---
title: "RIVN: Pain Now—Can R2 Drive a Turnaround?"
type: "Topics"
locale: "en"
url: "https://longbridge.com/en/topics/40347327.md"
description: "The key inflection for volume comes in Q4 2026. GPM is set to inflect then as well."
datetime: "2026-05-01T06:13:25.000Z"
locales:
  - [en](https://longbridge.com/en/topics/40347327.md)
  - [zh-CN](https://longbridge.com/zh-CN/topics/40347327.md)
  - [zh-HK](https://longbridge.com/zh-HK/topics/40347327.md)
author: "[Dolphin Research](https://longbridge.com/en/news/dolphin.md)"
---

# RIVN: Pain Now—Can R2 Drive a Turnaround?

$Rivian Automotive(RIVN.US) **reported Q3 2025 results after the U.S. close on Nov 5, 2025. Overall, the quarter was solid, showing a recovery from the Q2 trough.** **Key takeaways:**

**1) Revenue in line:** Total revenue was $1.38bn, up 11.4% YoY and broadly in line with Street estimates.

Auto revenue (incl. regulatory credits) was $910mn, down 1.5% YoY. The decline was driven by ~$100mn less credit revenue YoY, a higher mix of lower-priced EDV vans, and heavier R1 promotions as IRA subsidies faded, taking ASP down by ~$7k YoY to ~$82k.However, software & services outperformed with $473mn, up 49% YoY. High-margin tech licensing from the JV with Volkswagen was the core driver (Q1: $282mn, ~60% of segment), and it was the main contributor to YoY top-line growth.

**2) GPM slightly above expectations:** Company-level GPM was 8.6%, down 70bps QoQ but above the Street at ~8.2%.

Reported auto GPM was -6.8%, roughly flat QoQ, mainly helped by higher credits QoQ; underlying vehicle GPM still fell sequentially. Software & services GPM was 38.3%, down 170bps QoQ, still supported by high-margin licensing from the VW JV.

**3) Underlying vehicle margin under pressure QoQ:** Ex-credits and inventory write-downs, underlying vehicle GPM was -14.1%, down 320bps QoQ.

Key drivers were lower ASP QoQ, and higher per-unit fixed amortization and variable costs (raw materials inflation, customs rebate not recognized this quarter, and higher amortization from pre-R2 mass-production prep).

**4) Adj. EBITDA slightly better than expected:** Supported by better-than-expected GPM, Adj. EBITDA came in at -$472mn, slightly worse QoQ but ahead of the Street at -$500mn.

Adj. EBITDA margin was -34.2%, improving 200bps QoQ. Profitability was slightly better than expected overall.

**Dolphin Research view:**

In aggregate, Rivian delivered a slightly better-than-expected print. Revenue matched expectations, while Adj. EBITDA and net income beat.

But underlying vehicle ASP and GPM both fell QoQ. Underlying vehicle GPM declined from -10.9% last quarter by 330bps to -14.0% in Q1, and with deliveries up 3.3% QoQ to 10.4k units, this margin trend is not encouraging.

**Versus the quarter, the market is more focused on mass-market R2 ramp timing and margin impact, and the call signals were not very upbeat:**

**i) Auto GPM: pressure in Q2–Q3, turning positive in Q4**

Rivian expects auto GPM to remain pressured in Q2–Q3 due to the R2 ramp, for three reasons. a) R2 entered SOP in Q2 and depreciation started; early single-shift production limits volume, leaving depreciation under-absorbed and per-unit D&A elevated.

b) A new manufacturing team hired for the R2 ramp adds labor costs. c) Ramp complexity at SOP further pushes up unit costs.

Management guides auto GPM to turn positive in Q4 (both R2 and overall auto GPM to positive), driven by two factors. a) Q4 volume release should bring scale benefits.

b) R2 has significant cost advantages: BOM at ~50% of the R1 platform and \>50% reduction in non-production COGS. Design optimizations include large castings, structural packs, a new efficient drive unit, next-gen E/E architecture with less copper, and integrated HV components, plus better supplier pricing.

**ii) Ramp and deliveries: R2 contribution concentrated in Q4**

Rivian maintained its 2026 delivery guide of 62k–67k, up 47%–60% vs. 42k in 2025. The incremental volume is almost entirely from R2.

The company also kept Q2 2026 deliveries at 9k–11k units. This implies H2 needs 42k–47k deliveries, up 20k–25k YoY, with the net increase largely from R2.

On our math, assuming R1 declines ~7% YoY due to subsidy fade, the guide implies R2 deliveries of ~21k–27k in 2026. **R2 starts SOP on a single shift, with a plan to move to double shift by end-2026; volume release is thus heavily skewed to Q4, creating quarterly delivery pressure.**

**The company targets 4k units/week at Normal by year-end, reinforcing that both volume and margin inflection are concentrated in Q4 2026.**

**iii) FCF breakeven threshold higher and pushed out; DOE loan cut**

Per prior planning, the U.S. DOE loan authorization was $6.6bn. On the call, management confirmed a reduction to $4.5bn (~$4.0bn principal + ~$0.5bn capitalized interest), with drawdowns expected from early 2027.

