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The R2 reveals — in its smallest details — the automaker’s aggressive new focus on keeping costs low.
Let’s get the big news out of the way: The new Rivian cars are very cool. The airy R2 is a two-row SUV that, if released today, would rival anything else on the American electric vehicle market; Rivian claims that its entry level trim will cost $45,000 and that it will get more than 300 miles of range. After including the Inflation Reduction Act’s incentives, that means the starting price for this car — for many Americans — will be $37,500.
Even more exciting are the company’s R3 and performance-oriented R3X, a hot-hatchback-slash-crossover concept that will be even cheaper than the R2 and has “the soul of a rally car,” according to Rivian’s lead designer Jeff Hammoud. It looks at once like a Volkswagen Golf GTI, an AMC Gremlin, and — could it be? — a Yugo. I love it.
It was a good day for Rivian after a disappointing year. Many things about its business are still working well. The brand evokes a fusion of Apple’s and Patagonia’s sensibilities, although it’s historically been priced more like Porsche, and it has become a favorite of high-earning Millennial dads. I saw more Apple Watch Ultras on Thursday than I have ever seen in one place before. RJ Scaringe, Rivian’s chief executive officer, was wearing one of them.
But Thursday, more importantly, signaled a new phase in Rivian’s life. After years of aggressive spending, the Irvine, California-based company is cutting costs and trying to find a financially sustainable — and profitable — footing. It’s one more sign that in the global electric vehicle sector, an industry that will be central to the fight against climate change, the startup phase has definitively ended.
This shift to profitability can be seen in virtually every aspect of Rivian’s business right now — and even in the design of the R2 itself.
Courtesy of Rivian.
If Rivian can make it, its prospects are good. It is one of a handful of American electric-vehicle makers that has a shot at competing with Tesla and surviving for the long term. But that will require it to get through the next few years and cross the “EV valley of death.” This is the period after a company has fully ramped up production and has very high costs, but before its revenue has grown to compensate. Tesla made it across this valley in 2021 and 2022; now Rivian is making its own attempt. This was the deeper message of Thursday’s event: Now is Rivian’s make-or-break moment, and the company’s leadership knows it.
To get across the valley of death, Rivian must become obsessive to the point of maniacal about its costs. The company’s survival is going to be an exceptionally close thing, and every dollar will matter. That’s why possibly the event’s most important news came right at the end, when Scaringe disclosed, almost as an aside, that Rivian is indefinitely delaying work on its new Georgia factory. That will save it about $2.25 billion, a significant sum for a company that burned roughly twice that amount last year. Rivian’s shares leapt 13% on the news.
“Every single thing we do within the business is focused on driving costs on this,” Scaringe told CNBC on Thursday. Other Rivian executives kept the message going: Walking through the R2’s design with reporters, Jeff Hammoud, Rivian’s design chief, mentioned the company’s efforts to cut costs at least six times. (Form follows function, indeed.)
The team kept asking itself “how can we simplify things — and not only simplify things from a design perspective, but also from a cost perspective,” he said, adding that “we’re not trying to make this thing feel or look cheap — that’s not what we do.”
He’s right: The R2 does not look cheap (as for feel, I wasn’t allowed to touch it), but some of the R1 series’s more premium touches are gone. Rivian has moved the R2’s speakers out of the driver and passenger doors and put them in the center console, a cost-saving measure that Hammoud suggested would give people more space for their water bottles. One of the panels in the car’s rear is made of mold-injected plastic, not sheet metal, which Hammoud said will save money and make the car easier to repair after a fender bender.
Then there are changes most drivers will never notice. The R2’s dashboard panels have a wood-like finish, and Hammoud wanted us to know that they are made of actual wood. And unlike other cars, which use wood purely as a decorative element — I assumed he was talking about the BMW i3 here — the R2’s wood is structurally integral to the dashboard. In other words, they look good and save money on underlying structural material. “With our vehicles and the R2, [the wood] literally holds the screen, it creates the shape for the vents,” Hammoud said. “If you were to take it out, literally the panel would fall apart.”
Courtesy of Rivian.
You can see, too, how other business needs are shaping how the vehicle looks and works — and even what kind of vehicle it is in the first place. Rivian only sells vehicles in the United States and Canada now, but wants and needs to expand into global markets in the coming years. It might be most famous for its pickup trucks, and yet Rivian didn’t announce a next-generation pickup on Thursday. Hammoud told me that that’s partly because Rivian is thinking about what will work well abroad, and mass pickup truck ownership remains a profoundly American phenomenon.
