Trump administration trade and regulatory policy initially hurt electric vehicle maker Rivian. Changes in the administration stance may now help some.
Rivian cannot recognize over $100 million in previously expected revenue from sales of regulatory tax credits to other auto companies that need them to meet fuel economy and admissions rules. Federal enforcement shifts have disrupted the market for those credits. Rivian executives said in their third quarter earnings call with analysts they are not booking any revenue from that source going forward. Regulatory credits had been a part of the Rivian road to profitability.
Tariffs have also complicated Rivian's efforts to gain steady profitability. Those too hurt — at first. There the news is getting better.
“We’re really appreciative of the administration for these new changes that were announced most recently,” said Claire McDonough, Rivian Chief Financial Officer.
The Commerce Department announced last week it is lengthening a 3.75% MSRP offset for what's called Section 232 automotive tariffs. It reduces tariffs on auto parts The new expiration is 2030. That also includes expanding the pool of parts eligible for the offset.
CEO RJ Scaringe said that's particularly important for Rivian because Rivian had been building some sub-assemblies in-house that weren't previously eligible for the offsets.
“We previously have guided to say the effect of tariffs have been a couple of thousand dollars and what we would now guide to say is that it’s a few hundred dollars of tariff costs per vehicle. So, it’s a pretty significant shift for us,” said Scaringe.
Changing trade policy with the European Union by the Trump administration is giving a different boost to Rivian.
“The impact of zero-percent export tariff is certainly something we’ve been quite enthusiastic about, and we’ve been pleased to see. And it hasn’t had as much attention as we think it deserves,” said Scaringe.
The trade deal announced a few months ago has EU automakers paying a 15% import tax on what they send to America. U.S. automakers will pay nothing to the EU. The Europeans were willing to do that because till now, the U.S. hasn't exported a lot of vehicles to Europe. American vehicles tend to be larger. European buyers tend to prefer smaller vehicles. The advantage for the U.S. didn't seem like a lot.
Except that Rivian's upcoming release of its R2 mid-sized SUV is a little smaller than average. Rivian had eventually planned on exporting to Europe. Scaringe said the export goal was a significant part of Rivian's decision to build a plant near Atlanta, Georgia.
“Without a tariff to now bring our vehicles from the United States to Europe, there is a real opportunity to get into Europe sooner,” said Scaringe.
How much sooner, Rivian isn't saying. The Georgia plant won't be up and running till 2028. And Scaringe says the company does want to capitalize on demand for the R2 in the U.S. by reaching a critical mass of domestic sales. He does say the tariff boon is something they will consider "when adding a layer of complexity to the business."
The tariff changes might also shift the cost structure for the electric vehicle batteries Rivian uses, though not right away. The company's Bill of Materials [BOM] has Rivian buying LG cells. Car companies like to have their BOMs under contract for new models. Analysts like to say that makes BOM costs sticky or hard to change.
Scaringe said the new trade rules may eventually offer options for different manufacturers and different battery technologies, but for now starting late next year Rivian will use cells produced by the LG company in Arizona.
Third-quarter financials
Rivian is calling its third-quarter financial report a good one. It had consolidated revenue of $1.6 billion, and a small gross profit of $24 million.
A better measure is something called EBITDA. It stands for earnings before interest, taxes, depreciation, and amortization. It's a metric of core profitability. Rivian's adjusted EBITDA losses for the third quarter were $602 million. Rivian left its full-year guidance unchanged projecting an EBITDA loss of $2 billion to $2.5 billion.
Claire McDonough said the company had expected higher operating expenses for the quarter, driven by research and development investments on prototypes for the launch of the R2 mid-sized SUV next year and training costs for the company's autonomy platform. She said some of those operating expenses will not be part of the long-term cost structure.
In the third quarter, Rivian produced 10,720 vehicles and delivered 13,201 from the plant in Normal. That’s likely to be the highest quarter for the year even with a plant shutdown for retooling for R2. The company full-year projection remains at a maximum of 43,500 units. Automotive gross profit was negative $130 million, also affected by the plant shutdown.
“Despite this headwind, we saw strong progress in our unit economics with one of the best quarters even in automotive cost of goods sold per unit delivered driven by improved material costs,” said McDonough.
Software and services had a gross profit of $154 million. About half the gross revenue in this segment came out of the partnership with a joint venture with VW and Rivian expected another $2 billion in revenue from VW next year and another $500 million after that. The company is still counting on an energy department loan of $6 billion to facilitate building the Georgia plant.
Rivian’s balance sheet showed an end of quarter balance of $7.1 billion in cash, cash equivalents, and short-term investments. McDonough said working capital continued to improve because of decreases in raw materials, work in progress, and other costs.
She said the company continues to expect gross profit for 2025 to be roughly break even.
“We look forward to 2026 and remain steadfast in our belief that R2 and our technology roadmap will be truly transformative for our growth and profitability,” said McDonough.
About R2, CEO RJ Scaringe said they have had good quality design validation builds and remain positioned to do manufacturing validation builds by year end following the full commissioning of manufacturing equipment.
Rivian recently completed construction of its 1.1 million square foot R2 body shop and 1.2 million square foot supplier park and logistics center in Normal.
“All shops have started equipment bring up and we are in the process of commissioning the robots in the R2 body shop,” said Scaringe.
When the Georgia factory comes on board in 2028 it will add 400,000 units of capacity for R2, R3 and variations and 7,500 jobs in Georgia.
Rivian Chief Operating Officer Javier Varela said they are also working on cost containment for the rest of the R2 through greater efficiencies at the plant, line transformations and improved daily operation performance.
“The design of our process is more compact in R2. Less space. Less costs in terms of maintenance and overhead consumption so we are really confident we are sticking to our target of reducing by half the cost,” said Varela.
He said they're done with updates to the paint shop.
A lot is riding on the R2. Scaringe said the new SUV will be proof that electric vehicle makers should focus on buyer decisions about what’s the best car for them in the aggregate, not whether it’s an EV.
“It’s hitting the most popular segment with the mid-size SUV five-passenger SUV with a price point that starts at $45,000. The average price of a new vehicle sold in the United States is around $50,000. So, we’re really bullish, really confident on R2 and what it represents for us as a business,” said Scaringe.
Rivian said it believes it can ramp up to full production in Normal of 216,000 units per year by the end of 2026. And analysts have noted Rivian has been pretty good on meeting its promised deadlines on the R2 so far.
