Prepared remarks
Good afternoon. Thank you for joining us for Rivian's second quarter 2026 earnings call. Today, I'm joined by RJ Scaringe, our CEO and Founder, Claire McDonough, our Chief Financial Officer, and Javier Varela, our Chief Operations Officer. Before we begin, matters discussed on this call, including comments and responses to questions, reflect management's views as of today. We will also be making statements related to our business operations and financial performance that may be considered forward-looking statements under federal securities law. Such statements involve risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are described in our SEC filings and the earnings presentation we filed with the SEC today. During this call, we will discuss both GAAP and non-GAAP financial measures. A reconciliation of historical non-GAAP to GAAP financial measures is provided in our earnings presentation and press release. Just before the earnings call, we posted our earnings presentation, which includes an overview of our progress over the recent months. I encourage you to read it for additional details around some of the items we will cover on today's call. Following our prepared remarks, we will be taking questions from sell-side analysts. In the interest of keeping the call to one hour, we would ask these analysts to limit any follow-on questions to one. With that, I'll turn the call over to RJ.
Thanks, Chip. Good afternoon, everyone. Thanks for joining us for today's call. In the second quarter, we began deliveries of R2 vehicles to external customers. We expect R2 to be a game changer for our customers and a driver of Rivian's long-term growth and profitability. Importantly, in the U.S. automotive marketplace, starved for high-quality EV choice, I strongly believe R2 is an attractively priced option for everyday adventurers that will resonate with a broad set of consumers. Many reviews of R2 are outstanding. One journalist wrote, "R2 is one of the best new cars I've driven in years." Another praised R2 as among the finest vehicle designs in the world. Early customer feedback of R2 is positive, and I have to say, I love it as my daily driver. Strong R2 reviews and increasing brand awareness are directly translating into accelerating customer touchpoints with our products. In the second quarter, we hosted over 57,000 demo drives, a Rivian record. While it's early in our ramp, we are pleased with the reservation conversion we've seen to date for Launch Edition R2s. Turning to our manufacturing footprint, our team in Normal is focused on the production ramp of R2. As a reminder, R2 production started with a single shift, and we expect to scale to two shifts by the end of the third quarter. We are seeing good progress in new team member training and process improvements for the ramp of the first R2 shift. Additionally, members of our supply chain team are spending time on-site with suppliers as we look towards supporting the ramp in the back half of the year and into next year. In Georgia, construction of our next manufacturing site is progressing well. The combination of our Normal and Georgia facilities provides Rivian the path to scale to 515,000 units of annual capacity, with plenty of room for future expansion. As an update on our Amazon partnership, Amazon now has over 40,000 Rivian electric delivery vans active in its fleet, delivering packages across thousands of cities in North America. In addition to the EDV Standard pack variant already on the road, we're developing new variants with a larger battery pack and all-wheel drive to support Amazon's needs. In the second quarter, we surpassed 1 billion miles driven on the Rivian commercial van platform. Turning to our technology roadmap, autonomy remains one of the most important areas of investment at Rivian. In the not-too-distant future, we believe advanced assisted driving capabilities will be a key differentiator for customers and a substantial driver of market share. Our autonomy development is on track, and we expect to begin rolling out point-to-point capabilities by the end of this year. We believe our rapidly expanding car park with R2 will accelerate our data flywheel to enable delivering hands-off, eyes-off capabilities in 2027, and ultimately Level 4 capabilities in consumer and robotaxi variants of R2. Since we began monetizing Autonomy+ in April, take rates are trending positively for the service, and we believe further feature releases will drive continued increased uptake of Autonomy+. Later this year, we will host another Autonomy & AI Day, where we'll provide more updates around our autonomy and AI progress. At the end of 2026, we are targeting the launch of our third-generation autonomy hardware. This includes RAP1, our first in-house design silicon, and the addition of lidar. The development of our RAP1 chip is on track, and we've begun final testing phases of production silicon. Finally, in May, we rolled out our Rivian Assistant on all R1 vehicles and plan to launch the feature on R2 with an over-the-air update later this year. Rivian Assistant is our new AI-powered voice assistant that is built to be a digital co-pilot, with integration into the vehicle ecosystem and other external apps. Customers love this new feature and its intuitive functionality across applications like Spotify and Google. In closing, I want to thank our team for their continued execution this quarter. We are laying the foundations for a future that we believe will be fully electric, autonomous, and AI-defined. The reviews for R2 affirm that our category-defining brand and vertically integrated and extensible technology resonates deeply with customers. I couldn't be more excited about the opportunity ahead. With that, I'll pass the call over to Claire to discuss our financial results.