Meanwhile, the hurdle for FCF breakeven has moved up: Normal (IL) + Georgia combined capacity needs to reach 515k units/year to turn FCF positive. This pushes the timing beyond the previously expected 2027 EBITDA and FCFF breakeven, which had relied on full-year R2 scale, software & services growth, and incremental tech licensing/strategic partnerships.

**iv) Adj. EBITDA guide unchanged at -$1.8bn to -$2.1bn (vs. -$2.06bn in 2025):**

Despite 2026 delivery growth of 47%–60%, Adj. EBITDA guidance is roughly flat YoY. Most of the year will be devoted to the R2 ramp, and autonomy R&D spending will increase materially, diluting the profit uplift from higher volume.

Software & services is guided to grow ~60% YoY to $2.5bn in 2026, with ~60% from the VW JV, at ~35% GPM. This segment will help stabilize overall margins during the R2 ramp.

**v) Cash flow: sharp QoQ decline, but combined with VW and Uber funding, liquidity appears sufficient for the R2 ramp:**

As of Q1 2026, cash, cash equivalents and ST investments were ~$4.8bn, down from $6.08bn QoQ by $1.25bn. For 2026, Rivian expects $2.0bn of investment and loans from Volkswagen and a $550mn strategic investment from Uber.

Combined with existing cash, total available liquidity is near ~$8.0bn for the year, which should support R2 SOP and the capacity ramp.

**vi) Autonomy progress:**

In H2 2026, Rivian plans to roll out point-to-point automated driving for consumer models. It will also pilot Robotaxi test vehicles with safety drivers in San Francisco and Miami, unlocking $250mn in Uber equity funding.

In 2027, L3 'Eyes-Off' capability will launch in specific geofenced areas. In 2028, Rivian plans to deploy L4 first as Robotaxi variants with extra sensing hardware, while also planning an L4 consumer version; autonomy R&D will step up meaningfully in 2027 and is already accelerating in 2026.

The Gen-3 autonomy hardware suite includes the in-house RAP1 inference platform (800 TOPS per chip; dual chips per vehicle, ~4x the NVIDIA-based setup), plus LiDAR and other perception upgrades. Initial fitment on R2 is targeted by end-2026, supporting sales.

**On valuation, based on management guidance, Rivian trades at ~2.7x 2026 P/S, mid-range vs. its historical 1.8–3.8x.**

This multiple requires successful delivery of full-year targets. Management has concentrated both delivery and margin inflections in Q4 2026: auto GPM remains pressured in Q2–Q3 and turns positive in Q4; if R2 SOP and deliveries disappoint again in Q4, full-year volume guidance could be cut.

**Medium- to long-term uncertainty has risen:** first, the hurdle and timing for FCF breakeven have moved out, now requiring 515k units/year combined capacity at Normal and Georgia, later than the market’s prior 2027 EBITDA breakeven expectations. Second, the DOE loan facility was reduced from $6.6bn to $4.5bn, adding funding pressure.

**All in, with Q2–Q3 under pressure and risk of a full-year volume guide cut, plus higher medium/long-term uncertainty, we suggest waiting for a wider margin of safety.** We see better entry at a $14.1–15.5bn market cap, implying ~2.0–2.2x 2026 P/S.

**Details:**

**I. Q1 GPM edged lower QoQ**

Q1 GPM was 8.6%, down 70bps QoQ but slightly above the Street at 8.2%. The small dip was led by software & services, while reported auto GPM was roughly flat QoQ.

**i) Reported auto GPM flat QoQ:** Reported auto GPM was -6.8%, roughly flat QoQ and above the Street at -7.8%, helped by ~$58mn of pure-margin regulatory credits recognized this quarter.

Ex-credits, underlying vehicle GPM was -14.1%, down 330bps from -10.9% last quarter. Drivers were a modest ASP decline (higher EDV mix) and higher procurement and per-unit amortization costs QoQ.

**ii) Software & services GPM slightly lower QoQ:** Segment GPM fell 170bps QoQ from ~40% to 38.3%. Revenue still leaned on high-margin licensing from the VW JV (Q1: $282mn, ~60% of segment), while gross margins in used cars, maintenance and repair likely softened.

**II. Underlying vehicle margin still declining QoQ**

Rivian’s underlying auto margin is complicated by accounting adjustments (e.g., LCNRV reversals, one-offs). Ex-credits and inventory write-downs, underlying vehicle GPM was -14.1% in Q1, down 320bps QoQ from -10.9%.

The decline was driven by lower ASP and higher per-unit costs QoQ. **Per-unit economics detail:**

**1) ASP: down QoQ on higher EDV mix and heavier promotions**

ASP was ~$82k, down ~$1k QoQ. This reflected a higher EDV mix and more aggressive promotions post-IRA phase-down (0% APR for up to 60 months on 2025 R1s and select 2026 high trims, $3,000–$6,500 lease incentives, plus $1,000 cash discounts on R1s).

