Good afternoon, and thank you for joining us for Rivian's second quarter 2026 earnings call. Today I'm joined by RJ Scaringe, our CEO and founder, Claire McDonough, our chief financial officer, and Javier Varela, our chief operations officer. Before we begin, matters discussed on this call, including comments and responses to questions, reflects management's views as of today. We will also be making statements related to our business operations and financial performance that may be considered forward-looking statements under federal securities law. Such statements involve risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are described in our SEC filings and the earnings presentation we filed with the SEC today. During this call, we will discuss both gap and non-gap financial measures. A reconciliation of historical non-gap to gap financial measures is provided in our earnings presentation and press release. Just before the earnings call, we posted our earnings presentation, which includes an overview of our progress over the recent months. I encourage you to read it for additional details around some of the items we will cover on today's call. Following our prepared remarks, we will be taking questions from sell-side analysts. In the interest of keeping the call to one hour, we would ask these analysts to limit any follow-on questions to one. With that, I'll turn the call over to RJ.

Thanks, Chip, and good afternoon, everyone. Thanks for joining us for today's call. In the second quarter, we began deliveries of R2 vehicles to external customers. We expect R2 to be a game-changer for our customers and a driver of Rivian's long-term growth and profitability. Importantly, in a U.S. automotive marketplace starred for a high-quality EV choice, I strongly believe R2 is an attractively priced option for everyday ventures that will resonate with a broad set of consumers. Many reviews of R2 are outstanding. One journalist wrote, quote, R2 is one of the best new cars I've driven in years. Another praised R2 as among the finest vehicle designs in the world. Early customer feedback of R2 is positive, and I have to say I love it as my daily driver. Strong R2 reviews and increasing brand awareness are directly translating into accelerating customer touchpoints with our products. In the second quarter, we hosted over 57,000 demo drives, a Rivian record. While it's early in our ramp, we are pleased with the reservation conversion we've seen to date for launch edition R2s. Turning to our manufacturing footprint, our team in normal is focused on the production ramp of R2. As a reminder, R2 production started with a single shift and we expect to scale to two shifts by the end of the third quarter. We are seeing good progress in new team member training and process improvements for the ramp of the first R2 shift. Additionally, members of our supply chain team are spending time on site with suppliers as we look towards supporting the ramp in the back half of the year and into next year. Thank you for joining us. Thank you for watching. In this second quarter, we surpassed 1 billion miles driven on the Rivian commercial van platform. Turning to our technology roadmap, autonomy remains one of the most important areas of investment at Rivian. In the not-too-distant future, we believe advanced assisted driving capabilities will be a key differentiator for customers and a substantial driver of market share. Our autonomy development is on track and we expect to begin rolling out point-to-point capabilities by the end of this year. We believe our rapidly expanding car park with R2 will accelerate our data flywheel to enable delivering hands-off, eyes-off capabilities in 2027 and ultimately level 4 capabilities in consumer and robotaxi variants of R2. Since we began monetizing Autonomy Plus in April, take rates are trending positively for the service and we believe further future releases will drive continued increased uptake of Autonomy Plus. Later this year, we will host another Autonomy and AI Day where we'll provide more updates around our exciting autonomy and AI progress. At the end of 2026, we are targeting the launch of our third-generation autonomy hardware. This includes RAP1, our first in-house designed silicon, and the addition of LiDAR. The development of our RAP1 chip is on track, and we've begun final testing phases of production silicon. Finally in May, we rolled out our Rivian Assistant on all R1 vehicles and plan to launch the feature on R2 with an over-the-air update later this year. Rivian Assistant is our new AI-powered voice assistant that is built to be a digital co-pilot with integration into the vehicle ecosystem and other external apps. Customers love this new feature and its intuitive functionality across applications like Spotify and Google. I couldn't be more excited about the opportunity ahead. With that, I'll pass the call over to Claire to discuss our financial results.

