Rivian ‘Model 3 Moment’ Won’t Happen Until The R2

Rivian stock has surged as deliveries jumped and as analysts chimed in with upgrades. But Rivian’s breakthrough vehicle won’t arrive until the R2.

The next-generation R2, hitting the market by 2026 (and slated to be shown in early 2024), is expected to be a compact SUV priced at between between $40,000 and $60,000, much less expensive than its current products, which start at over $70,000. A pickup version is also expected.

Like Rivian’s current R1T truck and R1S SUV, the R2 will be off-road-capable (via Car and Driver).

In a recent Bloomberg interview, Rivian CEO RJ Scaringe brought up the R2 again and again — usually unprompted by the interviewer — indicating its importance going forward.

The R2* may be shaping up to be analogous to Tesla’s 2016 introduction of the Model 3, which transformed Tesla from a manufacturer of overpriced elite EVs to a mainstream car maker — putting it on a path to be one of the top global vehicle manufacturers by output.

Rivian future hinges on R2

Rivian’s “business will grow disproportionately” based on the coming R2, according to Scaringe, with the “R2 platform representing a significant step up in volume and at a much lower price point, much larger addressable market,” he said, adding that the R2 will be the “core focus” now for Rivian.

The CEO also pointed to an improving supply chain situation overall but particularly as it applies to the R2.

“The R2 supply chain…is starting with so much more strength and really we think a much better de-risked volume ramp and a much better pricing starting point in terms of the cost of those components,” he said to Bloomberg.

The R2 will also have domestically-made batteries that meet Inflation Reduction Act (IRA) federal EV tax credit criteria. Currently, Rivian cars are not eligible for the entire credit. The R2 will be eligible for the entire $7,500 credit, potentially driving down the price even more.

Share price surge

Until Tuesday, when the stock pulled back, shares were up more than 80% over eight trading days.

Rivian delivered 12,640 vehicles in the second quarter, beating analyst estimates. It expects to deliver 50,000 vehicles in the fiscal year, more than double the roughly 20,000 units delivered in fiscal 2022.

Among recent triggers for the stock surge are a price target upgrade from Wedbush analyst Dan Ives, citing “a major turning point” in production (via Yahoo Finance). Ives raised the stock price target to $30 a share from $25.

Another positive: customer wait time for vehicles is improving. In particular, production for its R1S SUV is catching up with demand, according to Scaringe.

Another positive: Rivian and Tesla have reached an agreement to integrate Rivian’s vehicles into Tesla’s Supercharger network. Rivian cars will adopt a charging port compatible with Tesla’s starting in 2025, which Scaringe described as a more “elegant” charging solution.

Rivian is also assembling electric vans for Amazon.

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NOTES:

*Scaringe also said that his goal is to under promise and over deliver, which could mean an aggressive launch of the R2.