Rivian is betting it can turn the R2 EV into a well-known brand like Tesla

PARK CITY, Utah — Rivian CEO RJ Scaringe is actively touring the display of the electric car maker’s new R2 SUV.

The company’s founders are moving quickly from the EV’s suspension and software systems to a variety of R2 models that will soon reach U.S. consumers, including an entry-level model priced at about $45,000 that Rivian announced Tuesday will be delayed from late 2027 to next summer.

But Scaringe, speaking to employees and the media at an R2 launch event in western Utah, hears fear in his voice as the car prepares to go on sale globally starting Tuesday for current pre-order holders.

Scaringe founded the EV maker in 2009. He built Rivian into a $22 billion company that ranked highest in Consumer Reports’ latest customer satisfaction survey, but the lowest in the industry’s predictive reliability due to problems reported by consumers with early vehicles.

This is unusual for an automobile brand. Typically, the more issues a brand has, the lower it ranks in customer satisfaction, but that’s not the case with Rivian.

It’s a testament to the brand that Scaringe, a 43-year-old car enthusiast and technology entrepreneur, has built. As a brand grows, it also becomes difficult to maintain such customer satisfaction. That’s Rivian’s goal with R2.

The new SUV aims to transform Rivian from a niche EV maker that primarily sells luxury cars in California and states with strong electric vehicle sales to a brand that is not only competitive with U.S. EV leaders but also more mainstream. tesla However, it also covers a wider range of mainstream car brands such as Jeep and Subaru.

“The goal is to be a mass-produced product,” Scaringe told CNBC. “Sure, we’re going to capture some Tesla customers, but the market for non-Tesla customers is many times larger.”

Wall Street analysts have described R2 as a make-or-break moment for Rivian, comparable to Tesla’s transition from expensive first-generation EVs to the mainstream Model 3 and Model Y that currently dominate the U.S. market.

Mr. Scaringe does not object to such classification.

“When you start a company from scratch, everything is hit or miss. If things don’t go well, the company doesn’t exist,” he said. “If you ask me, ‘You either succeed or you fail,’ I think that’s a given.”

Rivian stock fell about 5% in intraday trading on Tuesday, following the announcement of a new release date for the entry-level model and generally positive expert reviews published for the R2.

Rivian also wants to achieve profitability, which is R2’s main goal. The company lost $3.6 billion last year despite delivering just 42,247 vehicles.

Rivian had promised investors it would be profitable on an adjusted basis by 2027, but earlier this year it withdrew that goal without disclosing a new timeframe for achieving the milestone. This comes after the company’s automotive division lost about $6,000 per vehicle delivered in the first quarter of this year.

Scaringe reiterated to CNBC that Rivian expects to meet its goals once the multibillion-dollar factory in Georgia is up and running. Production is scheduled to begin in the second half of 2028 and could reach full production capacity by the end of this year.

Scaringe said Rivian will reach a profit per unit produced this year with the R2. But he said achieving profitability would require larger scale than the 160,000 units already planned for the company’s current plant in Normal, Illinois.

“Georgia brings in gross margin generating volumes for all-in-one auto sales,” Scaringe said. “The good news is that burn rates are actually starting to come down. That’s the beauty of volume, and all of these vehicles are cash flow positive at the vehicle level.”

Once the Georgia plant is fully operational, the company’s production will include the R1T pickup, R1 and R2 SUVs, R3 crossover, robotaxis, and delivery vans. The company also said it plans to offer additional vehicles based on the R2 platform.

Despite the R2’s visual resemblance to the R1S, an approximately $80,000 SUV, Rivian said the company cut the vehicle’s manufacturing material costs in half, reduced production complexity and achieved other significant efficiency gains.

Scaringe said each R2 model, with a starting price of about $45,000 to $58,000, will be cash flow positive for the company. “That’s a requirement. Every vehicle has a positive gross margin.”

The positive cash flow also includes a $45,000 entry-level model, which the company raised in price after facing online backlash over its timing.

Scaringe said in a media roundtable that the changes were made to address potential perception concerns about the R2 being a more expensive car and a “desire to get it out there.”

“The base trim gets a lot of attention, but very few people actually buy it,” Scaringe says. “It doesn’t really affect the economics of the business, but it creates a lot of noise.”

Scaringe said that once full production of the R2 comes online, the company expects the sales sweet spot to be in the low $50,000 range, just above the average U.S. selling price of $49,000 and below the average selling price for EVs of more than $55,000, as reported by Cox Automotive.

Its pricing and vehicle size place it at the heart of the small and midsize SUV market, which Cox Automotive reported accounted for 45% of U.S. sales last year.

When it comes to EVs in particular, the Tesla Model Y is dominant in the U.S. Cox Automotive estimates that Tesla will sell more than 357,500 Model Ys in 2025, accounting for about 40% of the U.S. EV market, although sales figures by region are not disclosed.

“I think it’s going to do well. Rivian has a strong brand and there’s room for another attractive vehicle, especially in the midsize segment,” said Stephanie Valdez Streety, director of industry insights at Rivian investor Cox Automotive. “They’re not just competing with EVs, but also competing with (internal combustion engine) cars.”

Challenges remain for Rivian, Valdez said. In addition to slower-than-expected EV adoption and a lack of charging infrastructure, the company also needs to prove it can scale up production quickly without quality issues.

Among non-EV vehicles in this segment, the Toyota Rav4 and Honda CR-V lead the compact SUV segment, while the larger Ford Explorer and Jeep Grand Cherokee lead the midsize SUV segment.

“We want people to look at it and just say, ‘This is the best car in its price range,’ and that will attract new non-EV customers,” Scaringe said.

To do that, Scaringe believes Rivian will also need to become a leader in software and in-vehicle technologies such as self-driving and artificial intelligence.

Rivian has received external recognition for its efforts in emerging technologies, including a $5.8 billion deal with Volkswagen to power the German automaker’s future EVs with its software and electrical architecture.

Volkswagen is now Rivian’s largest shareholder, followed by long-time supporters Amazonremains the largest customer for delivery vehicles.

The R2 will be launched with advanced driver assistance systems (ADAS), which will be controlled automatically under certain conditions and primarily through driver monitoring, but the AI ​​voice assistant won’t arrive until later this year. Both systems will continue to be updated through over-the-air updates, Rivian said.

Scaringe said he believes the company’s new software services are just as important as the vehicles.

“We need both. It’s like asking which is more important in humans: the heart or the brain. You can’t live without both,” Scaringe said. “This is a false binary. I don’t believe these are separate things.”