Thank you, RJ, and good afternoon, everyone. As RJ shared, we started external customer deliveries of R2 in June. My family took a road trip in our R2 earlier this summer, and we put the storage capacity to the test by piling in four large suitcases, backpacks, golf clubs, tennis rackets, and groceries. Road tripping with universal hands-free is outstanding, making long car rides relaxing. I'm so looking forward to the launch of point-to-point capabilities later this year. As I discussed previously, delivering a strong 2026 exit rate for R2 production and deliveries is a key focus for our team as we believe it will directly translate into positive automotive gross profit for the business. Turning to the results for the second quarter, our consolidated revenue was $1.66 billion, a 27% increase over the same quarter last year. Consolidated gross profit was $179 million and our gross margin was 11%. Gross profit included $138 million of depreciation and amortization and $31 million of stock-based compensation expense. Adjusted EBITDA losses for the quarter were $379 million, driven by our $179 million of gross profit and increased adjusted operating expenses as we prepare to scale R2 and invest in our autonomy roadmap. In the second quarter, we produced 12,613 vehicles at our plant in Normal, Illinois and delivered 12,194 vehicles. Delivery results topped our 9,000 to 11,000 vehicle expectations due to robust growth quarter over quarter in EDV and R1 coupled with the introduction of R2 deliveries. Our $1.14 billion of automotive revenue, a 23% increase over the same quarter last year, were primarily driven by a 14% increase in vehicle deliveries and a $103 million increase in revenues related to automotive regulatory credits, partially offset by a decline in average selling prices from a higher mix of commercial van and R2 deliveries. Automotive gross profit loss was $36 million compared to a gross profit loss of $335 million for the same quarter last year, a $299 million improvement primarily due to increases in delivery and production volumes, an increase in revenues related to automotive regulatory credits, and an IEPA tariff refund receivable partially offset by the ramp of R2 production. In the quarter, we recognized approximately $100 million in incremental cost of revenue due to the ramp of R2 production as compared to the production at more normalized levels. While current macro and geopolitical factors are creating added complexity, cost, and uncertainty, our team continues to work hard to manage supply chain risks and increasing commodity and memory costs. Our software and services segment reported another strong quarter. During the second quarter, the segment generated $515 million of revenue, a 37% year-over-year increase, primarily due to an increase in vehicle electrical architecture and software development services by the joint venture, repairs and maintenance, and autonomy plus, offset by lower remarketing sales. 308 million dollars or 60 percent of software and services revenue was attributable to our joint venture with Volkswagen Group. Software and services gross profit was 215 million dollars a 42 percent margin due to higher vehicle electrical architecture and software development services by the joint venture. Looking at our balance sheet we ended the quarter with approximately 5.3 billion dollars of cash, cash equivalents, and short-term investments. In July, we sold 86.25 million Class A shares in a follow-on equity offering to raise approximately $1.3 billion for general corporate purposes, including the funding of equity commitments and reserves for our $4.5 billion Department of Energy loan associated with the construction of our Georgia plant. Additionally, later this year, we expect to receive $1 billion in non-recourse debt from Volkswagen Group and an additional $250 million equity investment from Uber, both subject to the completion of certain conditions. Our total available liquidity and targeted future capital is over $14 billion to support Rivian's investments in growth initiatives. This includes current liquidity, the Department of Energy loan, and additional targeted equity investments from Uber and Volkswagen Group, which are all subject to certain conditions. Finally, for our 2026 guidance, in early July we announced we expect to deliver 65,000 to 70,000 total vehicles across R1, R2, and our commercial van, a 3,000 unit increase as compared to our prior guidance. This implies approximately 42,400 to 47,400 deliveries in the second half of the year. We expect deliveries will be weighted towards the fourth quarter as we ramp R2. While we continue to believe our gross profit will increase year over year, we expect the complexity of a new vehicle launch will negatively impact our automotive gross profit in the third quarter, as it did in the second quarter, before becoming a benefit for our overall operations in the fourth quarter as we ramp production and deliveries. As a reminder, we believe this is a transition year for the automotive segment's path towards long-term profitability as we scale our two. For 2026, we expect an adjusted EBITDA loss between $2 billion to $1.8 billion, a $50 million improvement at the midpoint due to better-than-expected revenue related to regulatory credits in the second quarter and increased delivery volumes, which were partially offset by raw material, memory, and logistic cost increases. While economic and geopolitical conditions, including international conflicts, pose risks, we remain steadfast in our plans to invest behind key growth drivers. We continue to progress our autonomy roadmap and the expansion of our sales and service footprint as we scale with our two. We believe these strategic investments will deliver long-term value to our shareholders and customers. Finally, for 2026, we are reducing our capital expenditure guidance by $250 million at the midpoint to $1.7 to $1.8 billion, benefiting from project efficiencies and timing of spend. Our capex spend primarily relates to finalizing construction and tooling for R2 and Normal, the continued build-out of our sales, service, and charging infrastructure, and construction for our Greenfield plant in Georgia. In closing, I'd like to congratulate our team again for the start of external R2 sales in June and the continued strong execution in the second quarter. We continue to believe that R2 and our technology roadmap will be truly transformative for the growth and profitability of our business. I'd like to turn the call back over to the operator to open the line for Q&A.

