Now we are watching Rivian stock this morning. It is down pre market after the EV maker's second quarter revenue missed analysts estimates by just a tiny tiny hair. Cash burn for the quarter though also came in bigger than expected, and this is the worry. With Rivian joining us now is the founder and CEO r J. Scarringe, as well as Bloomberg Technology co host ed Ludlow, who covers the EV market so closely.
R J.
I want to ask you just quickly about the sales. This is no doubt a hot product. I mean, I have been fascinated by the car, I love the design, looking at it for years, and people wait in line to get them for a long time. Why are sales only growing three point three percent?
Yeah, I mean it's great. As you said, it's great to see their action to the products, and we see that both through the excitement of our customers directly. But there's lots of ways to measure this, and we just had a Jdpower as an annual appeal study. We came out as an number one brand this year. We had a number one ranking owner JD Power City last year.
So the reaction of the product has been great. We've in the second quarter, we went through a big refreshed to the product where we've now launched what we call generation two of that vehicle, of the R one tRNS, where we made significant improvements in the product, but also took a tremendous amount of cost out of the vehicle.
Oh Jay, The kind of summary of the earnings print was that all of the guidance previously issued was reiterated, and there's a lot of positivity around that. Very simply. Loads of people asked me to ask you, can you define what modest gross profit means or what you're defining it by in order to achieve it?
Yeah, I mean, ultimately, this has been the central focus for us as as a company as a business is driving cost efficiencies into everything that we do in Tarbilo materials, into how we operate and run our plant, and ultimately driving towards, you know, getting our production of our R one T and R O n s to to positive gross margin ultimately to have the business gets a positive
for cash flow and profitability. So there's a whole series of steps we're making along the way in terms of improving costs, but the biggest singular step that we've made
is what we did in the second quarter. We took the plant down for about a month or it, made meaningful changes to the operations and importantly changed a significant portion of our supply base out to new suppliers in conjunction with a number of design improvements, and all that comes together to take us to a place where, uh, you know, the incremental contribution to every vehicle we sell is positive. And that's you know, that's what we're driving towards.
That's where we continue to guide towards for the fourth quarter of this year.
In the first instance, Oh sorry, Matt, I was just going to hold our jay to account on that one and say, in the first instance, is it just like more than zero or single digits gross profit? Just I think that's the so that we're looking for.
Yeah, we haven't provided a specific number, but certainly by saying it's positive gross margin, it's more than zero. You know, our objective, what we've guided to for a long time. We continue to maintain this guidance is the long term margin profile on our one should be around twenty five percent. And so that's what we you know, beyond just this this fourth quarter performance that we're tracking towards seeing how we continue to improve in twenty twenty five and beyond.
We still maintain confidence in the twenty five percent gross margin.
And the gross profit on vehicles has nothing to do with the credits. But with credits you can make a lot of money, as we've seen in the in the case of Tesla, you're making you know, double digit millions there. Do you expect that to grow considerably? Is it really part of your financial planning?
And I think as we design the business and think about how we're operating a company, the credits environment is certainly something that's a helpful tailwind, but we don't design the company or the business or a strategy around it. It is worth noting, though, that we're seeing the credits environment really become a lot stronger as a number of existing or legacy manufacturers dial back or walk back from
their electrication strategies. And we see that is further I mean, the most important point here is there further amplifies the
need for more product in the marketplace. There's very very little choice in the sub fifty thousand dollars price range, and we see that, but just the dominant market share position that Tesla has with its Model three and its model y. Customers need choice, and so this is why we're so excited about the R two program, because we think there's a tremendous amount of late in demand that wants to buy a vehicle a lot like an R two, wants something that's less than fifty thousand dollars in that
product when it comes to market, it hopefully answers ended.
For most of the time that you and I have known each other and we've talked, Rivian has been in a position where it's been supply constrained. I wonder if that's still the case on the R one refresh. You know, you talked last night as a big factor towards growth profit being asp essentially that these higher performance spec are ones are going to put you in a wider range of price points, but that will be a contributing factor.
Is there a backlog essentially for our one? Are you supply constrained in that sense?
I mean, it's an important point. We've with a relaunch of what we call the Gentwo R one, it's not just cost out. We've also added some new packages. We have a tri motor, Our new next generation quad motor is extremely high performance. That's a lot of us to stretch the pricing band from our base you know, roughly seventy thousand our vehicle up to over one hundred thousand for our quad motor. And what that's really helpful in doing is helping to drive I have continual you know,
sort of maintenance of that high average selling price. So this is something that we also continue to have confidence in. Uh, it does reflect as you pointed out, that there's there's a backlog of interest and excitement around the product. And today one of the things we're focused on is making sure that the tri motor and the quad motor ramp meets customer demand. It's those are the you know, higher
price variants. They're great for driving ASP. They're also them, you know, the products that a lot of our early adopter customers really want to get. They want the best version of the vehicle that we make.
I want a quad motor over a thousand horse power. With this vehicle, I think it starts at what around around one hundred grand. If I want the highest trim level RJ, I would have to borrow money to buy that. How important is it for you that the FED bring rates down into the into the next year.
I mean Ultimately, we watched this extremely closely and just the overall macro environment that we're in, an interest free environment, it does have an impact on folks that are buying vehicles that are of this price point, you know, eighty ninety one hundred thousand our vehicles. You know, it's hard for us to predict exactly how that's going to play out. We much like in the credits environment, we work really hard to make sure our business is not dependent upon
ultra low rates. But it certainly affects anybody who's selling or selling products that have financing associated with them.
Oh, Jay, you gave really early heads up to investors that you're going to shut down Normal for about a month for splicing the plant right accommodate for R to install. That's a long period of time. Thinking back to April the three weeks, I know you're not going to tell me a number for production for twenty twenty five, but could you extrapolate out whether it's higher or lower than the base of fifty seven given that that four week period you outlined.
Yeah, the decision to put R two in Normal was one that's going to ultimately provide us around two point twenty five billion dollars of capital savings in terms of reduce the amount of capital necessary to launch our two. So it was one of the big drivers. The other is it allows us to have really high fixed soss absorption between R two, R one and our commercial bands and a single plan. Now, of course, to do that, it does requires, as you've said, to shut down the
plant for a period of time. What we've provided guidance on this is to say in the second half of twenty twenty five will be shutting down the plant for about a month, and that will impact production. We haven't we've been We've guided to say twenty twenty five will grow relative to twenty twenty four. We haven't been overly specific around these exact numbers of vehicles were produced, but it will be another year of growth for us.
Are When I was a kid, some of the cooler guys had a Scout International truck in the high school parking lot. I always thought they looked so cool, and Folkswagen is reviving that brand. You're working closely with Folkswagen. My immediate thought when I saw that story was, Wow, they could just take a Rivian and rebody it as their new Scout. Is that anywhere near part of the plan or what kind of vehicles can you build together with VW.
Yeah, the Volkswaging partnership is something we're really excited about. But the focus of this is around our leveraging our network architecture, our topology of computers, thepology of electronic controlling is the EC used in the vehicle, and then of course our software stack. It does open the door to other types of partnership and activities we could be doing with Folks Riding Group, but to date, the core focus, the singular focus is around our software and electronics technology.
All right, Well, we look forward to any news that comes out on that.
R J.
Thanks so much for joining us. Really appreciate your time today.
R J.
Scaringe there of Rivian as well as Bloomberg Technologies anchor Ed Ludlow, who also is essentially the ed reporter for us here across all our platforms.