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Rivian Automotive (RIVN) Q4 2025 Earnings Call Transcript

DATE

Thursday, February 12, 2026 at 5:00 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Robert Scaringe
• Chief Financial Officer — Claire McDonough
• Unknown Executive (Operations, Workforce)

TAKEAWAYS

• Revenue -- $1.3 billion consolidated revenue was reported for the quarter, with $839 million from the Automotive segment and $447 million from Software and Services. The sum of segment revenues does not equal the consolidated total due to eliminations and other adjustments.
• Gross profit -- $120 million consolidated gross profit produced a gross margin of 9%, including $108 million in depreciation and $26 million in stock-based compensation.
• Automotive gross profit -- Negative $59 million in the quarter, improving by $71 million sequentially from Q3 2025, primarily due to a higher commercial van mix reducing cost of goods sold per unit.
• Software and services segment -- $447 million revenue and $179 million gross profit, with $273 million (about 60%) of segment revenue attributed to the Volkswagen Group joint venture.
• Vehicle production and deliveries -- 10,974 vehicles produced and 9,745 delivered from the Normal, Illinois facility in the quarter.
• Unit economics improvement -- Annual average sales price per vehicle improved by nearly $5,500, and cost of goods sold per unit declined by approximately $9,500 year over year due to material and operational efficiencies.
• First full year positive gross profit -- Greater than $1.3 billion improvement in full-year gross profit, marking the first full year of positive gross profit for Rivian Automotive (NASDAQ:RIVN).
• Adjusted EBITDA -- Quarterly adjusted EBITDA loss was negative $465 million, a $137 million sequential improvement, and full-year adjusted EBITDA was at the favorable end of guidance.
• Balance sheet and liquidity -- Year-end cash, cash equivalents, and short-term investments totaled $6.1 billion, with an additional $2 billion in capital expected from Volkswagen Group in 2026 (split between a $1 billion investment upon completion of winter testing and $1 billion of nonrecourse debt anticipated in October).
• 2026 vehicle delivery guidance -- Management guided to 62,000-67,000 total deliveries across R1, R2, and commercial vans, with 9,000-11,000 per quarter expected in the first half and production ramp of R2 commencing with a single shift.
• Automotive margin commentary -- Management explicitly stated that “the complexity of a new vehicle launch” will negatively impact automotive gross profit in Q2 and Q3, with anticipated improvement as R2 production ramps in Q4.
• 2026 adjusted EBITDA guidance -- Loss expected to range from $2.1 billion to $1.8 billion, reflecting R&D acceleration, SG&A growth, and scaling for R2.
• 2026 capital expenditures -- Planned at $1.95 billion to $2.05 billion, covering R2 construction, tooling, Georgia plant build-out, and expanded infrastructure for sales, service, and charging.
• R2 program milestones -- First manufacturing validation vehicle was completed in January; R2 customer deliveries are set to begin in Q2; detailed product and pricing to be announced March 12.
• R1S market position -- R1S ranked as the best-selling premium electric vehicle (over $70,000) in California, New York, New Jersey, Oregon, Virginia, and Washington, D.C., and as the top-selling SUV (EV or non-EV) over $70,000 in California for the quarter.

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RISKS

• Management warned that “the complexity of a new vehicle launch” will negatively impact automotive gross profit in the second and third quarters before anticipated recovery as R2 ramps.
• Claire McDonough said, “We will see working capital be an outflow of cash for us over the course of 2026,” due to R2 inventory buildup.
• Adjusted EBITDA guidance explicitly includes a “step-up in R&D spend” and SG&A inflation driven by R2 scaling, which increases targeted losses for the next year.
• Management acknowledged ongoing supply chain challenges and higher input costs, stating that EBITDA guidance “does contemplate some of the increases that we've seen in raw material costs and the current supply chain backdrop as well.”

SUMMARY

Rivian Automotive (NASDAQ:RIVN) entered its first full year of positive gross profit, driven by improved unit economics and higher-margin software and services revenue, especially from its Volkswagen Group joint venture. Management forecasted 2026 vehicle deliveries between 62,000 and 67,000 units and expects R2 mass market deliveries to begin in the second quarter, with a production ramp throughout the year. Capital discipline is partly supported by a robust year-end cash position and expected $2 billion in incremental capital from Volkswagen Group during the year. Management outlined that automotive gross margin will be pressured in the first half by R2 launch complexities but anticipates margin improvement as scale and efficiencies materialize by year-end. Rivian also emphasized the expanding role of its autonomy and AI platform, including in-house chip development, and set expectations for substantial growth in its software and services segment.

• Adjusted EBITDA losses for 2026 are guided between $2.1 billion and $1.8 billion as significant R&D and SG&A expansions are underway to support new platform launches and technology initiatives.
• Commercial van and R1 volumes are planned to remain consistent with 2025 totals, while supply ramp strategies involve a phased approach, starting with a single R2 production shift and targeting a second shift by year-end.
• Rivian confirmed product and pricing announcements for R2 on March 12, with customer configuration and delivery sequencing enabled to address its substantial order backlog.
• Leadership reaffirmed that no retrofit hardware upgrades are planned for Gen 2 vehicles, with the next-generation autonomy platform and LiDAR arriving for R2 in early 2027.
• Future software and services revenues are expected to grow by about 60% year over year, with gross margins in the mid-30% range, primarily driven by Volkswagen Group joint venture contributions.