The charging port on the new Rivian models is on the rear passenger side, a move that confused many Americans who have come to prefer the charging port on the drivers’ side. (That’s where Tesla and the Rivian R1 put it, and the location is seen as better for home charging.) But think about it, Hammoud said. Many people in left-hand-drive countries charge their vehicles on the street, and a passenger-side setup — which becomes a driver’s side setup — makes more sense for them. The new setup also puts the charger closer to the battery, reducing the amount of high-voltage wires needed in the car. That cuts the car’s weight and — ding ding ding — lowers its cost. (Tesla puts its charger in the car’s rear for the same reason.)
The company hasn’t always been like this. During the first decade of its existence, interest rates sat nearly at zero, and Rivian could spend with abandon. It planned for its sprawling Georgia factory and could plan to sell more expensive cars to consumers who had access to cheap credit to buy them. The R2 carries forward the R1 tradition of having a flashlight in the drivers’ side door, but it lacks the hidey holes and air suspension of its predecessor. “With the R1, it was our premium flagship. We got to say yes to a lot of things,” Hammoud said. With R2, the question was “what do we have to say no to.”
Courtesy of Rivian.
This spring, Rivian will close down its Normal, Illinois, factory for a series of process upgrades. These will speed up its assembly lines and allow it to make its existing vehicles, the R1T and R1S, faster, with fewer internal computers and less wasted material; Rivian expects these improvements to carry it most of the way to profitability.
Even if it achieves its goal of turning a technical profit by the fall, it will still have a long way to go to become an actually sustainable business — and it will have to survive another year with no new products. The R2 is not due to go on sale until the first half of 2026, and the R3, which is built on the same platform as the R2, won’t start deliveries until “after the R2.” (No price or firm release date for the R3 has been announced.) The American EV market will change significantly by then. By the end of this year, some 50 different EV models in the U.S. will get more than 300 miles of range. Hyundai, Kia, Ford, and GM are all capable of bringing new cars to market during that interval that could smoke the R2 or R3, in part because they will be benchmarked off of them. The R2 and especially R3 seem like perfect cars for today’s market — and perfect cars for Rivian’s cash-saving situation. Whether they’ll be as perfect two years from now is anyone’s guess.
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Rob talks to Peter Brannen, author of the new book The Story of CO2 Is the Story of Everything.
How did life first form on Earth? What does entropy have to do with the origins of mammalian life — or the creation of the modern economy? And what chemical process do people, insects, Volkswagens, and coal power plants all share?
On this week’s episode of Shift Key, Rob chats with Peter Brannen, the author of a new history of the planet, The Story of CO2 Is the Story of Everything. The book weaves together a single narrative from the Big Bang to the Permian explosion to the oil-devouring economy of today by means of a single common thread: CO2, the same molecule now threatening our continued flourishing.
Brannen is a contributing writer at The Atlantic and the author of The Ends of the World, a history of mass extinctions on Earth. He is an affiliate at the Institute of Arctic and Alpine Research at the University of Colorado, Boulder. Shift Key is hosted by Robinson Meyer, the founding executive editor of Heatmap, and Jesse Jenkins, a professor of energy systems engineering at Princeton University. Jesse is off this week.
Subscribe to “Shift Key” and find this episode on Apple Podcasts, Spotify, Amazon, YouTube, or wherever you get your podcasts.
You can also add the show’s RSS feed to your podcast app to follow us directly.
Here is an excerpt from our conversation:
Robinson Meyer: Why do we have a surplus of oxygen in the air in the first place? It was, for me, also something I did not understand at all before I read the book.
Peter Brannen: So there’s this common trope that two out of the next three breaths you have is from phytoplankton the ocean, or a quarter of it is from the Amazon alive today. And there’s a sense in which that’s true because oxygen and CO2 are being exchanged very quickly in the biosphere. But there is something like 800 times more oxygen in the air than can be produced by the entire biosphere. And all of the oxygen that’s produced by the rainforest, say — the rainforest is a living system where everything else is consuming that organic matter and feeding off of it. And it’s kind of a wash — just as much oxygen is created by the trees as is consumed by the bugs and fungi and jaguars and all the things that are living in the rainforest that are feeding off those plants and respiring that plant matter back to things like CO2 and water. So on a net scale it’s a wash.
