Rivian is bracing for tariffs and making changes to its R2 sedan supply chain, CEO says

• Donald Trump's tariff proposals and pushback on EVs could have a significant impact on automakers.
• Rivian CEO RJ Scaringe said during an earnings call the company has been bracing for tariffs.
• The fate of the $7,500 EV tax credit issued under the Biden Administration remains unclear.

EV company Rivian says it's already bracing for the impact that the increased tariffs proposed by President-elect Donald Trump would have on its supply chain.

Rivian CEO RJ Scaringe said that to prepare for potential tariffs Trump has proposed on foreign goods, the company has been deliberate about materials sourcing for its upcoming lower-cost SUV, the R2.

"The R2 sourcing process is something we've looked at very strategically and certainly have contemplated even prior to the election, just what the impact would be, should the overall approach to tariffs change," Scaringe during the company's Q3 earnings call on Thursday — a day after the election was called for Trump.

"So a lot of our focus has been on sourcing suppliers that are not going to be subject to large tariffs."

The CEO said Rivian also structured its partnerships with overseas suppliers that could be subject to tariffs so that the company is "not carrying much of the risk." He did not specify where the suppliers are based.

Still, analysts say uncertainty surrounding the incoming administration could hurt already slowing demand for EVs.

The stocks of Lucid and Rivian — smaller auto companies dedicated to EVs — saw a brief jolt. Rivian's stock dropped as low as 9.7% on Wednesday before recovering some of the losses by the next day.

On the campaign trail, the president-elect has also targeted the Biden administration's Inflation Reduction Act, which includes a $7,500 tax credit for SUV and pickup truck EVs that cost $80,000 or less.

Claire McDonough, Rivian's chief financial officer, said during the call that Rivian customers who qualify for the tax credit are largely those who lease. The CFO said the "lease penetration," or percentage of total cars sold through leases, was 42%.

Rivian's R1S and R1T pickup trucks have a base price of $75,900 and $69,900 respectively, while the company plans to sell the R2 for $45,000.

"Given the price point of our vehicles and the overall income levels, most of our customers don't qualify on a financed or cash purchase," she said.

RBC Capital Markets auto analyst Tom Narayan told Business Insider that he's concerned Rivian could lose the tax credit incentive under the new administration.

A Rivian spokesperson declined to comment.

Scaringe said during the call that Rivian also is on the lookout for potential policy impacts on the "upstream supply chain," which includes raw materials.

On top of the uncertainty that comes with the second Trump administration, Rivian continues to face hurdles toward profitability — a challenge many new automakers face, with the exception of Tesla.

Rivian reported a negative gross profit of $392 million in the third quarter compared to a negative gross profit of $477 million for the same period of last year.

Total Q3 revenue was down 35% from last year, to $874 million, driven by the delivery of 10,018 vehicles, the company reported. Regulatory credits, or credits automakers receive from the government for producing EVs, accounted for $8 million of the total revenue for Q3 2024.

Scaringe said he was optimistic about Rivian's path to profitability, noting an expected 20% reduction in material costs to produce Rivian's pickup truck, the R1, between Q1 and Q4 this year.

"As we look forward, we're excited to work with the new administration," Scaringe said in an interview with CNBC before the earnings call, "but really our focus is making sure the vehicles really can help customers make the switch from internal combustion to electrification."