INDUSTRY GLOSSARY

• Adjusted EBITDA: A non-GAAP metric representing earnings before interest, taxes, depreciation, amortization, and further adjusted for non-cash or non-core items as specified by management.
• COGS: Cost of goods sold, the direct costs attributable to vehicle or service production, excluding indirect overhead expenses.
• RAP1: Rivian’s proprietary autonomy platform chip, designed for enhanced performance and integration of AI-driven features in its vehicles.
• Universal hands-free: Rivian’s hands-free driver-assist feature, enabling monitored autonomous driving on marked-lane roads.
• Gen 2 / Gen 3 (autonomy stack): Successive generations of Rivian’s vehicle autonomy hardware and software, with Gen 3 offering increased capabilities and LiDAR integration.
• Section 232: Refers to U.S. tariffs on imported materials, with offsets benefiting unit economics by lowering per-vehicle tariffs.
• EDV: Electric Delivery Van, Rivian’s commercial vehicle platform, especially in partnership with Amazon.com.

Full Conference Call Transcript

Robert Scaringe: Thanks, Chip. Good afternoon, everyone, and thanks for joining us for today's call. 2025 was a year focused on execution at Rivian as we laid the foundations for scaling our business. Our team progressed the development of our technology road map in R2, while simultaneously driving continued improvement in our customer experience and our path to profitability. In founding Rivian, I wanted to demonstrate how a clean sheet technology-focused vehicle could eliminate long accepted compromises and provide consumers choice. Our goal with the launch of our R1 products was to establish the Rivian brand by delivering a combination of efficiency, on-road performance, off-road capability, functional utility and product refinement that simply didn't exist in the market.

The first vehicles established Rivian as a brand that enables people to do the things they love, enable adventure as well as transcend different segments, form factors, use cases and geographies. In the fourth quarter of 2025, the R1S was the best-selling premium electric vehicle priced above $70,000 in California, New York, New Jersey, Oregon, Virginia and Washington, D.C. And it was the best-selling SUV EV or non-EV, over $70,000 in the state of California. Now I'm excited that we are months away from starting customer deliveries of R2, our first mass market vehicle.

One of the things that's often overlooked around EVs is that there is a surprising lack of high-quality choices at prices around or below $50,000 for a new vehicle in the United States, there are only a few compelling EV choices as compared to hundreds of internal combustion or hybrid options that have a wide range of form factors and design aesthetics. From the lens of the customer, if you want to buy a midsized SUV with robust technology, autonomous capabilities and a reasonable price point, you've really only got one choice, and it's been that way for a long time. This is a reflection of a market that's being underserved. We believe R2 is going to change that.

R2 is an extension of the experience we delivered in R1 with design elements and performance to inspire adventure, but in a smaller form factor and importantly, at an attractive lower price point. Launch Edition R2 variants will be well equipped with a dual motor all-wheel drive setup that provides more than 650 horsepower and over 300 miles of range. In mid-January, I was thrilled to drive our first R2 manufacturing validation build off the production line in our factory in Illinois.

As you've seen from the extremely positive, media reviews of our preproduction vehicles over the last few days, R2 is an exceptional vehicle, and I believe will be a game changer for our customers, our company and the industry. One reviewer said, the R2 is an exceptional vehicle, quite possibly the best all-around electric vehicle I've ever driven. We look forward to getting investors and more media in R2 for demo drives so they can experience the capabilities of the vehicle. We plan to provide additional product, pricing and lineup details on March 12. Turning to our AI and Autonomy Day. It was great to see so many of our stakeholders at our offices in Palo Alto this past December.

We were excited to showcase our innovation across our vertically integrated hardware, software and autonomy teams and unveil RAP1. Developing our own chip was driven by the need for velocity, performance and cost efficiency and is a key development of our autonomy platform. Near the end of last year, we released universal hands-free, which expanded our advanced assisted driving capabilities for Gen 2 customers to more than 3.5 million miles of roads across North America. Since its release, customer utilization of our autonomy features has doubled.

Rivian is also making significant progress in making software and AI core to everything we do from the way we design, develop, manufacture and service our cars to the way our customers interact with their vehicle. This is enabled by the Rivian Unified Intelligence, a common AI foundation that understands our products and operations as one continuous system and personalizes the experience for our customers. It also defines how applications will integrate in our vehicles in the future. We were excited to demo the Rivian Assistant at AI and Autonomy Day and expect to launch this feature early this year.

Finally, we continue to see the extensibility of our electrical hardware and software platform with the work happening in our joint venture with Volkswagen Group. I'm very pleased that we have delivered vehicles for winter testing for multiple Volkswagen Group brands, 13 months after the formation of the joint venture. In closing, 2025 was a foundational year for scaling Rivian, and I could not be more excited for the year ahead. I believe 2026 will be an inflection point for our business. As an American automotive technology company that develops and manufactures incredible electric vehicles, we believe that the future of the automotive industry will be fully electric, autonomous and AI defined.

