Rivian Automotive, Inc. (RIVN) Earnings Call Transcript & Summary

Well, thanks, everybody, for coming back and joining us. Next up, we have Rivian. Claire McDonough, Chief Financial Officer, is here. Rivian is a new Autotech company, which I think a lot of you probably are reasonably familiar with, focused on design, development, customer experience, sales and service of electric vehicles is really kind of across the life cycle of the vehicle for retail consumers but also commercial markets. And I think I will say one of the most interesting things about Rivian is it's not just an Autotech company going through the due diligence process and learning about the company bit over time, they actually really understands the auto business and the opportunity that's being missed by most people in the auto business, in a way that is kind of very refreshing for a new tech start-up because we see a lot of EV companies that don't understand that. And I think that's actually a huge differentiating factor, in addition to be having amazing vehicles, really absolutely amazing vehicles. There's an R1T outside on 58th Street. Hopefully, if you haven't had a chance please go out there and check it out. I think some people might be able to drive it in limited numbers.

You can do test drives.

Well, you can't really push it on New York Streets, the way you'd really want to really enjoy. Maybe if you got loosen in Central Park, not to -- just across the street, you could. But if you could, I actually just doing it, but maybe not. Claire has been a great partner and helpful in us understanding everything that's going on with the company, not just financially but strategically. So we really appreciate you being here today. We've got a long list of questions to get through retail side, commercial side. So we're going to try to get through in the next 37 minutes, and we'll take a few questions from the audience as well. So certainly get teed up.

So to kick off the discussion, obviously, the supply chain issues and the production ramp have been a little bit challenging. Not too surprisingly, actually, I think, I mean, not to be mean. But I mean it's tough to get these vehicles these ramped up. So to us, it's not -- sorry, that's surprising. I think to some people it was a bit surprising. Certain issues around batteries, initially, you kind of worked through those and then it was more around suppliers across the board in semis. So maybe if you could talk about that, maybe not just your near-term forecast, but understand how you're going to manage the supply chain? How you're going to push the partners -- your partners more to really understand you've got an unbelievable product, the pipes are going to be a lot higher than that people are probably expecting, at least in my opinion, and really kind of work through these kinks maybe short-term and long-term, but just really a strategy for doing that?

Sure. So as you can imagine, our primary focus for 2022 is all about ramp. And our ability and what's been gating our ramp as you think about sort of what we went through in 2021, starting out -- it first started out as some of the internal constraints in getting our equipment going and getting all of our sort of internal processes and teams all marching in the same direction as we thought about bringing up the process of that start of production in the ramp. As we've been able to demonstrate rate within our facility in Normal, Illinois, right, as we made that transition from 2021 into 2022 is where we've started to see now the supply constraints as being sort of that limiting factor in regards to the rate of weekly production, which we hope to continue to improve upon week after week as we think about the cadence and flow of overall production volumes throughout the course of 2022. And we put the supply chain in really sort of 2 key buckets. One key bucket is really some of the supply constraints that we've experienced which have just been related to our supply chain partners that haven't really ramped their own production, right? As they're thinking about managing all of the inputs on their side, again, managing their own equipment, their own labor to build at rate to meet Rivian's production goals in means. And so in terms of what's been gating our overall production rate in sort of the immediate term, it has been more of those that have just struggled to sort of increase their weekly output from a production rate perspective. However, as we take a step back and we look around quarters at where the next constraints are coming into the fold. That's where we see really the semiconductors as being the limiting factor as we think about rate 2022 in aggregate. And there is much more of an allocation play as we think about the need for Rivian to continue to demonstrate our own production capabilities to give [indiscernible] still that level of confidence with our semiconductor partners to lean in and provide greater levels of allocation to Rivian, but also importantly, giving each of those supplier partners confidence that their peers are also leaning in, in the same way. And so because no one really wants to be the key constraint here but they also don't want to be a mile ahead of everybody else knowing that them giving us that allocation is going to upset another client of theirs as well. So it's really been a process that we are sort of actively managing day in and day out. RJ is spending a tremendous amount of his time focused on CEO to CEO type meetings across the supply chain on both sides -- both of these core issues, both those partners that need to invest, right? The resources and labor to really ramp production to the scale that we expect of them. But also importantly, as we think about navigating this semiconductor challenge as well.

