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Rivian plans for new tariff structure following Trump's election

Rivian's new R2 vehicle
Rivian
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Courtesy
Rivian's new R2 vehicle will be made in Normal, and later in Atlanta, Georgia, with deliveries to customers beginning in the first half of 2026.

The campaign promises of President-elect Donald Trump have many businesses scrambling to figure out how to adjust to a higher tariff environment. Bloomington-Normal's largest manufacturer is one such firm.

The electric automaker Rivian is getting ready to launch its new R2 vehicle in 2026. It's building an addition to the plant in Normal. It's signing deals now to make sure all the many parts of the vehicle will flow steadily from around the world to Normal when production begins.

Rivian CEO R.J. Scaringe acknowledged to analysts in Thursday's third-quarter earnings call the Trump approach to trade will be a lot different than during the Biden administration.

"There's a lot of policy elements that are in play and we're watching it very closely," said Scaringe.

With sources for 85% of the R2 already nailed down, analysts wanted to know how tariffs might change the cost structure for the new vehicle. Scaringe said Rivian anticipated the issue some time ago.

"A lot of our focus has been on sourcing suppliers that are not going to be subject to large tariffs," said Scaringe.

Not every piece of the new R2 will be able to evade tariffs. Scaringe said Rivian is trying to hedge on those.

"In places where we have source suppliers that are overseas that could be subject to changes in tariff structure, we've designed the contracts and designed the relationships in such a way that we are not carrying much of the risk," said Scaringe.

In a photo posted to Instagram, Rivian founder and CEO RJ Scaringe, left, at the site of the company's next expansion in Normal.
Instagram
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@RJScaringe
In a photo posted to Instagram, Rivian founder and CEO RJ Scaringe, left, at the site of the company's next expansion in Normal.

There's still a lot of uncertainty. And Scaringe said it's not just in finished parts.

"What's going to be interesting is how far this reaches into the upstream supply chain. So as we think about raw materials, that's something that every manufacturer, ourselves included, are thinking about," said Scaringe.

It's also possible tax incentives to buy electric vehicles will disappear in an administration that has given signals it wants to preserve the fossil fuel industry. Rivian Chief Financial Officer Claire McDonough said so far Rivian's vehicles are at a price and most buyers are at an income level that prevent them from capturing all of the existing credits anyway.

And when Rivian does introduce lower cost EVs for mid-market, Scaringe said at the end of the day what will convince motorists to convert from gas-powered vehicles to EVs is variety, choice, driving experience, and the features and capabilities of the vehicles. He said Rivian will continue to compete well on those fronts.

Third-quarter challenges

Rivian still thinks it will begin turning a modest profit in the fourth quarter of the year, and projects a full year gross profit in 2025, even though there will be a monthlong shutdown of the plant late in the year. In a company earnings call, though, Scaringe said they've had troubles finding some parts for existing models.

"This has been a tough quarter for us because of some of those supply ramp challenges. One of the suppliers in particular has limited our production quite substantially and we're working very, very hard to address that," said Scaringe.

Rivian said the parts supply chain issue is a short-term problem; they're still excited about substantial cost reductions and plant efficiencies.

McDonough said the shortage has caused a temporary pivot in the models coming out of the plant.

"We expect to increase our tri-motor and commercial van production and deliveries in the fourth quarter as those variants only require one Enduro motor," said McDonough.

Rivian said it will still end the year with the same production it predicted earlier, about 47,000. In the third quarter, Rivian produced 13,157 vehicles and delivered 10,018 vehicles.

Earnings

Rivian had gross revenue of $874 million for the quarter but lost $392 million in the period. Rivian's gap in operating expenses is the lowest in three years, said McDonough. She maintained Rivian's $39,100 gross per vehicle loss will shrink as more cost savings happen from a new parts mix and more revenue from price increases and sales of EV tax credits. That gross loss per vehicle included $18,600 in depreciation amortization and a $600 stock compensation expense, said McDonough.

Construction of the plant expansion in Normal is on pace for the introduction of the R2 model in 2026, said McDonough.

Rivian affirmed it will close its joint venture with Volkswagen by the end of the year. That’s expected to give Rivian a $6 billion shot in the arm that it plans to use to complete the launch of the R2 and build a second plant in Georgia.

McDonough said Rivian also expects to realize $300 million through the sale of EV tax credits to other businesses, and both sets of capital will take them through "positive free cash flow." That’s a measure that represents cash a company generates after accounting for cash outflows to support operations and maintain capital assets.

WGLT Senior Reporter Charlie Schlenker has spent more than three award-winning decades in radio. He lives in Normal with his family.