I've never been more confident in the opportunity ahead for Rivian than I am today. I firmly believe Rivian's technology, along with our direct-to-customer ownership experience, position our company to build a category-defining brand with a strong mass market product portfolio for the U.S. and global markets. With that, I'll pass the call over to Claire to discuss our financial results.

Claire McDonough: Thanks, RJ, and good afternoon, everyone. As RJ discussed, we believe 2026 will be an important year as we scale our business. Launching R2 will extend our brand to the mass market, and we expect R2 will drive meaningful automotive segment growth and profitability over time. Now before I dive into the quarter, there are a few key financial metrics that I'd like to highlight for 2025. First, on a full year-over-year basis, we delivered nearly $5,500 of improvement in average sales price due to the introduction of our second-generation R1 quad models, a higher mix of R1 units and increased base prices for the 2026 model year.

Second, on a full year-over-year basis, we achieved an approximately $9,500 improvement in automotive cost of goods sold per unit due to material cost reductions and operational efficiencies. Finally, the improvement in unit economics in our Automotive segment, when combined with our strong software and services performance, resulted in greater than $1.3 billion of improvement in full year gross profit, making 2025 our first full year of positive gross profit. Additionally, our gross profit performance, coupled with our focus on cost management, enabled our adjusted EBITDA for 2025 to be at the favorable end of our guidance.

All of these metrics represent our continued progress in the operational efficiency and profitability of our business, which sets a strong foundation for 2026 and beyond. We expect the gross profit per unit for R1 and the commercial vans to be further enhanced as we ramp up production and deliveries of R2, coupled with the gross profit contribution of R2 over time. Turning to the results of the fourth quarter. Our consolidated revenues were approximately $1.3 billion. Consolidated gross profit was $120 million, and our gross profit margin was 9%. Gross profit included $108 million of depreciation and $26 million of stock-based compensation expense.

Adjusted EBITDA losses for the fourth quarter were negative $465 million, $137 million improvement from Q3 2025 due to higher gross profit and lower operating expenses. Now looking at our Automotive segment. During the fourth quarter, we produced 10,974 vehicles and delivered 9,745 vehicles from our manufacturing facility in Normal, Illinois. This was the primary driver of the $839 million of automotive revenue. Automotive gross profit for the fourth quarter was negative $59 million, a $71 million improvement from Q3 2025 due to a higher mix of commercial vans, which resulted in the lowest cost of goods sold per unit in our history.

Our Software and Services segment reported another strong quarter with $447 million of revenue and $179 million of gross profit. $273 million or approximately 60% of software and services revenue was attributable to our joint venture with Volkswagen Group. We also experienced strong growth from our marketing and vehicle repair and maintenance. Looking at our balance sheet, we ended the year with approximately $6.1 billion of cash, cash equivalents and short-term investments.

In 2026, we expect to receive an additional $2 billion of capital as part of our joint venture with the Volkswagen Group. $1 billion is an investment subject to the successful completion of winter testing, which RJ discussed earlier and $1 billion is nonrecourse debt, which we expect to receive in October. Finally, for our 2026 guidance, we expect to deliver between 62,000 and 67,000 total vehicles across R1, R2 and our commercial vans. We expect total deliveries of approximately 9,000 to 11,000 per quarter in the first half of 2026. We plan to start production of the R2 launch variant with a single shift and expect to add a second shift towards the end of the year.

While we believe our gross profit will increase year-over-year, we expect the complexity of a new vehicle launch to negatively impact our automotive gross profit in the second and third quarters before becoming a benefit to 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 profitability. Delivering a strong exit rate for R2 production and deliveries will be a key focus for our team. For 2026, we expect an adjusted EBITDA loss of between $2.1 billion and $1.8 billion.

Our adjusted EBITDA guidance also includes a step-up in R&D spend as we accelerate investments in our autonomy road map and look to deliver LiDAR, our first RAP1 chips and limited point-to-point functionality for our customers by the end of the year. We believe autonomy will be a key fundamental long-term differentiator for our business. We also plan on the continued growth of our SG&A, driven by the expansion of our service and sales footprint as we scale with R2.

Finally, for 2026, we expect capital expenditures of $1.95 billion to $2.05 billion related to finalizing construction and tooling for R2 and normal, kicking off vertical construction for our greenfield plant in Georgia and the continued build-out of our sales, service and charging infrastructure. In closing, thank you again to the team for delivering a great 2025. As we look forward to 2026, we remain steadfast in our belief that R2 and our technology road map will be truly transformative for our growth and profitability. I'd like to turn the call back over to the operator to open the line for Q&A.

Operator: [Operator Instructions]. Our first question comes from Emmanuel Rosner with Wolfe Research.

Emmanuel Rosner: My first question is on the cadence that Claire, you just highlighted with the 9,000 to 11,000 units per quarter in the first half and then obviously, 62,000 to 67,000 on a full year basis. Is that 10,000 per quarter or so, is that your expectation for R1 plus EDV for this year in 2026? And then the upside in the second half would be essentially delivering the R2?

Claire McDonough: Thanks, Emmanuel. As you think about the cadence, as RJ articulated in his prepared remarks, we expect first deliveries to begin for R2 in the second quarter. Like any ramp, the number of deliveries will be rather small as you think about the Q2 impact of R2 contribution to the 9,000 to 11,000 units per quarter that we anticipate in the first half of the year. And then as we get into the second half of the year, we expect to see the continuation of the ramp of R2, coupled with the ongoing deliveries of our commercial van as well as R1.