**2) Unit cost: up ~$1.4k QoQ as both amortization and variable costs rose**

**a) Per-unit amortization up $700 QoQ**

Per-unit amortization increased by ~$700 to ~$11.8k. Deliveries were only ~10.3k (15.3%–16.6% of full-year target), limiting fixed-cost absorption, still pressured by IRA fade; R2 pre-SOP capex added to D&A, so per-unit amortization rose even with a 6% QoQ delivery uptick.

**b) Variable cost still rising**

**Per-unit variable costs rose ~$700 QoQ to ~$82k, as customs rebates were not recognized and upstream input costs increased.**

**i) Customs costs not yet offset by rebates:** Under Section 232, the 3.75% of MSRP tariff offset was extended to 2030 with more components qualifying. Rivian’s vertical integration may allow more exemptions; while IEEPA offsets were not booked this quarter, management sees potential recovery worth tens of millions of dollars over time.

**ii) Higher raw materials and electronics costs:** Aluminum and other metals rose; DRAM and automotive-grade chips tightened due to AI capacity crowding, rebounding in price; lithium carbonate also rose. These pushed BOM costs higher.

Supply-chain volatility led Rivian to source alternates at prices above long-term contracts. Parts and logistics costs also rose on tightness, lifting per-unit variable cost.

**c) Per-unit gross profit declined QoQ**

Per-unit GP fell by ~$2.5k QoQ to about -$12k on lower ASP and higher unit costs. Underlying vehicle GPM also fell, down 330bps from -10.9% last quarter.

**III. Auto GPM: pressure in Q2–Q3, positive in Q4**

**Rivian expects auto GPM to remain pressured in Q2–Q3 due to the R2 ramp, for three reasons:** i) R2 SOP in Q2 with D&A recognition; initial single-shift production limits scale, under-absorbing new depreciation and lifting per-unit D&A.

ii) A newly formed manufacturing team for R2 adds payroll costs. iii) Early ramp complexity for the new model further raises unit cost pressure.

**Auto GPM is expected to turn positive in Q4 (both R2 and overall auto GPM), driven by:** i) Concentrated volume release in Q4, unlocking scale effects.

ii) Clear R2 cost advantages: BOM ~50% of R1, and \>50% reduction in non-production COGS. Design changes include large castings, structural packs, a new high-efficiency drive unit, next-gen E/E cutting copper usage, and integrated HV components, plus improved supplier terms.

R2 SOP starts with a single shift, moving to double shift by end-2026. Normal’s 'North Star' target is 4k/week by year-end, reaffirming that volume and margin inflections are anchored in Q4.

**IV. Revenue broadly in line**

Total revenue was $1.38bn, up 11.4% YoY, largely driven by software & services up 49% YoY to $473mn. Overall revenue was in line with market expectations.

i) Auto revenue (incl. credits) was $910mn, down 1.5% YoY, mainly due to ~$100mn less credits and lower ASP from a higher EDV mix and heavier R1 promotions post-IRA fade. ASP fell nearly $7k YoY to ~$82k in Q1.

ii) Software & services drove the YoY top-line increase, at $473mn (+49% YoY), primarily from high-margin tech licensing via the VW JV (Q1: $282mn, 60% of segment).

**V. Opex rising**

**i) R&D: $460mn in Q1, up 20% YoY**

**R&D rose 20% YoY to $460mn due to:** a) increased autonomy spend on in-house RAP1 silicon, point-to-point autonomy, and Robotaxi with Uber, lifting software, cloud and training costs and front-loading for a 2027 step-up.

b) R2 pre-SOP engineering: pilot builds, process optimization, next-gen E/E, and the Rivian Assistant AI efforts lifted spend. c) Higher headcount and SBC in R&D.

**Timeline and hardware plan:** In H2 2026, point-to-point autonomy will roll out to consumer models; Robotaxi pilots with safety drivers will run in San Francisco and Miami, unlocking $250mn from Uber.

In 2027, L3 'Eyes-Off' in select areas; in 2028, first L4 deployment as Robotaxi variants with extra sensing, alongside a planned L4 consumer version. Autonomy R&D will ramp sharply in 2027 and is already accelerating in 2026.

The Gen-3 autonomy hardware includes the in-house RAP1 inference platform (800 TOPS per chip; dual chips per car, ~4x vs. NVIDIA platform), LiDAR and other perception upgrades, targeted for R2 by end-2026 to support sales.

**ii) SG&A: $540mn in Q1, up 13% YoY**

SG&A rose 13% YoY to $540mn due to a) pre-sales and channel build-out for the R2 ramp: stores, service centers and charging network expansion, plus higher marketing and user ops. b) Higher headcount and SBC across sales, G&A and ops.

**VI. Adj. EBITDA slightly ahead**

Adj. EBITDA was -$472mn, slightly worse QoQ but better than the Street at -$500mn, mainly on stronger GPM. Adj. EBITDA margin improved 200bps QoQ to -34.2%.

**<End\>**

**Risk disclosure and disclaimer:** [**Dolphin Research disclaimer and general disclosure**](https://support.longbridge.global/topics/misc/dolphin-disclaimer)

### Related Stocks

- [RIVN.US](https://longbridge.com/en/quote/RIVN.US.md)