It’s been a tough year for electric vehicle (EV) makers. Consumer demand growth has slowed while competition has created more choice for those buyers still in the market. Some government subsidies have also expired, taking away an additional incentive.
Yet the future could still be bright for California-based Rivian Automotive(NASDAQ: RIVN). That’s because the company is about to launch what could be its best-selling EV yet. In its latest quarterly report, the electric vehicle (EV) maker said it was on track to begin selling its next-generation model in the first half of 2026.
Rivian’s R2 SUV will begin production and sales early next year. Image source: Rivian Automotive.
Rivian reported another loss in its third-quarter report. On the positive side, though, the loss was lower than expected, and Rivian brought in more revenue than anticipated. More importantly, the company was able to show a positive gross profit of $24 million when analysts penciled in a negative $39 million result. But the story for Rivian isn’t about those results or even the upcoming fourth quarter. It’s about next year and the launch of its next-generation R2 electric SUV.
Rivian management adjusted the estimate for 2025 deliveries slightly lower to about 42,000 units. But whether it’s 40,000, 50,000, or even 60,000 doesn’t matter right now. The company can’t be viable for the long term at those volume levels. The R2, which is expected to be priced at about $45,000, is Rivian’s way to meaningfully boost production and sales.
That vehicle should be more profitable to the company as well. In an Oct. 29 interview, Rivian CFO Claire McDonough said she expects the R2 to cost the company about half of what it costs to manufacture its current R1 SUV.
She said Rivian has streamlined its manufacturing process through vertical integration. McDonough said Rivian has lowered costs in every single step in the process for the development of the R2. The R2 remains on track to begin production and deliveries in the first half of 2026. That news helped push Rivian stock sharply higher after the third-quarter report.
With the R2 launch on schedule, Rivian is now emphasizing its technology advances, too. The company is pushing into the world of vehicle autonomy. While autonomy has always been part of its business plan, Rivian stressed how it is now integrating artificial intelligence (AI) into all aspects of the business.
Management stated, “With the convergence of technologies across AI, GPUs, and low-cost multi-modal sensors, we are making rapid progress in the advancement of the Rivian Autonomy Platform.”
The company will provide more details when it holds an Autonomy & AI Day coming up on Dec. 11.
Rivian’s timing for its R2 launch may be good. EV sales growth rates have been slowing this year. While that may sound like a negative development, Rivian may actually benefit. As EV sales growth slows, some manufacturers are backing out of the market. Fordfor example, said this week it may completely discontinue the production of its once highly touted F-150 Lightning electric pickup truck.
Rivian is ready to boost production volumes with the R2. One reason for relatively low production volume this year is a three-week pause it took in September to expand its Illinois factory’s annual production capacity to 215,000 units.
Rivian also recently broke ground on a second production facility in Georgia. The R2 pricing level will allow it to tap into a large market opportunity. That vehicle’s popularity will be the factor that likely determines whether Rivian will ultimately be successful and profitable. Investors who see a good chance of that outcome would do well to buy Rivian stock now.
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Howard Smith has positions in Rivian Automotive. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