If you would like to ask a question, click on the raise hand button at the bottom of the screen. Once prompted, please unmute yourself and begin your question. We will now pause a moment to assemble the queue. Thank you. Our first question comes from Mark Delaney with Goldman Sachs. Your line is open. Please unmute and ask your question.

Good afternoon. Thanks for taking the questions and congratulations on the R2 launch. Very exciting to see. So I'm going to start there on the R2. Can you share more on how the production ramp is progressing and any examples or metrics maybe you can share on that front to illustrate how the ramp is going? And then as you think about R2 over the next year, do you think the pace of deliveries is going to be gated more by a supply or demand?

Thanks, Mark, for the question. We're also very excited about our two. Well, I guess first on the production ramp, of course, ramping production of a vehicle, especially where it's a first-time launch of a new vehicle, is complex. It's an orchestration of ramping hundreds of suppliers. The suppliers all need to ramp at the same rate. Of course, our overall production output is throttled by or gated by the slowest-moving supplier. and so on. So saying that, this is a complex effort. There's lots of moving parts, and we went into it fully recognizing the complexity and having been through this with R1 and iterations in R1 with a lot of learnings and Knowledge as a business that we certainly didn't have to this level with the launch of our one. And so where it stands today is we are ramping. We're continuing to make progress week over week. As you saw, we've updated our guidance to reflect the progress we're making. And the biggest category of focus for us has been supply base and making sure that all of our suppliers are ready to continue ramping to much higher levels as we look at the back half of the year. and in particular, as we start to plan for fully utilizing the plant and running across two shifts. Now, on the demand side, there's enormous excitement around the product. We've been really encouraged by the conversion of reservations to orders on our launch edition. We, of course, had our own internal projections as to what that would be, recognizing that we're launching with the launch edition, which is a $58,000 version of the vehicle, the most expensive version of R2. And that conversion rate from reservation to orders has been meaningfully higher than what we expected, which is a great signal. Now, of course, with that said, we are looking forward to introducing the other trims, our mid-spec and our base or standard spec as we look at the early part of 2027. But the excitement even for the launch edition and the higher price point launch edition has been very, very high.

I appreciate all those details. My other question was trying to understand what the R2 ramp might mean for the financials and putting that into context with some of the other comments around the input cost environment. So as you look out through the end of the year and start ramping R2, does Rivian still expect to reach a positive gross margin exiting 2026? Thank you.

Thanks, Mark. As I mentioned in my prepared remarks, we continue to expect that R2 will achieve a positive gross profit as part of our exit rate for 2026. And that's enabled, as RJ mentioned, by the ongoing efficiencies of being able to produce R2 at much higher volumes and the fixed cost leverage that that will enable within the business.

Your next question will come from George Giannarikas with Panacord Gratuity. Please go ahead.

Hi, everyone. Thank you for taking my questions. I wanted to focus a little bit on the EDV. Can you provide an update maybe on commercial adoption beyond Amazon? And as you expand pilot programs for non-Amazon fleets, what's the current primary governor on deployment pace? Is it TCO parity upfront, capital outlay, charging density, anything you could share there? Thank you.

Thanks, George. I think the first point to just call out is the ramp up that we're seeing within Amazon. And so you're seeing this already in the numbers the first two quarters this year that Amazon is purchasing more vans. We're ramping up meaningfully from where we were in previous years. And that's absolutely a reflection of the TCO advantages that our EDV platform represents and enables. and we think that those cost benefits that are being so clearly realized by Amazon and so clearly evidenced by their ramping up of volume, we think that's going to translate to other commercial operators ultimately seeing those cost benefits and recognizing both to remain competitive but also to address their own cost structures that they're going to be pursuing Opportunities with EDV. Now, that has taken longer than we would have expected or we would have hoped for in terms of other fleets adopting a strategy towards electrification and a strategy of adopting not just an electric vehicle but a highly connected intelligent vehicle. But the signal that's being sent through Amazon's significant ramping of this is really outstanding in terms of a billboard for the capability and a billboard for what the EDV is possible delivering from a business point of view.