Thank you, RJ, and good afternoon, everyone. As RJ shared, we started external customer deliveries of R2 in June. My family took a road trip in our R2 earlier this summer, and we put the storage capacity to the test by piling in four large suitcases, backpacks, golf clubs, tennis rackets, and groceries. Road tripping with Universal Hands-Free is outstanding, making long car rides relaxing. I'm looking forward to the launch of point-to-point capabilities later this year. As I discussed previously, delivering a strong 2026 exit rate for R2 production and deliveries is a key focus for our team, as we believe it will directly translate into positive automotive gross profit for the business. Turning to the results for the second quarter, our consolidated revenue was $1.66 billion, a 27% increase over the same quarter last year. Consolidated gross profit was $179 million, and our gross margin was 11%. Gross profit included $138 million of depreciation and amortization and $31 million of stock-based compensation expense. Adjusted EBITDA losses for the quarter were $379 million, driven by our $179 million of gross profit and increased adjusted operating expenses as we prepare to scale R2 and invest in our autonomy roadmap. In the second quarter, we produced 12,613 vehicles at our plant in Normal, Illinois, and delivered 12,194 vehicles. Delivery results topped our 9,000-11,000 vehicle expectations due to robust growth quarter-over-quarter in EDV and R1, coupled with the introduction of R2 deliveries. Our $1.14 billion of automotive revenue, a 23% increase over the same quarter last year, were primarily driven by a 14% increase in vehicle deliveries and a $103 million increase in revenues related to automotive regulatory credits, partially offset by a decline in average selling prices from a higher mix of commercial van and R2 deliveries. Automotive gross profit loss was $36 million, compared to a gross profit loss of $335 million for the same quarter last year, a $299 million improvement, primarily due to increases in delivery and production volumes, an increase in revenues related to automotive regulatory credits, and an IEEPA tariff refund receivable, partially offset by the ramp of R2 production. In the quarter, we recognized approximately $100 million in incremental cost of revenue due to the ramp of R2 production as compared to the production at more normalized levels. Current macro and geopolitical factors are creating added complexity, cost, and uncertainty; our team continues to work hard to manage supply chain risks and increasing commodity and memory costs. Our software and services segment reported another strong quarter. During the second quarter, the segment generated $515 million of revenue, a 37% year-over-year increase, primarily due to an increase in vehicle electrical architecture and software development services by the joint venture, repairs and maintenance, and Autonomy+, offset by lower remarketing sales. $308 million or 60% of software and services revenue was attributable to our joint venture with Volkswagen Group. Software and services gross profit was $215 million, a 42% margin due to higher vehicle electrical architecture and software development services by the joint venture. Looking at our balance sheet, we ended the quarter with approximately $5.3 billion of cash equivalents and short-term investments. In July, we sold 86.25 million Class A shares in a follow-on equity offering to raise approximately $1.3 billion for general corporate purposes, including the funding of equity commitments and reserves for our $4.5 billion Department of Energy loan associated with the construction of our Georgia plant. Additionally, later this year, we expect to receive $1 billion in non-recourse debt from Volkswagen Group and an additional $250 million equity investment from Uber, both subject to the completion of certain conditions. Our total available liquidity and targeted future capital is over $14 billion to support Rivian's investments in growth initiatives. This includes current liquidity, the Department of Energy loan, and additional targeted equity investments from Uber and Volkswagen Group, which are all subject to certain conditions. Finally, for our 2026 guidance, in early July, we announced we expect to deliver 65,000-70,000 total vehicles across R1, R2, and our commercial van, a 3,000-unit increase as compared to our prior guidance. This implies approximately 42,400-47,400 deliveries in the second half of the year. We expect deliveries will be