So that gets you a planet with close to zero oxygen, and instead we have this absurd abundance of this thing that wants to react with everything. And the only way you can do that is if, say, you imagine a tree and when it dies, rather than being decomposed by fungi and beetles and on and on, that tree suddenly gets buried in sediment and falls into the crust and becomes part of the rock record, and the oxygen it made in life is not used in its own destruction. And by shielding that tree in the earth, you leave this surplus of oxygen in the air. And over all of Earth history, as a vanishingly small amount of this organic matter, things like plants and algae, do make it into the rock record, they leave an equivalent gift of oxygen in the air as a surplus.
We are more familiar with plant matter in the crust where it’s economically exploitable — we call those fossil fuels. So in a weird way, the fact that me and you can breathe — I don’t think a lot of people attribute that to the fact that there’s fossil fuels in the ground. Luckily most, you know, quote-unquote fossil fuels are very diffuse in mudstones, and they’re not economically exploitable. And we’re never going to run out of oxygen by burning fossil fuels because, you know, we worry about CO2 going up in parts per million and oxygens in whole percent. So, you know, it is true that for every molecule of CO2 we burn we’re bringing down oxygen by an equivalent amount, it’s just not that concerning.
But yeah, there is this astounding way of reframing, of looking at the world where the plant surface is breathable only because of what’s happened in the rocks beneath it.
Mentioned:
Peter’s book, The Story of CO2 Is the Story of Everything
This episode of Shift Key is sponsored by …
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Music for Shift Key is by Adam Kromelow.
Is the “turbine crisis” coming to an end? Or at least the end of the beginning?
One of the few bright spots for renewables this year has been that their main competitor for energy generation, natural gas, has been in a manufacturing crunch. An inability (or unwillingness) to ramp up production of turbines, the core component of a gas-fired power plant, to meet rising energy demand is cited regularly by industry executives and financiers to explain why renewables are the best solution to quickly getting power. And it’s reflected in the data; planned additions to the grid are overwhelmingly solar and storage.
But now there might be more turbines coming. Mitsubishi Heavy Industry chief executive Eisaku Ito told Bloomberg over the weekend that it aims to double its capacity to build gas turbines over the next two years.
The industry is essentially an oligopoly of three suppliers: Mitsubishi, GE Vernova, and Siemens Energy. Due to the high level of capital investment necessary to build turbines, there’s little chance of the triumvirate expanding. This means it’s a seller’s market. Developers describe having to be vetted by their suppliers for a product that might get delivered in five years, instead of suppliers fiercely competing for new business. That means for the turbine crisis to be truly reversed, executives (and investors) at Mitsubishi’s two competitors will have to be convinced that large-scale capacity expansions are worth it.
Something that might help them reach that conclusion is if capacity expansion plans are met with a higher stock price. In another ominous development for the renewable energy industry, Mitsubishi’s stock price went up in response to the news. Renewable developers have enough problems on their hands without having to worry about a gas turbine industry that could supply more and more megawatts over the medium term.
Gas turbine manufacturers have been trying to navigate the tension of fulfilling orders for new gas turbines and avoiding costly investments in new capacity that might not actually be utilized should the AI boom peter out, let alone if public policy makes it much more difficult to build new fossil-powered generation.
Up until now, manufacturers — and their investors — have seemed content with heavy demand and constrained supply. Going into the weekend, the stock prices of the gas turbine industry powerhouses GE Vernova, Siemens, and Mitsubishi Heavy Industry had risen 86%, 79%, and 69% so far this year.
But Mitsubishi Heavy Industry’s stock bump on Tuesday indicates that investors are not completely averse to capacity expansion. Yet at the same time, executives across the industry are careful to portray themselves as thoughtful and prudent stewards of capital.
Ito emphasized that the planned capacity expansion would not mean reckless investments, telling Bloomberg “the goal is to be as lean as possible” and that there would be work on the efficiency of the production process to address spiraling costs of turbine manufacturing.
“The executives seem keen to stress that this expansion will be lean and efficient,” Advait Arun, a climate and infrastructure analyst at the Center for Public Enterprise and the author of a much-cited Heatmap article on the turbine shortage, told me. “There’s a tension between getting over their skis by expanding overmuch while also killing the goose that’s laying their golden egg by not expanding.”
The pressure to build is immense — but so is the industry’s hard-won reticence about expansion.
Gas turbine orders are likely to hit a new record this year, according to S&P Global Commodities Insights, and the industry might be unwilling to go further.
“Past boom-and-bust cycles have made the industry cautious in its investments, and turbine demand in the early 2030s is uncertain,” S&P analysts wrote.
