Rivian Unveils More Affordable R2 SUV, But Faces Uphill Battle

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Rivian has unveiled the R2, a smaller and more affordable SUV starting at $59,485. The R2 is Rivian's first model priced for middle-market car buyers, with cheaper trims not arriving until 2027. Experts say the R2's success will be crucial for Rivian to turn a profit and stay in business, as the company continues to burn through billions in cash. However, the R2's high starting price compared to competitors like Tesla could be a hurdle, especially as EV demand in the U.S. has waned.

Why it matters

The R2 is a critical launch for Rivian, as the company aims to transition from an unprofitable startup to a sustainable business. How well the R2 sells will determine if Rivian can turn its first profitable year into long-term success, or if it becomes another cautionary tale about the challenges of scaling an EV company. The R2's performance will also be a test for whether American consumers will buy electric vehicles without federal tax credits.

The details

Rivian is launching the R2 SUV, with the first trim, the Performance model, starting at $59,485. This is significantly higher than the $45,000 price point Rivian had previously promised. Cheaper trims with a single motor, 350 horsepower, and 275-mile range won't arrive until 2027. Rivian is following the standard EV maker strategy of starting with a profitable high-end trim to build scale, then unlocking cheaper versions later. However, this risks turning off buyers who reserved an R2 expecting a $45,000 vehicle. The R2 Performance costs more than a Tesla Model Y Performance AWD at $57,500, though Tesla's base Model Y starts around $40,000, a price Rivian won't match until 2027.

• The R2 Performance model will start deliveries this spring.
• The R2 Premium trim with 450 horsepower and 330-mile range is scheduled to arrive later in 2023.
• Rivian's base model R2 with a single motor, 350 horsepower, and 275-mile range is planned for 2027.

What’s next

Rivian expects to receive $3 billion in new funding this year, including equity from Volkswagen and additional debt financing. The company will need to continue raising capital as it works to bring down the cost of producing the R2 to reach profitability.