weighted towards the fourth quarter as we ramp R2. While we continue to believe our gross profit will increase year-over-year, we expect the complexity of a new vehicle launch will negatively impact our automotive gross profit in the third quarter, as it did in the second quarter, before becoming a benefit for 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 path towards long-term profitability as we scale R2. For 2026, we expect an adjusted EBITDA loss of between $2.0 billion and $1.8 billion, a $50 million improvement at the midpoint, due to better-than-expected revenue related to regulatory credits in the second quarter and increased delivery volumes, which were partially offset by raw material, memory, and logistic cost increases. While economic and geopolitical conditions, including international conflicts, pose risks, we remain steadfast in our plans to invest behind key growth drivers. We continue to progress our autonomy roadmap and the expansion of our sales and service footprint as we scale with R2. We believe these strategic investments will deliver long-term value to our shareholders and customers. Finally, for 2026, we are reducing our capital expenditure guidance by $250 million at the midpoint to $1.7 billion-$1.8 billion, benefiting from project efficiencies and timing of spend. Our CapEx spend primarily relates to finalizing construction and tooling for R2 and Normal, the continued build-out of our sales, service, and charging infrastructure, and construction for our greenfield plant in Georgia. In closing, I'd like to congratulate our team again for the start of external R2 sales in June and the continued strong execution in the second quarter. We continue to believe that R2 and our technology roadmap will be truly transformative for the growth and profitability of our business. I'd like to turn the call back over to the operator to open the line for Q&A.
Questions and answers
If you would like to ask a question, click on the raise hand button at the bottom of the screen. Once prompted, please unmute yourself and begin your question. We will now pause a moment to assemble the queue. Thank you. Our first question comes from Mark Delaney with Goldman Sachs. Your line is open. Please unmute and ask your question.
Good afternoon. Thanks for taking the questions. Congratulations on the R2 launch. Very exciting to see. I was hoping to start there on the R2. Can you share more on how the production ramp is progressing and any examples or metrics maybe you can share on that front to illustrate how the ramp is going? As you think about R2 over the next year, do you think the pace of deliveries is going to be gated more by supply or demand?
Thanks, Mark, for the question. We're also very excited about R2. On the production ramp: ramping production of a vehicle, especially a first-time launch of a new vehicle, is complex. It's an orchestration of ramping hundreds of suppliers. The suppliers all need to ramp at the same rate. Our overall production output is gated by the slowest-moving supplier. The coordination to make sure everything is ramping consistently and in an organized fashion across all the different suppliers is a key focus for us, and it's the reason we start on a single shift and get everything moving efficiently before we bring on a second shift. This is a complex effort with many moving parts. We went into it fully recognizing the complexity and with a lot of learnings from R1. Where it stands today is we're ramping and continuing to make progress week over week. As you saw, we've updated our guidance to reflect the progress we're making. The biggest category of focus has been the supply base and making sure that all of our suppliers are ready to continue ramping to much higher levels as we look at the back half of the year, and in particular, as we start to plan for running fully utilizing the plant and running across two shifts. On the demand side, there's enormous excitement around the product. We've been encouraged by the conversion of reservations to orders on our Launch Edition. We launched with the Launch Edition, which is a $58,000 version of the vehicle, the most expensive version of R2. That conversion rate from reservation to order has been meaningfully higher than what we expected, which is a great signal. We are looking forward to introducing the other trims, our mid-spec and our base or standard spec, in the early part of 2027. The excitement even for the Launch Edition and the higher-price Launch Edition has been very high.