Siemens Energy chief executive Christian Bruch had told Morgan Stanley analysts in a note released Tuesday that the company had “no intention” of increasing capacity beyond working to expand the facilities it already has. He also said the company’s constraints are its own supply chain issues, namely the blades and vanes used in the turbines
And GE Vernova has been practically bragging about how far back they have reservations for turbines. “Our pipeline of activity for gas demand is only growing, but it is growing at even more healthy levels for 2029 deliveries, 2030, 2031,” the company’s chief executive Scott Strazik said on an earnings call in July.
And Wall Street has been happy to see developers get in line for whatever turbines can be made from the industry’s existing facilities. But what happens when the pressure to build doesn’t come from customers but from competitors?
A federal appeals court on Tuesday cleared the way for the Trump administration to kill former President Biden’s $20 billion green bank program, which would have provided low-cost loans for solar installations, building efficiency upgrades, and other local efforts to reduce greenhouse gas emissions.
The three-judge panel overturned a lower court’s injunction temporarily requiring the Environmental Protection Agency to resume payments, and ruled that most of the plaintiffs’ claims were contract disputes and belonged in the Court of Federal Claims. If the case now moves to the Court of Federal Claims, the plaintiffs would only be able to sue for damages and any possibility of reinstating the grants would be gone. But they could also petition to appeal the decision.
Congress created the grants, known as the Greenhouse Gas Reduction Fund, as part of the Inflation Reduction Act in 2022. It authorized Biden’s EPA to award $20 billion to a handful of nonprofits that would then offer financing to individuals and organizations for emission-reduction projects, mostly geared toward low-income or otherwise disadvantaged communities. The agency fully obligated the funds last August to eight nonprofits that would “create a national financing network for clean energy and climate solutions across the country.”
Then Trump took office and ordered his agency heads to pause and review all funding for Inflation Reduction Act programs. EPA Secretary Lee Zeldin targeted the Greenhouse Gas Reduction Program for termination, making a big show of a covert recording of a former agency employee comparing Biden’s efforts to get climate money out the door after the election to “throwing gold bars off the edge” of the Titanic. Nevermind that this particular program had been fully obligated prior to the election, and recipients had already started to announce investments as early as October.
The nonprofit awardees sued the Trump administration, and the District Court for the District of Columbia issued a temporary injunction on the EPA’s grant terminations in mid-April, mandating that the funds continue to be paid out while the case proceeded. The EPA appealed that injunction, leading to today’s ruling.
In her opinion for the majority, appeals court Judge Neomi Rao, a Trump appointee, dismissed the nonprofits’ claims that the EPA’s grant terminations were arbitrary and capricious, in violation of the Administrative Procedures Act. She wrote that the dispute was “essentially contractual” and therefore did not belong in the district court to begin with. The nonprofits had also alleged that the EPA violated the constitution's separation of powers in attempting to cancel the grant agreements, as Congress had given explicit direction to the agency to award the funds by September 2024. While Judge Rao allowed that the district court had jurisdiction over this particular claim, she ruled that it was “unlikely to succeed” on the merits.
This decision, if it stands, means the case is basically over, David Super, an administrative law expert at Georgetown Law, told me. The plaintiffs could ask to have it transferred to the Court of Federal Claims if they wish to pursue monetary damages, but that’s likely a losing proposition since Judge Rao — unusually, according to Super — went on to opine that the plaintiffs would have no case there, either.
The plaintiffs could, however, ask for a rehearing by the full D.C. circuit. “Given that this is a very important case, both legally and practically, I think they would have a good chance of getting reheard,” Super said.
There was one other important point in the decision. While this case has been playing out, Congress rescinded any “unobligated” funding — money that hasn’t yet been spent or contracted out — from the Greenhouse Gas Reduction Fund as part of Trump’s tax and spending law. The Congressional Budget Office estimated that the remaining balance in the fund was just $19 million, essentially the cost of program administration. But the Trump administration has argued in the ongoing court case that the law rescinded the full $20 billion. Judge Rao disagreed, writing that the law “did not render this appeal moot.”
This is the latest in a series of wins for the Trump administration over the termination of grant funding. Last week, the D.C. district court dismissed a challenge brought by nonprofits over the termination of the Environmental and Climate Justice Block Grants, another Inflation Reduction Act program, on the grounds that it belonged in the Court of Federal Claims. The Supreme Court also issued a similar opinion in August regarding grant funding from the National Institutes of Health that was terminated on the grounds of a shift in agency priorities.
The evaporation of $20 billion in clean energy funding is no small loss, but Super said the consequences could also be much more systemic, threatening the viability of federal grantmaking as a tool to stimulate private capital. “If these commitments are utterly unenforceable, then no one's going to do business with the federal government,” he said.