So on a full year basis, you can think about the R1 commercial van being roughly in line with our 2025 total volumes.

Emmanuel Rosner: Okay. And then another one on the cadence side, but more from a financial point of view, I think in the past, you had targeted, I think, by the fourth quarter of this year, some level of profitability on R2 to sort of like demonstrate essentially the potential. Is that still the expectation for this year?

Claire McDonough: Yes. As I mentioned, we expect 2026 will be a transformational year for our automotive gross profit, and we expect that both R2 [Audio Gap].

Operator: Our next question comes from Dan Levy with Barclays.

Dan Levy: First, I wanted to start with just a question on the R2 volume assumptions, which you just talked about a moment ago. As you're going into the launch, do you have a feel for what the aggregate demand is? And maybe you could just talk to the question of your confidence on people wanting to take delivery of R2 before the new ADAS platform or hardware is put into the vehicle? How much of a current the lack of that new hardware will be on deliveries?

Robert Scaringe: Dan, thanks for the question. With regards to R2, I've had chance to spend a lot of time in it over the last several months and really over the last month or so, driving our validation vehicles that are produced in our plant off of our manufacturing validation build. And the vehicle is just absolutely incredible. It's the combination of features, the packaging, the vehicle dynamics, the steering wheel, we're incredibly bullish on. And as I talked about a lot in the past, we ultimately think the market is really hungry for some choice in this segment.

As I said in my opening remarks, just the lack of choice that exists in and around this $50,000 price point has led to very high market share concentration of one vehicle. And so this is the first time there's going to be a real alternative. And this is important for folks that are in internal combustion vehicles today, midsized SUVs and looking for something that fits their form factor needs, their aesthetic needs, their packaging needs. And so we're very, very focused on putting this together.

And with that said, we have a lot of confidence in the overall demand of course, that's why we leaned so much into the program and lean so much into what we're about to launch.

Dan Levy: And just the issue of the ADAS platform, people taking it before the new hardware comes in?

Robert Scaringe: Yes. With new technology, there's always -- especially for us as a business, given that we've got an enormous focus on developing new technology, there's always something new coming and recognizing that there are a lot of customers that are just waiting to get a great midsize SUV.

And so given the enormous backlog of demand we have as well, the short period that we have where we'll be launching with essentially an upgraded version of our Gen 2 autonomy stack before our Gen 3 autonomy stack comes -- we don't think that's going to be a significant issue for those that want to wait for it, they certainly can and for others that are going to be excited the vehicles in a short time frame, be available prior to that.

Dan Levy: Okay. Great. As a follow-up, I wanted to ask about partnership or licensing deals with other automakers. And maybe you could just give us a sense of the tone or tenor of discussions on licensing the network architecture to others. And you said at your Autonomy Day that one of the opportunities on your in-house processor was not only that it could be used for your vehicles, but you could also sell this to others. It's a better, what you said, bang for buck. So I know it's early days, that still isn't out and the initial units of that process are going to need to be for you.

But what types of discussions are you having with automakers on potentially selling that or licensing that to them?

Robert Scaringe: So as I said in the opening remarks, we've had in the first 13 months of establishing a joint venture with Volkswagen, we've testing on multiple VW Group products. And I think the true demonstration and existence proof, if you will, of the scalability of our technology in terms of being able to work across multiple form factors, different price points, different brands and importantly, be productized into a platform that can go across a large existing OEM. This relationship is really important for that. And so that's our focus. But of course, we have relationships with a broad spectrum of other manufacturers.

And I've said this in the past, but I deeply believe that over the course of the next several years, every manufacturer has to make the decision as to whether or not to get to a software vehicle or they're going to develop it themselves, secure it from a third source of which we will be the only demonstrated example of having scaled this technology outside of our own products or accept that without the technology, you will lose market share. And so we're quite bullish on the potential for this technology platform, and we see it as really an important part of our portfolio going forward.

Operator: Ladies and gentleman, we are having further technical issues, please standby, we will resume the Q&A as soon as possible. Thank you. [Audio Gap]. Our next question comes from Ben Kallo with Baird.

Ben Kallo: Congrats on all the progress so far. Maybe first, can we talk about just the VW relationship and there was an uptick in revenue from that. And just if you give us a sense of how that progresses and the potential to expand the relationship or how we should think about it growing? And then the second question is just around Georgia, the DOE loan guarantee, how you're looking at that and maybe just liquidity in general as you start working on that.

Robert Scaringe: Thanks, Ben. And I spoke a little bit about this in the previous response, but I understand we've had a few technical difficulties here. So at risk of repeating myself, I'll just say -- cover a few things that I said earlier. The Volkswagen relationship continues to progress. We're now 13 months since the joint venture started. We've -- with that, we've started winter testing on several different Volkswagen Group products. And of course, we're working towards the first launch of those vehicles in 2027. And the relationship has been very, very strong. We had a great session, in fact, coincidentally last week with a broad set of the Volkswagen Group leadership team.