Appreciate all those details. My other question was trying to understand what the R2 ramp might mean for the financials and putting that into context with some of your other comments around the input cost environment. As you look out through the end of the year and start ramping R2, does Rivian still expect to reach a positive gross margin exiting 2026? Thank you.
Thanks, Mark. As I mentioned in my prepared remarks, we continue to expect that R2 will achieve a positive gross profit as part of our exit rate for 2026. That's enabled, as RJ mentioned, by the ongoing efficiencies of being able to produce R2 at much higher volumes and the fixed cost leverage that that will enable within the business.
Your next question will come from George Gianarikas with Canaccord Genuity. Please go ahead.
Hi, everyone. Thank you for taking my questions. I wanted to focus a little bit on the EDV. Can you provide an update maybe on commercial adoption beyond Amazon? As you expand pilot programs for non-Amazon fleets, what's the current primary governor on deployment pace? Is it TCO parity, upfront capital outlay, charging density? Anything you could share there? Thank you.
Thanks, George. A first point to call out is the ramp-up we're seeing within Amazon. You're seeing this already in the numbers for the first two quarters this year; Amazon is purchasing more vans. We're ramping up meaningfully from where we were in previous years, and that's a reflection of the TCO advantages our EDV platform represents. We think those cost benefits being realized by Amazon will translate to other commercial operators ultimately seeing those cost benefits and recognizing they need to pursue opportunities with EDV to remain competitive and address their own cost structures. Adoption outside Amazon has taken longer than we'd hoped in terms of other fleets adopting electrification and a strategy of adopting a highly connected and intelligent vehicle. Amazon's significant ramping is an outstanding billboard for the capability and what the EDV can deliver from a business point of view.
Thank you. Maybe more of a long-term question. As you continue to benchmark other global EV platforms, particularly from Chinese OEMs, what structural or operational lessons can you apply to the R3 and other future vehicles as you spec those out and try to build them? Thank you.
The auto industry is one where every manufacturer is very aware of what other manufacturers are doing. Rivians are purchased by many companies and taken apart for benchmarking, and similarly, Chinese vehicles are analyzed widely. There's not a magic difference in how a Chinese vehicle is built relative to a vehicle built in the West in terms of manufacturing approaches, use of high-pressure die castings, and part consolidation—those methods are being deployed across best-in-class vehicles globally. The big difference is the input cost: much lower labor cost in China, lower capital cost, and sometimes capital provided by local governments, which compounds across the supply chain and results in materially lower costs than producing in the Western world. That raises questions around trade policy and supply chain strategy. We're navigating complexities around sourcing components and raw materials and recognizing frameworks established around trade. In a world of completely open trade, supply chains would look different because we'd optimize purely around cost. That's not the world we work in; there are intentional industrial policies that change how we source components. In many cases, it's helpful to ensure certain components are sourced from the United States.
Your next question comes from Shreyas Patil with Wolfe Research. Your line is open. Please unmute and ask your question.
Hey. Thanks so much for taking the question. I was curious if you could maybe unpack the $50 million increase in adjusted EBITDA for the year. How much of that is tied to the better regulatory credit sales, and how should we think about input cost inflation?
Sure, Shreyas. As you look at the evolution of our EBITDA guidance, we improved the bottom end of the range by $100 million, which moves the midpoint by $50 million. We had higher-than-anticipated regulatory credits in the first half of this year. Looking ahead, we have the benefit of incremental delivery volumes with the 3,000-unit increase in our outlook. Offsetting that, we have headwinds associated with increases in raw material cost, memory cost, and logistics cost that led us to this EBITDA range. Regarding second half performance relative to the first half: on the gross profit side, we'll continue to see some inefficiencies and complexities associated with the R2 ramp impact Q3 automotive gross profit. We'll start to see tailwinds of scale and volumes kick in in Q4. Beyond that, we'll see ongoing investments across R&D—specifically growth in our autonomy spend—and continued fixed cost leverage as we grow our sales and service footprint while growing sales more rapidly.
