know how the buck is
behaving overall
know this this is something today that's purchased as a separate subscription
you know you you could imagine models where this gets embedded into the price of the vehicle
so there's a lot of different ways this is gonna be priced i i do
i i called it out as inflection point i would just say
autonomy represents a a big big
shift in in the overall topology of of
the auto industry i think it's gonna be a big driver of market share and it could drive
huge changes in market share
shifting between different companies
i think the the models by which we charge for
monthly subscription upfront embedded in vehicle price there's
there's a whole host of really exciting and interesting opportunities
but but like any marketplace it's gonna be market driven
and so we'll you know we're watching it very closely
but i i'd say if i were to say one the guide on one thing i'd say it's gonna be dynamic
it's not it's not gonna be the same for for ten years it's gonna it's gonna 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
thanks so much
evening everyone i'll just reiterate all my
peer's comments claire been great working with you and i know you've a good
opportunity in front of you so best of luck and and derek hope
looking forward to working more with you going forward
you know maybe just one follow-up question for for me and around
the r one seems like
you know just based on what you guys have disclosed the r two volumes were
guess close to nearly double r one and it's clear it's outselling the r one
which i i would assume is was the you know
intention with with the vehicle but i i'm curious
how you're thinking about positioning the r one
over time and i know you've gotten asked about this before and obviously there's clear
value in having that vehicle in the portfolio but from a pricing
do you think that there's 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 r two to make
the r one 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 you know medium long term view on how you're thinking about positioning the product from a pricing standpoint
to maybe leverage some scale and and get some incremental volume on the r one over time
thank you
thanks andrew derek referenced in his opening remarks
but just to
state and to make sure it's clear we we we actually expect the r one
pricing
to to go up a bit and so not the price i'm
say the average selling price to go up and it's really
strategic we we removed what we call our standard trim for r one
and have intentionally moved the product a bit upmarket
and
really doing that because of where our two sits in terms of pricing
and
as we think about the how it sits within the portfolio this is a flagship product so it's
you know the the highest spectrum it's got over a thousand horsepower it's
extremely capable on road extremely capable off road
the tri motor is also you know incredibly capable you know it's
more than eight hundred more than eight hundred horsepower extremely capable
and so by virtue of the quad the tri and the performance dual that we have on that
we very thoughtfully have moved it up market to really fill that
place as a flagship product
and so that was intentional and and we're now seeing the results of that and and derek referenced
it in terms of
you know when you look at revenue per unit of the quarter
now with that its objective is not to be a high volume product
it's it's not trying to compete in the
in like the low priced or lower priced segment of of
two or three road vehicles it's it's it's 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'll leave it there
okay well great everybody for joining us
on this call and and appreciate the time we're and hopefully as you could see we're really excited about what's in
of us we're excited about the the continued ramp up of r two
you know in looking at the
additional volume we'll be building in in q4 and then
into into next year
i think along with that really excited for for what's to come with the
autonomy we spent a lot of time today talking about it i'm i'm encouraged by the level of interest that
that that there is around our point to point capability
and looking forward to showing a lot more about that
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
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