And seeing this be used and deployed across not just vehicles of similar price point to Rivian's vehicles, but across the price point -- across a wide band of price points and across a range of form factors is really important. And it really demonstrates the scalability of the technology. And so ultimately, we're going to continue working towards delivering multiple Volkswagen Group products, but this does, of course, open the door for opportunity with other manufacturers as well.

Claire McDonough: And then to put some of the financials behind the software and services outlook as a whole, we anticipate seeing that we'll approach about 60% year-over-year growth in our software and services business, and it will be a significant driver of our gross profit outlook as well with margins that we expect to be in the mid-30% area as a whole. Then as your second question, which was on the capital road map, as I mentioned in my prepared remarks, we ended 2025 with $6.1 billion of cash, cash equivalents and short-term investments. We expect that we'll receive another $2 billion from Volkswagen Group throughout the course of 2026.

There's still roughly another $0.5 billion payment associated with the original joint venture transaction as well that will happen, we anticipate in 2027. And then as it pertains to our broader capital road map, we'll continue to remain opportunistic as well on that front. On the DOE loan question, similar to what we've shared in the past, we certainly share the President's desire to bring jobs back to the United States. We're excited to keep up our work on creating new American manufacturing jobs. We'll be adding approximately 2,000 new jobs at our Normal, Illinois plant for the ramp-up of R2, an additional 7,500 jobs at our future Georgia plant as well.

And similar to the comments RJ just made, Rivian is working to help drive innovation and technology leadership in the U.S. automotive industry for consumers and also associated with our joint venture with Volkswagen Group, enabling this technology for the industry as a whole.

Operator: Our next question comes from George Gianarikas with CG.

George Gianarikas: As it relates to your guidance for vehicle sales this year, to the extent you see a strong conversion in your backlog for the R2, could you see upside to that? Or are there certain production bottlenecks that you'll have to work through towards the end of the year?

Robert Scaringe: Thanks, George. The process of ramping a vehicle is something we've spent a lot of time talking about in this forum, but certainly internally, we're really putting a lot of effort on making sure we have a very smooth production launch and then associated ramp. And we often think of the plant as being the bottleneck for the ramp. But in fact, we have to remember there's hundreds of other companies that are providing components into Rivian that ultimately really contribute and are a key part of the ramp. And ramping our supply base is something that we're very focused on and planning around. And you can only ramp as fast as your slowest part, so to speak.

So with that said, we've -- as you heard earlier, we're starting with a single shift. We're bringing on a second shift that will be happening near the end of the year. And then in 2027, we'll be adding our third shift. And this has been very methodically laid out to make sure that we're ramping consistently and evenly across the supply chain. And so certainly, and as you alluded to, there's going to be a large demand backlog that we're working through and a tremendous amount of excitement for the R2 vehicle. And as more reviews come out about it and more people get exposure to it, we expect that to continue to expand and grow.

It's worth noting some of the preproduction reviews that came out last week, the feedback has been universally super positive. And so we're acutely aware of that, but we are working very carefully to coordinate the ramp and coordinate the growth of output with our supply base.

George Gianarikas: And maybe as a follow-up, as you sort of crystallized your selling prices and your cost structure for the R2, can you just maybe speak to the guidance you gave at your Analyst Day last year about reaching EBITDA positivity in 2027 and your long-term vision around having 25%-ish gross margins and high teens EBITDA margins?

Claire McDonough: Thanks, George. As prepared -- as discussed in our prepared remarks, we believe that 2026 is going to be a transition year for the automotive gross profit segment. And our North Star for the normal plant is going to be getting our production and deliveries up to about 4,000 units per week. While there's a lot of execution required, as RJ just walked through from the team in order to achieve that outcome, if we're successful, we believe it would put the company in a strong position to achieve our adjusted EBITDA goals. And as we look at the broader outlook, we certainly see there being 20% gross profit target for our automotive segment.

As we think about the overall contribution of software and services, there's many outcomes or licensing deals that [ Rubin ] could do that could allow gross profit to be much higher than the 25% in our end state as well.

Operator: Our next question comes from Joseph Spak with UBS.

Joseph Spak: Just a couple of questions. Claire, I know you said the second shift starts in the back half. Does the guidance contemplate like exiting the year at a full 2-shift rate for the R2? I just want to sort of understand how we should think about a jumping off point for '27.

Claire McDonough: Sure. As you can imagine, Joe, we'll be in the process of ramping up the second shift. So as you think about the exit rate of 2026, we won't yet be at full production across 2 shifts. We'll be getting there as we continue to progress all of our operational efficiencies and get the team ready to ramp up throughout the course of 2027.

Joseph Spak: And then I guess, RJ or Claire, just you mentioned more details on March 3. I'm assuming that's also when reservation holders will be invited to configure. But is there any update you could give us on that order book? And then on the pricing side, one of the things we've seen, again, not Rivian specific just to the industry and the world really is the cost side between metals and memory. So curious to sort of wonder how you're thinking about that impacting either your pricing for the vehicle or whether that's contemplated in the EBITDA guidance for the year?