Okay, thanks. Maybe just on Autonomy+. You're going to be launching the point-to-point solution later this year. I'm curious where things stand today with Autonomy+, any way to give us a sense of take rates or adoption trends. How do you see point-to-point driving both demand and take rates, ultimately the subscription revenue opportunity? Thanks.
We've been encouraged by the take rates on Autonomy+ to date. It's encouraging to see customer engagement and usage of the feature and related willingness to pay for Autonomy+. We have clear visibility into what's coming and are confident that adoption will expand meaningfully as we add capabilities and features. Think of autonomy as a staircase of features that lead to higher autonomy. Point-to-point will allow you to type an address and have the vehicle drive itself to that address. Initially, this will be a Level 2++ type of experience where your hands are off the wheel but your eyes are primarily on the road—you can look away for short moments but not read a book or respond to emails. In 2027, we plan to go further to hands-off and eyes-off, enabling true Level 3 capability. Into 2028, we expect to bring on Level 4, where the vehicle can operate as a robotaxi with no one needed in the driver's seat. We also see this personal Level 4 as a feature for owned vehicles—your vehicle could drop you at the airport, pick up your kids, or go to the grocery store. We think this roadmap will drive increasing adoption and uptake of Autonomy+. We also see an inflection in consumer behavior: historically autonomous features were not a primary purchase criterion, but this is changing. We believe market share will be driven by the vehicle's capability to drive itself and the vehicle being software- and AI-defined. Those are critical pillars of our technology strategy.
Your next question will come from Rajat Gupta with JPMorgan. Your line is open. Please go ahead.
Great. Thanks for taking the question. I had a question on the R2 customer profile. Any early reads on what that customer is proving to be—existing electric vehicle owners, first-time electric vehicle buyers, Tesla cross-shoppers? Just curious if you have any read on the customer profile of the early R2 orders. I have a quick follow-up. Thanks.
Thanks, Rajat. Our goal in designing R2 was to attract a diverse set of customer profiles across a wide range of brands and demographics. The data shows that's exactly what we're seeing. The mid-size SUV, two-row five-passenger segment is the largest in the U.S. market and globally, and our packaging, storage capacity, performance, range, efficiency, and driving dynamics have created a wide net for buyers. One exciting metric is the significant number of first-time EV owners—that's powerful. Having a customer's first EV be a Rivian creates a strong bond with the brand and indicates product-market fit, mobilizing latent demand for EVs. There are EV buyers in the mix, including customers coming from Teslas and from Rivian R1s, but the most important point is the very significant number of buyers who have not owned EVs before.
That's great color. Just to follow up for Claire: I noticed in the second quarter gross profit commentary you mentioned an IEEPA tariff refund benefit. I'm curious how much that was because I didn't see it in the full-year outlook. Just relatedly, it looks like the guidance implies a steeper EBITDA loss in the second half versus the first half, despite the positive gross margin exit rate commentary. Just trying to bridge those two aspects. Thank you.
Sure. On the IEEPA tariff refund piece, last quarter we sized the IEEPA tariffs in the tens of millions of dollars. The receivable we booked this quarter is roughly half of the total. The receivable is related to the refund of the amount of anticipated proceeds that are not subject to the existing DOJ appeal. Regarding the EBITDA loss being steeper in the second half of the year, a big difference is we had $164 million of regulatory credits that benefited our gross profit outlook in the first half. In the second half, we'll see some complexity associated with the R2 ramp impacting Q3 automotive gross profit before progress in Q4. The bigger driver is the absence of the regulatory credits in the second half versus the first half, and then ongoing investments in R&D and SG&A.
Your next question comes from Itay Michaeli from TD Cowen. Your line is open. Please go ahead.
