Rivian Reports Q3 Deliveries for the R2 SUV in October. Here's How Investors Should Prepare.

It's hard to overstate how important the Model Y was for Tesla's (NASDAQ: TSLA) overall growth journey. Today, that model alone accounts for more than 90% of Tesla's vehicle sales. The Model Y allowed Tesla to significantly expand its sales base, which, in turn, enabled the company to scale its production facilities to reach economies of scale -- the driving force behind Tesla's 24-quarter streak of consecutive profits.

In short, the Model Y is one of the biggest factors behind Tesla's current $1.1 trillion market capitalization.

Image source: Getty Images.

Rivian Automotive's (NASDAQ: RIVN) valuation, meanwhile, still hovers just above $20 billion. This valuation gap has many causes. But for years, the biggest issue was that Rivian lacked an affordable vehicle priced for the masses like the Model Y. Rivian addressed that problem this summer when it began deliveries of its R2 SUV -- its first vehicle priced under $50,000.

Next month, investors will get the first meaningful update on how Rivian's sales and production capacities are scaling for the R2. Here's exactly what you should be paying attention to.

Expect challenges with production scaling

Trying to pivot from a niche luxury carmaker to a mass producer of millions of vehicles comes with its challenges. Tesla faced significant difficulties scaling its production facilities for the Model Y. "[T]he reaction common among new Tesla Model Y owners is a love of their new EV offset by disappointing quality issues," MotorTrend warned readers in 2020. "As Tesla keeps on rushing to meet growing demand and chasing delivery numbers, it seems quality control is unable to keep up."

Rivian has already faced its own quality control issues on early R2 productions. The company has also shown signs of scaling production by adding factory shifts. Still, investors should expect some production challenges to be revealed, which could put a dent in the short-term deliveries momentum.

Don't take initial sales volumes too seriously

Initial sales momentum is where Tesla's Model Y will likely differ from Rivian's R2. Despite launching during the COVID-19 pandemic in 2020, Tesla experienced high sales demand for its Model Y. At the time, there simply weren't many vehicles like it on the market -- an affordable EV with a long range and appealing features.

The competitive landscape, however, has shifted significantly since then. So has pricing pressure. The R2 has a starting base price of around $50,000 -- very close to where the Model Y debuted in 2020. The entry-level Model Y today, however, is priced closer to $40,000. Competing alternatives, meanwhile, are much more prevalent than they were when the Model Y first launched.

Rivian has revealed that sales demand exceeded expectations. Customer deposits require only $100 up front, but Rivian says its conversion into full sales remains "very good." Still, I expect a relatively low volume of deliveries this quarter as production ramps up, so we still won't know exactly how Rivian's reservation list converts to actual sales.

Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.