Robert Scaringe: Yes. So on March 12, we'll be providing the full picture around the overall portfolio of products that will exist for R2, and that will include the launch configuration, which, as I've said, is a dual motor performance variant with a premium trim. The different combinations of trim, powertrain performance and battery size are what we'll be describing in detail on the 12th. And then along with that, allowing customers to start configuring their vehicles and allows us to start getting ready to be making deliveries later in Q2.

I think important here, as you think about the overall demand profile for the vehicle, we've put a lot of time into thinking about the different combinations and recognizing what different folks are going to want and having the benefit of having lots of conversations and also the benefit of seeing what are the most popular trims and configurations in R1. And so we're really excited to go through that, but it's something that we do want to go through as -- present it as the full meal as opposed to giving little bits and pieces.

So other than talking about the launch configuration, the rest of the configuration is going to be something we talk about in detail in about a month.

Claire McDonough: And then Joe, our adjusted EBITDA guidance does contemplate some of the increases that we've seen in raw material costs and the current supply chain backdrop as well.

Operator: Our next question comes from Mark Delaney with Goldman Sachs.

Mark Delaney: I was hoping to speak more about automotive COGS. Maybe you can help us better understand what led to the reduction in cost per vehicle, both sequentially as well as year-over-year. And then as you look forward, clearly, you just alluded to some of the supply chain challenges around DRAM and other input costs that are embedded into your guidance. But where do you ultimately think the R2 cost can get to? And is the 50% reduction in the BOM cost compared to R1 still the right level to think about?

Claire McDonough: Sure. For Q4, we were able to deliver $92,000 of COGS per unit, and that was about a $4,000 per unit improvement relative to the third quarter. One of the key drivers was associated with the mix shift. So we had higher penetration of commercial vans in the fourth quarter relative to the third quarter. And then beyond that, the ongoing operational efficiencies that we continue to execute across our normal operations as well that also contributed to the reduction in our COGS per unit.

As we look at the full year-over-year improvement, the biggest driver that we saw was associated with the reduction in our material cost, that was both the transition for us to move fully to Gen 2 vehicles. We also, in addition, saw a significant step down in terms of a lot of our raw material costs and importantly, a step down in the cost of our lithium prices that was another contributor for us as well as we looked over at the full year-over-year step down in terms of COGS per unit, coupled with the ongoing operational efficiencies that we continue to progress throughout the course of the year.

As we look forward to R2, one of the key factors for us with R2 is the opportunity for us to have also over the course of the last year, started to see some meaningful benefit from our joint venture -- joint sourcing opportunities associated with our low-voltage electronics that we're sourcing for the R2 vehicle. And that's really been a key enabler for us to continue to progress the material cost trajectory of the R2 product as well. And then as we approach the Georgia plant, we'll have further opportunity to drive additional synergies or efficiencies as we start to source future vehicle volumes as well that will share the fundamentals of the midsized platform as a whole.

So those are a couple of the puts and takes. The other callout that I would highlight as well is we do anticipate seeing a reduction in terms of our tariffs per unit. So we didn't have the full benefit of the Section 232 offsets for the entirety of the fourth quarter. So we'll see further benefit from a tariff per unit standpoint as we progress forward, and R2 will also benefit from that in the future.

Mark Delaney: My other question was on EDV, and I understand probably flattish volumes there for 2026 based on your comments earlier on the call, but you did speak to a plan for some additional variants, including one with more range for Amazon. So maybe help us better understand when to expect that new product for the commercial segment and what that might mean for van deliveries and the broader commercial opportunity going forward?

Robert Scaringe: We do expect some growth in our EDV demand in 2026. And as you called out, there's an all-wheel drive version of the van and a larger battery pack variant as well. And both of those are to help unlock specific use cases within the Amazon network. We're working really closely with Amazon in defining the requirements of those and excited to get those launched. And the relationship with Amazon continues to be very positive. And certainly, the EDV continues to perform extremely well.

Operator: Our next question comes from Chris Pierce with Needham.

Christopher Pierce: As you talk about adding the second shift, then adding the third shift, can you kind of just walk through setting up hiring for these workers in the normal area? I'm just not sure if we should think about that as a barrier or a burden or just kind of -- is it already in motion? Or do you already have these and you kind of move people from one shift to another? Just kind of any detail around that, please?

Unknown Executive: Yes. Chris, thank you for your question. Hiring process is in place, is proceeding according to plan. We have enough candidates. At the beginning, it was even spontaneous candidates that wanted to work for us. So we are good from that end. There's part of the team that will populate the R2 line that is coming from the existing flows, but it's an important part as well that is hired from outside. We have reinforced our training programs. We have even before hiring the people pre-hiring activity, just to let them know what is working in the lines and what they should expect there.

And so far, we are very happy with the response of the talent pool and the people pool that we have seen there. So...

Christopher Pierce: Perfect. And then just -- I guess, I just kind of want to understand, you've had the reviews this week. You're kind of flipping over the card as far as first trim and other trims in a month. And then we could see initial deliveries sometime in the second quarter. I guess I'm just kind of curious I'm just thinking about maybe Apple and the iPhone or the iPad, and it's just sort of boom, here it is, you can buy it now. I guess I'd just love to hear about why the spacing?

Is there a psychological effect or it just comes down to what you can produce, when you can produce it at the plant, but just the timing of the cadence as you move towards the launch.