Thank you. And maybe more of a long-term question, as you continue to benchmark other global EV platforms, particularly from Chinese OEMs, what structural or operational lessons can you apply to the R3 and other future vehicles as you spec those out and try to build them? Thank you.

of course uh you know the auto industry is a business where every manufacturer is very aware of what our other manufacturers are doing so Rivians are purchased by probably every car company in the world and taken apart and similarly uh the Chinese vehicles are purchased by many different both OEMs but also benchmarking companies and so as a result There's not really a – there's not like a magic difference in terms of how a Chinese vehicle is built relative to a vehicle built in the West in terms of the manufacturing approaches, the joining technologies, the use of high-pressure die castings, consolidation of stampings. Those methods are being deployed across all – All right. Thank you very much. and that compounds across the supply chain and all the way up through the OEM and it results in a materially lower cost than what it would take to produce in the Western world. And so that naturally opens the question around trade policy and importantly, it opens very complex questions around supply chain strategy. And we're navigating a lot of those complexities around sourcing our components and not just our tier one, but even down to the raw materials, where those are coming from, recognizing the frameworks that have been established around trade. And in a world of completely open trade, our supply chains would look very different because we'd be optimizing purely around cost, which would be, of course, optimizing around countries that have Thanks. Thanks.

Our next question comes from Shreyas Patil with Wolf Research. Your line is open. Please unmute and ask your question.

Hey, thanks so much for taking the question. I was curious if you could maybe unpack the $50 million increase in adjusted EBITDA for the year. How much of that is tied to the better regulatory credit sales? And then how should we think about input cost inflation?

As you look at the evolution of our EBITDA guidance, so we were able to improve the bottom end of the range by $100 million that moves the midpoint $50 million, as you stated. We had higher than anticipated regulatory credits in the first half of this year. And then as we look ahead, we have the added benefit of the incremental delivery volumes with the increase of 3,000 units in our outlook. But offsetting that, we have headwinds associated with increases in raw material costs, increases in memory costs, as well as increases in logistics costs that had us arrive at this specific EBITDA range and outcome. And so as we look at the second half Thank you for joining us. And then beyond that, we'll see just the ongoing investments that we're continuing to make across R&D and specifically the growth in our autonomy spend. And then the continued fixed cost leverage that we'll see as we're growing our sales and service footprint, but certainly growing sales much more rapidly as well.

Okay, thanks. And then maybe just on the Autonomy Plus, so you're going to be launching the point-to-point solution later this year. I'm curious where things stand today with Autonomy Plus, just if there's a way you can give us a sense of take rates or kind of adoption trends, and then how do you see point-to-point driving both demand and but then also those take rates. So ultimately the subscription revenue opportunity. Thanks.

We've been really encouraged by the take rates on Autonomy Plus to date. And I think in particular what's really encouraging is to see the status that we're at today in terms of customer engagement, customer usage of the feature, and then of course related to that the take rate around paying for Autonomy Plus. But we have a very clear line of sight and visibility into what's coming. And so as encouraged as we are with the take rates today, we're quite confident that that will expand meaningfully as we add in additional capabilities and features. And there's going to be a whole – you think of it as like a staircase of features that ultimately leads us to very high levels of autonomy. But a really important step that's happening in the very near future is the capability of point-to-point. And just to restate what that entails, that means you can get into the car, type the address into the vehicle, and the vehicle will completely drive itself to that address. And initially, that will be a feature in which it's like level 2++, where your hands are off the wheel, but your eyes are still open. primarily on the road, meaning you can look away for short extended moments of time but you're not in a position to officially be reading a book or be responding to emails. Now, the step in 2027 is going further where we go not only hands-off, but also eyes-off. And that's really important because then not only is the vehicle fully driving itself and navigating to the address, but importantly, you're able to truly get your time back without the vehicle dinging at you, say, to keep your eyes on the road, but actually be able to read a book, be on an iPad. And so that's really into the true, as per the definition, level three capability. And then, of course, into 2028, that's when we bring on level four. And that's where the vehicle is capable of operating as a robo-taxi, meaning there's no one even needed to be in the driver's seat for any operation. and so on. and many, many more. All of these are top of mind for them for some time. But for the vast majority of customers, this wasn't the driving purchase criteria. We think this starts to emerge to be much more of a primary purchase criteria And it's one of the reasons we've made the decision to invest so heavily here. We think ultimately market share is going to be driven by the capability of the vehicle to drive itself. And of course, linked to that, the vehicle being software and AI defined. And those are two very critical pillars of our technology roadmap and technology strategy.

Your next question will come from Rajat Gupta with JP Morgan. Your line is open. Please go ahead.

