Rivian’s R2 Will Bring Cheaper Costs, European Expansion

It’s no secret that Rivian has made large strides in reducing its expenses. In Q4 2024, the company posted its first profitable quarter. For the full year, it reduced operating expenses by $220 million compared to 2023. On the vehicle-specific side, teams managed to cut their automotive sector’s cost of goods sold per unit by $31,000.

Rivian CFO Claire McDonough, while discussing the company’s long-term plans at the Bank of America Securities 2025 Automotive Summit, said that change was driven by improving R1’s material cost. That trend has continued with the second generation Rivian vehicles as well.

When developing the upcoming R2 SUV, CEO RJ Scaringe has previously said the company’s focus was on bringing down the materials cost and, therefore, the sales price. While the R1 line starts at $70,000, the R2 SUV is expected to be roughly 65% of that price at $45,000.

The cost savings stretch beyond the bill of materials, as McDonough said at the conference. Since the R2 is cheaper and easier to manufacture, it ends up benefiting Rivian’s other products. 

“[Rivian] showed that the fixed cost of bringing R2 volumes into [the Normal, Ill., plant] had about a 34% improvement in our fixed cost per unit for R1 because of this shared cost absorption that R2 would help alleviate as a whole,” she said, adding that it will also drive meaningful growth in the software and services side of the business.

Trucks and SUVs are the fastest growing segment of the light-vehicle market, accounting for roughly 75% of that market. Last year, Rivian delivered more than 50,000 vehicles. With a similar goal for 2025, McDonough said Rivian’s “biggest” opportunity is converting ICE customers, many of whom she said have never driven an electric vehicle.

But the potential goes beyond the domestic market, which is where the R2 comes in.

“R2 was designed from the very get-go for global market expansion and that will be the primary global scaling product for the Rivian brand internationally,” McDonough said, adding that, after production begins in 2026, there are plans to export the vehicles to Europe, where the company has begun building a sales and service infrastructure.

Rivian isn’t completely starting from zero, though. Thanks to its formerly exclusive electric delivery van production deal with Amazon, some delivery vans are active in Germany along with a “handful” of service centers. Last year, an R1 SUV was spotted in the country.

The company isn’t planning a blitz entrance to the European market. McDonough said the plan is to take a “measured approach.”

“We’re not going to enter every country all at once but have a phased-in approach as we build the brand,” she said. “So, once we’re at more meaningful scale with the addition of the Georgia volumes, we’re ready to increase that export volume over to Europe as a whole. But we'll start with more brand building efforts out of the gate from our Normal capacity.”

Right now, Rivian only has one factory in Normal, where it manufactures its flagship R1T truck alongside the R1S SUV and electric delivery vans. While the plant currently has 150,000 units of capacity, the company is in the process of adding more than 1 million square feet to the space that will add a body shop and general assembly line for 2026’s R2 SUV launch. The addition is expected to bring another 155,000 units of capacity to the site. However, the factory won’t produce 305,000 vehicles each year.

“The overall nameplate capacity of Normal will be centered at about 215,000 units in total. What that means is we can’t run all three lines on three shifts at full operation and full tilt,” McDonough said. “But it provides us a lot of flexibility such that if we were building R2 across three production shifts, for example, at 155,000 units, that would still leave us with roughly 60,000 units to split between R1 as well as the commercial vans.”

Rivian’s planned Georgia plant, based 45 miles outside of Atlanta, is still expected to be completed in two phases, with the first part beginning construction in 2026 for a 200,000-unit capacity. While McDonough didn’t give a timeline on when executives expect to start phase two, she confirmed that production is projected to begin in 2028.