Robert Scaringe: Well, thanks, Chris. One of the amazing things about the R2 program is there's an enormous backlog, but that does create a challenge for us with making sure essentially how do we select who receives our vehicles first and having a processor on that. And so opening up the reservation or opening up the configuration process allows us to start taking this demand backlog and organizing around when we make deliveries and who gets the vehicles first. It's not as if you could like press a button and instantly have thousands and thousands of vehicles available. So we start producing, we are ramping production, but the demand will outpace our ability to produce.

And so that process allows us to organize in a thoughtful way and learning a lot from some of the past launches we've had, how do we prioritize and how do we sequence deliveries to our broad base of customers.

Operator: Our next question comes from Itay Michaeli with TD Cowen.

Itay Michaeli: I wanted to actually ask on the universal hands-free. Curious how initial feedback has been since December, how we should think about feature improvements and OTA updates this year? And maybe what you're also assuming for paid subscriptions this year?

Robert Scaringe: We're really excited to talk about this. This is a huge effort within the business and autonomy and AI was, of course, focused on all the work that we're doing here. But our Universal Lands Free is really think of it as the first step in a whole series of steps that expand the capability. And so Universal Lands Free expanded the number of miles where you can drive with hands off the wheel, but eyes on the road. It's around 3.5 million miles, essentially any road with marked lanes. And later this year, we'll be unlocking the ability or enabling the ability for the vehicle to drive point to point.

So you put your address into the vehicle and the vehicle navigates to that address. And then the next steps ultimately are driving towards what we think of as personal Level 4. But between point-to-point and personal Level 4, we'll have hands-off eyes off, so you'll be able to take your eyes off the road and do other things starting first on the highway and then expanding from the highway. And then following that, we'll have our first Level 4 applications within a geofence area to start, but ultimately expanding over time.

And our view and really strong conviction is that over the course of the remainder of this decade, we're going to see autonomy go from something that today with hands-off capabilities certainly is a nice feature to have. But as we start to move to hands-off and eyes off and then ultimately to Level 4 where the vehicle can operate itself entirely on its own, including driving empty, it really creates a whole new customer experience, and we think it becomes a critical part of the purchase decision. And this will -- this is going to drive significant change in how we think about the business model.

It's going to drive significant change in how consumers think about what vehicles they want to purchase.

Itay Michaeli: That's very helpful. As a quick follow-up on the financials, any sense of how we should think about working capital flows this year, particularly as you go through the initial R2 ramp?

Claire McDonough: Sure. We will see working capital be an outflow of cash for us over the course of 2026. And that in part is driven by the buildup of our inventory balance associated with the launch of R2.

Operator: Our next question comes from Andrew Percoco with Morgan Stanley.

Andrew Percoco: I actually just want to come back, RJ, to what you just said on autonomy really driving the value proposition and driving experience over the next few years. And I guess I'm just curious, like can you share your thoughts around whether or not there will be a retrofit opportunity for existing or new R2 customers that don't have Gen 3 with LiDAR and existing R1 customers? And any thoughts of when you'll introduce LiDAR onto R1 production?

Robert Scaringe: We're not -- in terms of retrofit, this isn't something that's contemplated or planned. Certainly, there will continue to be over their updates for our Gen 2 vehicles, our R1, Gen 2 vehicles and our launch R2 vehicles. But in terms of hardware upgrades, those are not planned. The hardware upgrades that we've talked about in the past, we talked about at our autonomy and AI Day, these are going to be on vehicles in the early part of 2027. And certainly very, very excited about those. But the capabilities and even the demo that we had at our Autonomy AI Day, which was a point-to-point demo, that's being done.

That demo was on a Gen 2 of our R1 vehicles. So that's -- that will be available on any Gen 2 R1 vehicle as well as the R2 vehicles we'll be launching with.

Andrew Percoco: Got it. Okay. And can you get to -- is the plan to get to eyes off point-to-point with Gen 2? Or is that something that's going to require Gen 3?

Robert Scaringe: I think the important thing to keep in mind on our upgraded architecture, which is, as I said, coming in '27, is that has a few really important purposes. One, of course, is it raises the ceiling on what's possible. So it grows the opportunity to add even more capability beyond point-to-point, but it also serves as an even more enhanced part of our data flywheel where we have enhanced cameras, higher level of inference in vehicle, but importantly, we add a LiDAR, as you referenced, which turns essentially every vehicle into part of our ground truth fleet, which is really helpful for training our end-to-end model.

And so the way that the model continues to improve is we're benefiting from the thousands and thousands of drivers that are on the road and the vehicles that are on the road, pulling interesting and unique events back off the vehicles and allowing us to feed that into the overall training loop that we have for what we call our large driving model.

Andrew Percoco: Got it. Okay. And just one quick clarification. When you say Gen 3 will be available early 2027, will that include R1? Or is that just still R2?

Robert Scaringe: This is for R2.

Operator: Our next question comes from Edison Yu with Deutsche Bank.

Yan Dong: This is Winnie on for Edison. Can you guys hear me?

Claire McDonough: Yes.

Yan Dong: My first question is on the relationship with VW as it matures. I was wondering if the topic of how to best utilize vehicle data come up. And more asking this in the context of VW naturally having a much larger fleet and Rivian being able to potentially benefit from getting access to that data for training. So just curious your thoughts on that topic.