Great. Thanks for taking the question. I had a question on the R2 customer profile. You know, any early leads on, you know, what that customer is proving to be, you know, existing electric vehicle owners, you know, first time electric vehicle buyers, you know, Tesla cross shoppers, you know, just curious questions. If you have any read on the customer profile of the early R2 orders, I'll have a quick follow-up. Thanks.

Thanks, Rajat. The goal in developing and designing R2 is to have a very diverse set of customer profiles, meaning customers that were coming out of a wide variety of form factors, coming out of a wide range of brands, and from a broad spectrum of demographics. And that was the intent. That was the target. We now have the benefit of being able to see the data to see who is actually buying our twos. And the great news here is that it is exactly that. We have a very diverse customer set coming out of a broad range of vehicles, which I guess – and many more. Thank you for joining us. and so on. This is a great metric. Now, of course, there are EV buyers that are in the mix. You have folks coming out of Teslas or folks coming out of Rivian R1s, but the most important metric here is the very significant number of folks that have not owned EVs before.

That's great color. And just to follow up for Claire, I noticed in the second quarter gross profit commentary, you mentioned an IEPRA tariff refund benefit. I'm curious how much that was because I didn't see it in the full year outlook. And then just relatedly, it looks like the guidance implies a steeper EBITDA loss in the second half versus the first half despite the positive gross margin exit rate commentary, just trying to bridge those two aspects. Thank you.

Sure. On the IEPA tariff refund piece, as we mentioned in our earnings call last quarter, we sized the IEPA tariffs in the tens of millions of dollars. The receivable that we booked this quarter is roughly half of the total. And so the receivable is related to the refund of the amount of anticipated proceeds that are not subject to the existing DOJ appeal. And then as we think about the second question on the EBITDA loss being steeper in the second half of the year, one of the big differences there is we did have $164 million of regulatory credits that benefited our gross profit outlook in the first half. And so as we look at the second half of the year, we'll see again some of the complexity associated with the R2 ramp impacting automotive gross profit in the third quarter before showing progress in the fourth quarter. But the bigger driver is really the absence of regulatory credits in second half versus first half, and then the ongoing investments in R&D and SG&A.

Understood. That's helpful. Thanks for the questions. Good luck.

Our next question comes from Ite Mikaeli from TD Cohen. Your line is open. Please go ahead.

Great. Thank you, everybody. Just first, a couple of questions on the R2. RJ, 57,000 demo drives. It's a big jump sequentially. Hoping you can talk a little bit about what you're seeing in terms of conversions of those drives into orders, how many people are actually experiencing autonomy plus. And then secondly, just curious whether you do expect to deliver a material amount of the premium trims this year or R2 sales just predominantly be the performance trim this year.

We're really excited. As I said in my opening remarks, the 57,000 drives this past quarter is a record for Rivian. The delivery of that, just enabling that number of drives, you said roughly doubling where we've been in the past. The team has had to really come together and we did a lot of prep knowing that the amount of excitement around R2 was going to drive a significant increase in both exposure of the brand, touch points of the brand, but of course that's manifested through these test drives. And so with that, we're not providing specifics around conversion, but that's a really important metric we look at internally. and that actually links pretty heavily to the availability of the other variants. And so to start, as you said, we have our performance variant, the most expensive variant of our two that we've launched with. We'll be introducing the premium and then our standard trims as we look at early 2027. But we are witnessing a higher level of conversion and many more.

That's great to hear. And then, Claire, maybe just a quick follow up. R&D, I think, was flat sequentially. I know you're making a lot of investments in autonomy. Just curious how you think about R&D kind of trending in the second half of the year. Thank you.

Sure. As we look at the second half of the year, we do anticipate seeing a step up that's predominantly related to GPU sourcing for our autonomy training that will continue to ratchet up over the course of the second half of the year. In the second quarter, there we saw some level of reduction as we're now in production. So there was a decrease in our engineering design and development spend. But we did underneath the R&D spend still see significant increase in terms of our overall autonomy spend.

That's very helpful. Thank you.

Your next question will come from Joseph Spack with UBS. Your line is open. Please go ahead.

Thanks, everyone. Just maybe, you know, the comment about the $100 million of incremental cost of revenues because of the ramp of R2 compared to normalized levels. Just maybe some context, like what are you classifying as normalized? Is that one shift, two shifts? And are you also assuming a more normalized mix in that analysis?