Great. Thank you, everybody. First, a couple questions on the R2. RJ, 57,000 demo drives is a big jump sequentially. Hoping you could talk a little about what you're seeing in terms of conversions of those drives into orders. How many people are actually experiencing Autonomy+? Secondly, curious whether you do expect to deliver a material amount of the premium trims this year, or will R2 sales predominantly be the performance trim this year?
We're excited. The 57,000 drives this past quarter is a record for Rivian, roughly doubling where we've been. The team prepared knowing excitement around R2 would drive a significant increase in touchpoints. We're not providing specifics around conversion, but conversion is an important internal metric and links to availability of other variants. To start, we launched our performance variant—the most expensive variant—then will introduce premium and standard trims in early 2027. We are witnessing a higher level of conversion than we expected into the Launch Edition package, which is encouraging and reflects excitement around the product. We are working on introducing the other trims in early 2027.
That's great to hear. Claire, maybe a quick follow-up. R&D was flat sequentially. I know you're making a lot of investments in autonomy. How would you think about R&D trending in the second half of the year? Thank you.
As we look at the second half of the year, we do anticipate seeing a step-up predominantly related to GPU sourcing for our autonomy training that will continue to ratchet up over the course of the second half of the year. In the second quarter, we saw some reduction as we're now in production, so there was a decrease in engineering design and development spend. Underneath the R&D spend, we still saw a significant increase in overall autonomy spend.
Your next question will come from Joseph Spak with UBS. Your line is open. Please go ahead.
Thanks, everyone. Just regarding the comment about the $100 million in incremental cost of revenues because of ramp of R2 compared to normalized levels: what are you classifying as normalized? Is that one shift, two shifts, and are you also assuming a more normalized mix in that analysis?
Joe, the $100 million reflects a combination of ramp-related inefficiencies such as expedited freight costs out of the gates or short-term premiums with suppliers that we anticipate coming off as we increase production volumes over the next couple of quarters. It's also cost we expensed in period that would have naturally been absorbed into inventory if we were at more of a Q4 run rate of production volume. That's the way we've sized the $100 million of estimated ramp cost.
Okay. A good portion of that is just you don't have the scale and leverage over the asset. If you're saying second shift comes on later in the year and you're exiting gross profit positive, then that could help triangulate the units you think you need to be close to break even. Is that a fair way to think about it?
That's generally a fair way to think about it. When we talk about Q4 normalized levels, that's not the full extent of R2 fully ramped up, but it is a more normalized production environment we can compare our standard cost to in the near term.
Okay. Then RJ, appreciate the Autonomy+ commentary earlier. Any update on RAP1 and Gen 3 hardware progress? Is that still on track for start of production later this year?
Yes, our in-house silicon RAP1 is on track. That underpins our Gen 3 autonomous hardware platform. RAP1 and the rest of the upgrades to the system are on track for later this year.
Your next question will come from Dan Levy with Barclays. Your line is open. Please go ahead.
Thank you. I wanted to start with a question for Claire on unpacking COGS per unit. To only see COGS per unit up a few thousand dollars quarter-over-quarter, despite that incremental $100 million, suggests other underlying cost improvements. Can you unpack why we're not seeing a bigger step up in cost per unit given raw material pressure?
Sure. In the quarter, COGS per unit was $96,700. Backing out the $100 million on a per-unit basis is about $8,200 a unit, which would get us to about $88,400—about a $5,000 per unit improvement quarter-over-quarter relative to Q1. One of the biggest drivers of that improvement is the volume we saw in the quarter. That's a key theme and we'll see COGS per unit continue to come down over the corresponding quarters of this year. Beyond that, we also had the IEEPA receivable benefiting this quarter.
As a follow-up, RJ, you addressed some of this in the past, but it's important in the early days of the R2 ramp. Compared to R1's launch where there were many configurations and complexities, how is this time different, given you still have many initiatives like autonomy, network architecture, and future vehicles? How are you approaching R2 execution and resource allocation?