Robert Scaringe: The Volkswagen fleet and what ultimately we're delivering to Volkswagen from a technology platform doesn't include our autonomy platform. So it's our embedded software platform, our topology of ECUs, including our zonal architecture, but it doesn't include our self-driving architecture.

Yan Dong: Got it. And then maybe just on the RAP1 chip. Curious to hear your maybe longer-term inspirations for that. Is this something you think that will be limited to Rivian? Or do you envision maybe this being used by some of your partners or other OEMs and whether it could be potentially applied to nonautomotive products like [ humanoid? ]

Robert Scaringe: I guess I'll answer it really broadly. This is -- when we think about our self-driving and autonomy efforts, this is an enormous focus for the business and represents our most significant area of capital investment from an R&D point of view. And so when we look at this through the lens of the next several years, we do believe that as we continue to demonstrate progress and work towards that growing capability set that I talked about before, ultimately culminating in Level 4, this is a platform that certainly beyond Rivian has applications. And so we do envision a world in which this becomes something that we can monetize through a few different ways.

We can monetize it through increased market share and growing number of vehicle sales. We can, of course, do that through new and unique business models and new ways of thinking about consuming transportation, and we can do that through selling and providing the technology to other manufacturers. Now specifically to our RAP1 processor as well as its future variants of that processor, we do see applications for vision-based robotics well beyond the vehicle. Of course, the vehicle is a great near-term vision-based robot. But even within Mind Robotics, which is a new company that we created, that is also an example of a great customer application and a great use case application for our RAP1 processor.

Operator: Our next question comes from Tobias Beith with Rothschild & Co. Redburn.

Tobias Beith: May I ask what Rivian's management's latest thoughts are on captive battery cell manufacturing and assembly are considering the recent development in the price of lithium salts. I know that this activity was contemplated at one point at your forthcoming plant in Stanton Springs.

Robert Scaringe: Well, thanks, Toby. We've found great working partnerships with our battery cell suppliers and have taken a very active role in securing and sourcing some of the upstream precursor materials. So you called out lithium. That's a really great example of an area that we, from a sourcing point of view, spend a lot of time on. But being able to work with these key battery partners and leverage the investments they've made in production capacity and in their own cell construction and cell design has been really helpful for us in terms of efficiently deploying capital.

Operator: Our last question comes from James Picariello with BNP Paribas.

James Picariello: Can you hear me?

Claire McDonough: Yes, James. We can hear you.

James Picariello: Great. [ Vista ] curious on your thoughts regarding R1's potential to see additional demand from one of your major competitors announcing the end of its 2 high-end models next quarter, right? We're talking about 20,000 annualized units essentially up for grabs in the U.S. It just seems like the R1 can be a natural home for many of those buyers. Just curious your thoughts.

Robert Scaringe: Yes. The Tesla Model X, which, as you said, will stop production, at least what's been said is next quarter. The Model X is a really important product from an electrification point of view, and it was one of the first more at-scale products to show customers how exciting electrification can be. And so as that leaves the market along with the Model X, it does create an opportunity. There's -- I've talked about this a lot in the context of R2, the lack of choice, but this also is true in the case of R1.

And R1 as it stands, our R1S is -- I called out in my opening remarks, it's an enormously successful product in this premium price category. So it's the best-selling premium SUV, electric or nonelectric in the state of California. And then it's the best-selling premium electric SUV in the United States and the best-selling premium electric vehicle, SUV or non-SUV in a number of states across the U.S. And so with even less choice now in that price category, it does represent an opportunity for us.

But I'd just say very broadly that the overall lack of choice, and this is really true in the price category of R2, we think is an enormous opportunity for us to capture market share and, of course, provide something really exciting to customers.

James Picariello: Yes, makes a lot of sense. My follow-up, just for the strong gross profit contribution slated for this year, can you help dimension at all what the expected contribution might look like from VW as we think about that 60% year-over-year growth?

Claire McDonough: Sure. As you think about the Software and Services segment, roughly half of our revenue comes from revenue streams associated with our joint venture with Volkswagen Group, and we expect that to largely remain true as we look ahead to 2026 as well. And it is a more disproportionate share of the overall gross profit dollars that we earn out of the [ Safran ] Services segment as a whole.

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

Robert Scaringe: Well, thanks, everybody, for joining the call, and we apologize for some of the technical difficulties that we had at the start. But -- we are -- hopefully, a takeaway from this is just how excited we are about R2.

As I said, I've had a chance to spend a lot of time in the car and in a variety of ways, whether it's taking my kids to sports games or loading up the back with gear, and it is just such an incredible embodiment of the Rivian brand and captures so many -- so much of the essence of what makes R1 a special vehicle, but at a price point that, as we said, starts at $45 and will allow a much larger number of customers to access the vehicle.

And so as we think about the next couple of months, we, as a company, remain incredibly focused on the launch ramp of this vehicle, along with the continued development of the technology we're building, both on the software side, which we talked a bit about, but certainly on -- also on our autonomy side. And so with that, thanks again for joining the call, and we're looking forward to a lot of folks being able to experience the R2 themselves.

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