Joe, the way to think about it is the $100 million reflects a combination of ramp-related inefficiencies, such as expedited freight costs out of the gates or short-term premiums with suppliers that we anticipate coming off as we increase our production volumes over the course of the next couple of quarters. And then it's also costs that we expensed in period that would have Thank you for joining us.

Okay, so yeah, that's what I, a portion, I mean, a good portion of that is just like you don't have the scale and leverage over the asset. So if you're saying, you know, second shift comes on at some point later, you know, later in the year and you're exiting gross profit positive, then that's sort of the, that can help us sort of triangulate sort of like the units you think you need to sort of be close to breakeven. But that's a fair way to think about it.

That's generally a fair way to think about it. And so as we talked about it being really at sort of Q4 normalized levels, that's not the full extent of R2 fully ramped up, but is in the near term a more normalized production environment that we can compare our standard costs to.

Okay. And then, RJ, you know, appreciate the Autonomy Plus commentary earlier. I was wondering if you'd also give us the latest update on RAP1 and Gen 3 hardware and any progress. Is that still on track for SOP later this year?

Yeah, our in-house silicon RAP1 is on track, as you know, and that underpins what we call our Gen 3 autonomous hardware platform. And so both the RAP1 along with the rest of the upgrades to the system are on track for later this year. Thank you.

Your next question will come from Dan Levy with Barclays. Your line is open. Please go ahead.

Okay, great. Thank you. I just wanted to start with a question for you, Claire, on just unpacking the COGS per unit on Joe's question there. You know, to only see COGS per unit up a few thousand dollars quarter over quarter, despite that incremental $100 million, says that there's probably something incrementally that's going on quarter over quarter on the cost side, whether it's within EDV, or R1. So maybe you can just help unpack if there's other underlying cost improvements and why we're not seeing maybe what should have been maybe a step up in raw material pressure in that cost per unit.

Sure. As you look at the quarter, we had $96.7 thousand a unit of COGS. If you were to back out the $100 million on a per unit basis, that's about Thank you so much. through the volume that we saw in the quarters as well. So that's going to continue to be a key theme as we'll see our COGS per unit continue to come down over the corresponding quarters of this year. And then beyond that, we did also have at the IEPA receivable that was also benefiting this quarter.

That would have been revenue or was that booked in COGS?

Booked in COGS.

Okay. Okay, thank you. As a follow up, RJ, I want to ask something that I know you've addressed in the past, but I think it's important just in the early days of the R2 ramp. You know, if we look back to R1, the days of R1, an early ramp, you probably bit off a bit more than you could chew, which is something I think you've acknowledged. There's a lot going on, a lot of different configurations. And if we look now, I know you talked about focusing on just the launch edition, but broadly within Rivian, there are a lot of different initiatives between RAP, and I'm sure there's multiple Other future iterations planned, your autonomy roadmap, what's going on with network architecture, and then also just mind also just a number of different initiatives here. So maybe you can just talk us through how this time is a bit different versus R1, how you're approaching R2 execution, given that you still have a lot of things on your plate, and how you're looking at resource allocation in this environment.

I mean, it does seem in some ways like yesterday we were launching R1, and then it also seems like it was a very, very long time ago. But with that said, the company that's launching R2 today is a very different business than what launched R1. I say that with regards to... Javier Varela, The structured approach we took to what we call design validation builds. at the very beginning of this year, at the beginning of 2026. And so that gave us time to work through issues around RAMP, work through issues around design elements, of course, supplier related issues as we were doing those validation builds. and so the number of unexpected surprises in now the production ramp-up of R2 is far lower. It's an incredibly different situation than what we had in R1. Now that's not to say there aren't surprises. As I said at the start, building Building and launching a new car is just an inherently very, very complex activity. And it's complex if you're a company that's been building cars for 100 years. It's complex if you're Rivian. And so we've done everything we can to prepare. But as we now are going through the ramp, we're still being very thoughtful around how rapidly we ramp up our supply chain, making sure that all of our suppliers can ramp consistently. and so on and so forth. and then we had a very complex set of build variations, essentially thousands of different possible build combinations for the R1T and the R1S. And in sharp contrast to that in R2, we have a very limited set of build combinations that we're building today, which is all embedded in the launch edition. Even within that, we've limited the number of color combinations. And so that was not an accident. That was highly intentional to facilitate a smoother and faster ramp and that – Thank you for joining us. And that doesn't, of course, mean we're not going to launch those other variants. So for any customers that are waiting for a standard trim or a premium trim, don't worry. We're on it. But those will be coming in the early part of 2027. Great.