The company launching R2 today is very different from the business that launched R1. We have more mature processes, team capabilities, and development sequencing. We took a structured approach to design validation builds on the pilot line and manufacturing validation builds that started at the beginning of 2026. This allowed us to work through ramp and design issues before full production. The number of unexpected surprises in the production ramp of R2 is far lower than with R1. That said, surprises can still occur; building and launching a new car is inherently complex whether the manufacturer has built cars for 100 years or is Rivian. We're being thoughtful about ramping suppliers consistently before bringing on the second shift. A big enabler for a smoother ramp was product simplification. With R1, we launched multiple variants in a short window with thousands of build combinations. For R2, we have a limited set of build combinations embedded in the Launch Edition, and we limited color combinations intentionally to facilitate a smoother and faster ramp. The higher-than-expected conversion from reservation to order for the Launch Edition is encouraging, but we will still launch other trims in early 2027 for customers waiting for them.
Your next question will come from Andrew Percoco with Morgan Stanley. Your line is open. Please go ahead.
Great. Thanks so much. Can you guys hear me? (Operator: Yes.) Awesome. Before my question, I was three of the 57,000 demo drives you mentioned. As a potential future customer, kudos on R2; great job. My question: how are you thinking about pricing and potential uplifts to ARPU as you roll out point-to-point and then eyes-off in 2027? How are you thinking about enacting pricing changes over time?
We believe there's opportunity to grow pricing for our autonomous capabilities as we add capabilities. Pricing needs to be earned through expansion of the feature set and capability, and we must be mindful of market dynamics around pricing. We're at an inflection point where customers are moving from seeing autonomy as a nice-to-have to a must-have. Level 3 capabilities—hands-off, eyes-off—make the feature easier to explain and mass-adopt beyond early adopters. We expect pricing potential to expand as features and capabilities grow, and we're actively thinking about how to price these over time.
Got it. That makes sense. One more: the new California rebate program requires some OEM buy-in. Are you planning to participate, and have you seen incremental demand from that program?
We're happy with the California EV incentive program. Consistent with our mission, we're excited about attracting new first-time EV owners to the Rivian community. The program offers $3,500 for new vehicles and $1,750 for used vehicles, with the OEM and the state of California splitting the incentive. There are caps by OEM and limitations on the population that can take advantage of these incentives.
Your next question will come from Chris Pierce with Needham. Your line is open. Please go ahead.
Oh, hey. Good afternoon. You've talked a lot about conversion. I'd like to hear the flip side: what are customers who aren't converting telling you? Are they waiting for a different variant or placed a reservation a long time ago? I'd like to hear about people falling out.
Thanks, Chris. There are many reasons someone may not convert. The most common is they're waiting for a different build combination than what's in the Launch Edition package. Conversion rates are higher, and we've had to dynamically watch this because we provide delivery windows to Launch Edition customers. That requires projections around conversion rates and working through the backlog of reservations. Our guidance reflects thinking about those conversions, with deliveries of different trims beginning in 2027.
I think you mentioned another Autonomy & AI Day this year. Since the IPO, long-term financial targets haven't been updated. Could this event be an opportunity to update long-term targets?
For the Autonomy & AI Day, it will be more focused on the technology roadmap. We're working to determine the right time to host a broader Investor Day focused on longer-term financial targets. This event will concentrate on autonomy and AI technical progress.
We had our first Autonomy & AI Day last year and detailed much of the technical development underway. Since then, we've announced the robotaxi partnership with Uber targeting availability in 2028. We'd like to provide more detail on the roadmap to Level 4 and the progress on the vehicle beyond what's in customer vehicles today to give better visibility and confidence around achieving those targets.
Your next question will come from Philippe Houchois with Jefferies. Your line is open. Please go ahead.
