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Electric Vehicles

Look Closely at Rivian’s New SUV. You’ll See a Survival Strategy.

The R2 reveals — in its smallest details — the automaker’s aggressive new focus on keeping costs low.

RJ Scaringe and a Rivian R2.
Heatmap Illustration/Getty Images, Rivian

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.

Rivian\u2019s new R2 SUVCourtesy 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.”

The R2 dashboard.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.”

Inside the R2.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.

Blue

Robinson Meyer

Robinson is the founding executive editor of Heatmap. He was previously a staff writer at The Atlantic, where he covered climate change, energy, and technology. Read More

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