Thank you. Your next question will come from Andrew Percoco with Morgan Stanley. Your line is open. Please go ahead.

Great. Thanks so much. Can you guys hear me?

Yes.

Awesome. Well, Before I get to my question, I do want to say I was three out of the 57,000 demo drives that you guys talked about. As a potential future customer, I just have to give you guys some kudos here on what you've done with the R2 and just recognize that up front. To get to my question, we talked a lot about autonomy already, but I'm just curious how you're thinking about the pricing side and potential uplifts to ARPU as you go to point-to-point and then and many more.

and many more. I think it's going to be quite fluid around how some of these features get priced. As I said, we're going through an inflection point where customers are going from this being a nice-to-have feature in terms of advanced autonomous capabilities to a must-have feature. There's a growing awareness around that capability set. And I really believe the transition to level three capabilities where you can go hands-off, eyes-off, Thanks for watching. and we think when that happens it'll make it far easier to explain, far easier to see mass scale adoption well beyond just early adopters and with that the desire and the expectation for these features to be in technology forward vehicles. And so ultimately what the pricing potential is there is something that we're actively spending a lot of time ourselves thinking about But ultimately, we believe it represents an opportunity to expand pricing beyond where we are today.

Got it. Okay, that makes a lot of sense. And then I was just hoping you can talk a little bit about this new California rebate program. In my understanding, it does require some level of OEM buy-in. So I'm just kind of curious if that's something you're planning on participating in and whether or not you've started to see some incremental demand from that program.

Sure. We're really happy with the California EV Incentive Program and consistent with our mission. We're really excited about the opportunity to attract new first-time EV owners into the Rivian community. So for the program, it's $3,500 for new vehicles and $1,750 for used vehicles. with the OEM and the state of California splitting the share of those incentives. There are caps by OEM, and so there will be limitations in terms of the full population set that can take advantage of some of these incentives.

Understood. Thanks so much for the questions.

Your next question will come from Chris Pierce with Needham. Your line is open. Please go ahead.

Oh, hey, good afternoon. You've talked a lot about conversion. I guess I'd love to hear the flip side of that. What are customers that aren't converting telling you? Are they, you know, they put in a reservation a long time ago, they're waiting for a different variant? I guess I'd just like to hear about people maybe falling out.

Well, thanks, Chris. Yeah, of course, there's a long list of reasons that someone may decide not to convert, but the biggest is they're waiting for a different build combination than what we have in the launch package. So that's by far and away the most common reason for someone to not convert a reservation into an order. But as I said, recognizing that conversion rates are higher Thank you very much. The way that we've tried to provide guidance on this is representative of thinking about those conversions, but ultimately beginning the delivery of those different trims in 2027. Okay.

And then I think you mentioned you might have another timing AI day this year. It's been a while since the IPO and long-term financial targets were put out. Could this be something where things have changed for better, for worse, for the better now? Could we see updated long-term targets for people to sort of anchor around?

For the Autonomy and AI Day, it will be more focused on the technology roadmap. We're working over the coming quarters to think about the right time to set up a broader-based investor day as well that would be more focused on longer-term financial targets. But this one, RJ, I don't know if you want to provide a little bit of context of some of the updates or plans for the day itself. Sure.

You know, we had our first autonomy day last year, and in it, we pulled the curtain back on a lot of the technology development that had been underway for quite some time within Rivian. So that was our in-house silicon program, the roadmap to level four capabilities. Subsequent to that, we've now announced a few important things, one of which is the deal that we've done with Uber for our Robotaxi program, which, as I said earlier, is going to be available in 2028. But there's a lot of other details that we'd like to provide around what that roadmap looks like. We'd like to show... Your next question will come from Philippe Bouchois with Jefferies. Your line is open. Please go ahead.

Yes, thank you and good evening. My first question is on the relationship with Uber. We've seen some tension between Uber and Waymo and their cooperation. And of course, there's a bit of uncertainty about the financial stability of Lucid and the fact that Lucid worked with Neuros who started as integrated a solution as what you offer in the partnership with Uber. So I'm just wondering how much of an upside to your relationship there is, maybe not in the timing, but in the magnitude of what you could be working with Uber in terms of offering robotaxis.