Yes. Thank you and good evening. My first question is on the relationship with Uber. We've seen some tension between ride-hailing companies and other autonomy providers. There's a bit of uncertainty about some vendors. How much upside is there to your relationship with Uber, not only in timing but magnitude of what you could be working on in offering robotaxis?
A core element of our approach is that vertically integrating the vehicle and the technology stack enables meaningful cost advantages and technical simplifications in vehicle and autonomy hardware architecture. Bringing silicon in-house gives us a low-cost way to achieve high levels of in-vehicle inference. We believe our technical approach and a neural net-based, end-to-end trained large driving model (LDM) create advantages. Progress on the consumer platform—point-to-point, hands-off, eyes-off, Level 3, and then Level 4—uses the same LDM workflow. The vehicle sensor topology and inference capabilities may differ slightly between Level 3 and Level 4, but the platform and model are the same. This unified approach has been a key shift and advantage for our architecture and the data flywheel through the deployed fleet.
Specifically on Uber, do you think there's a big opportunity for Rivian to be a much bigger partner in autonomy?
The working relationship with Uber has been fantastic from leadership to working levels. Engagement from Uber's leadership underscores the importance of this relationship. We're working toward the next milestone at year-end, deploying in a couple of cities in 2028 and then rapidly expanding to many cities. We're encouraged by the partnership and focused on making sure the technology and vehicle are ready for Level 4 performance and delivered in a cost-effective way.
Maybe more for Claire about the ramp. You haven't specified how many R2s you delivered; perhaps just a handful. You warned about gross margin risk as you ramped, but the dip in gross margin hasn't really happened. Now you warn it could be in Q3. Is that because the ramp hasn't happened much in Q2, or has it happened smoother than you feared? Could Q3 gross margin be a positive surprise?
In Q2, we moved from pre-production to start of production and hit cost of goods sold for roughly two-thirds of the quarter; it was not a full quarter's impact. In Q3, we'll have a full quarter's impact of the ramp and the introduction of a second shift, with some additional labor cost associated with the ramp. In Q4, you'll start to see benefits of scaling production and fixed-cost leverage across R2 and the broader plant. I'll invite Javier to add context on driving manufacturing efficiencies and executing the ramp in the second half.
Thank you, Claire. There's a big, laser focus of the teams in Normal to ramp up this first shift, which we started in Q2. We continue in Q3 with preparation for R2. We are not expecting any material contribution to volumes from the second shift in this quarter, but we will see it in Q4. The capability of the teams has very much increased compared to the launch of R1; that's a big advantage. Winning teams are those capable of solving problems at speed. We're focusing on training members on the assembly lines, training the team and automation, and getting output higher as we ramp. Of course, focus on the supply chain remains critical; it's always an area that requires special attention. We are focusing on a handful of suppliers with boots on the ground in a collaborative way; suppliers are willing to get our support and we're willing to give it. That's the focus in Normal today.
This concludes the Q&A section of the call. I would now like to turn the call back over to RJ Scaringe for closing remarks.
Thanks, everybody, for joining us on today's call. Hopefully you're observing a lot of excitement from the team here around R2, which is echoing the excitement we're seeing from consumers. This is something we've been building toward for a while. The ramp we expect in the second half of the year—Q3 into Q4—with Q4 being important as we start to see the benefits of our second shift coming online is a major focus. Our operational, engineering, and customer-facing teams are aligned to deliver on that ramp. We're continuing to focus on our technology roadmap and progress on our software-defined architecture, really thinking of it as an AI-defined architecture with a growing set of features and capabilities. That growing set of features allows the vehicle to create a better customer experience and exist within our ecosystem more efficiently. We have enormous emphasis on our self-driving platform, growing capability this year with point-to-point late this year, and expanding that in 2027 and 2028 to get to Level 4. This is an exciting time for us as a business; we see it as an inflection point both for our path to profitability and for the scale and scope of the business given the mass-market nature of R2. Once again, thanks, everybody, for joining today's call, and we look forward to future discussions.