Well, a core element of our approach is a strongly held belief that vertically integrating the vehicle and the technology stack together allows for meaningful both cost advantages and technical simplifications in terms of the vehicle architecture and autonomy hardware architecture. And so that means how sensors are integrated into the vehicle, the redundancies built around the controls, the way that we've architected the compute platform and the inference in our case, because we brought silicon in-house, we have a very low-cost way to achieve very high levels of inference within the vehicle. and so we believe that the technical approach that we've taken from a hardware point of view creates a cost structure, I should say, that's highly advantaged for delivering level four. Along with that, we believe that the fact that we're building a neural net based approach, an approach that's an end-to-end trained model, and many more. and many more. and many more. The industry in terms of how we approach autonomy that historically prior to, let's say, 2022, 2023, the technology topologies used for level four were very different than the topologies used for level two. And we've seen that merge with the approach of using transformer-based encoding and these end-to-end models that is really to the advantage of our architecture and to the advantage of the data flywheel that exists through the deployed fleet that we have.

But specifically on Uber, do you think there's a big opportunity for you? Because, I mean, when you announced the partnership, you were one of several partners that Uber was working with. Is there an opportunity for Rivian to be actually a much bigger partner of Uber in autonomy?

Well, I'd say the working relationship with Uber has been fantastic, you know, from the top of the organization through the working levels of the organization. So, you know, the engagement from DARA in terms of the importance of this relationship, along with the working level teams, it's been very positive, you We're working towards our next milestone at the end of this year and deploying in a couple of cities in 2028 and then rapidly growing following that to a large number of cities. We're quite encouraged by the relationship and the partnership. But ultimately, I do believe that the focus we have and the focus I think appropriately where we're placing our energy is making sure that the technology is ready. and many more.

Right. And then maybe more for Claire about the ramp. I think you still haven't told us exactly how many R2s you delivered. It's just maybe a handful. But you had warned us about the risk to growth margin as you ramp up. And in fact, I know there was a bit of an outside help in Q2 from Aipa, from Zed Income. But the dip in the growth margin has actually not really happened. And now you're warning us that they could be in Q3. I'm just wondering, is it because the ramp really hasn't happened that much on R2 in the second quarter, or has it actually happened in a smoother manner than you feared? And of course, you're cautious about Q3, but we could have a positive surprise in the Q3 gross margin as well.

As we think about the second quarter, you can think about us converting from a pre-production environment to our start of production and then start of our cost structure, hitting our cost of goods sold for roughly two-thirds of the quarter. So it's not a full quarter's impact. And so as we look ahead to the third quarter, we'll have a full quarter's impact of the ramp. We'll also, as RJ noted, have the introduction of a second shift of operation. and so some additional labor costs associated with the ramp as well. And then in the fourth quarter, that's where you'll start to see the benefits of scaling production, the fixed cost leverage, both across R2 as well as the broader plant. And then with that, maybe I'll also invite Javier to jump in as well, just as we think about driving towards manufacturing efficiencies and executing the ramp in the second half.

Yeah, thank you, Claire. Indeed, there's a big focus, laser focus of the teams in normal to ramp up this first shift. That's what we started in quarter two. And we continue in quarter three with the preparation of the R2. We are not expecting any material contribution to volumes with the second shift in this quarter, but we will see it in quarter four. The capability of the teams has very much increased compared to the launch of R1. And that's a big advantage. I mean, the winning teams are the ones that are capable to solve problems at a speed. And that's what we are doing now, focusing on training of the members in the assembly lines, training the team, the automation, and getting... The output higher and higher as we ramp. And then, of course, focusing on the supply chain. That is always not surprise. I've lived many launches in my life, and always the supply chain is a part that requires special attention. So we are focusing on a handful of suppliers with boots on the ground and with... Great example of collaboration where the suppliers are really willing to get our support and we are willing to give them. So that's the focus in normal today.

This concludes the Q&A section of the call. I would now like to turn the call back over to RJ Scaringe for closing remarks.

Thanks, everybody, for joining us on today's call. Hopefully you're observing a lot of excitement from the team here around R2. That excitement's echoing the excitement that we're seeing from consumers, and it's ultimately been something that we as a business have been building towards for a while. The ramp that we're going to see in the second half of the year, so Q3 into Q4 as Javier just described with Q4 being a really important element where we start to see the benefits of our second shift online, that's a major focus for us and our operational teams, Thank you for joining us. Thank you for joining us. This is an exciting time for us as a business. We see it as an inflection point for us as a business as well, both in terms of our path to profitability, but also in terms of the scale and scope of the business, given the mass market nature of R2. Once again, thanks, everybody, for joining today's call and look forward to future discussions.