So have these suppliers driven the product? Because they might have a different opinion about the success of the company if they've driven their product. Have they? I mean -- Like I mean , it seems like an obvious way to convince them, "Hey, this might work".

Well, RJ, and our head of our supply chain have done the number of tours with in Rivian throughout Detroit to put people behind the wheel. Because I often do say driving. When you drive the vehicle, you understand, right? All of the core technology and components and capabilities that went into creating what is the R1T and R1S and the same is true on the commercial side of the business with the EV or Electric Delivery Van. And so part of the strategy and approach is let's ensure some of those -- a lot of them are preorder customers as well. And so we wanted to turn that supply chain into evangelist for us as we're building the brand and getting them really excited, not just about our launch products, but importantly, getting them really excited about what's to come next as we think about like R2 and other additional vehicle platforms that we'll be bringing to market over the coming years.

And can you remind us -- I mean, I think you guys have talked about 25,000 units now as a target for the year, but I mean, you're saying your rated capacity or your installed capacity at normal, I think, is going to be closer to 50,000. I mean, that's not what you would hit, but like -- but what you could hit if the supply chain issues were worked out. I mean how are you measuring that? And should that give us more confidence that you could see a significant step-up in volumes in '23 and '24 as the stuff gets resolved and you're not going to hit another bottleneck inside on a micro basis?

Sure. So it's something that we're actively managing and measuring day in and day out. And so because of the supply constraints, we can't continuously run the plant at volume for every shift. And so the way we look at it and measure it is both looking and ensuring we have parts to run a specific area of the plant at full volume for the entirety of a shift. And so we're really measuring and looking at what are the demonstrated rate of jobs per hour per shift that's going to give us that confidence to say if we have the parts to continuously build we could maintain those levels and rates. And then we'll also do a handful of burst builds to really see what does a sprint look like? How quickly could we go if we were sprinting for 1 hour and then sort of translating that 1 hour as that next goalpost to say how do we go from an hour sprint to ultimately getting the entirety of a shift to operate at that jobs per hour level? And so that's what's really given us confidence in regards to the improvements that we've seen across each of the shops within the plant as we think about the ultimate rate that we can deliver throughout the course of 2022. And that's -- the challenge is that we haven't had the parts to really continuously build at those levels and skills day in and day out. But to give you all some additional context, at our plant in Normal, Illinois has 150,000 units of annualized capacity. And so the 50,000 that we've talked about was really taking into consideration the S curve of the ramp as we've started production over the last handful of months and where we think we can achieve in the confines of 2022 if the supply chain wasn't an issue for us. And so we wanting to make sure that the market understood that we were optimistic in the progress that we're making at the plant and it was really sort of much more driven by the fact that unfortunately, you do need all the parts to build a vehicle. I wish it wasn't the case. But unfortunately, we do need over 2,000 parts from 400 suppliers to all come together for us to continue to build that at rate and scale in the plan.

So there's a couple of things going on, a few vehicles that are being launched, right? I mean there's the commercial van, there's the R1T and then the R1S rolling in as kind of as we speak. As we think about all the parts constraints and the fungibility of parts across the product, you obviously have massive demand for all 3 products. Is there any prioritization between the products? I mean, how do you think about that? I mean you're like, well, Amazon is a huge investor and we got to get them their vans. Does everything go towards the vans? Or does it go like, hey, we want to drive the R1T and we got the R1T up and running, so let's just blow that volume out or R1S might be a higher margin -- my opinion -- Do I focus more on the R1S? I mean how do you kind of manage these scarce parts and you have chips and everything else that you're dealing with? And is there fungibility between the products or is it, hey, listen, we got no problem with the van parts and we're going to be off and running there, I mean how do you think about this in allocation?

No. It's a multivariable equation as you can imagine. So it's important to note that in the -- in our plant, we have distinct body shops and general assemblies for 1 for the commercial vans and one for R1 and -- for the R1S and R1T. And so in terms of actually sort of the production of the vehicles themselves, right, those are largely independent where we don't necessarily have to make trade-offs. We do have shared stampings or battery module lines are shared between the vehicles, right? Our paint shop and drive units are shared between the vehicles. And so those are more of the shared components that exist between each of those different vehicle platforms where -- we haven't sort of faced that today but where there could be constraints to say, where we would potentially sort of make -- have to make a trade-off in terms of are we over-indexing around R1 volumes? Or are we over-indexing around the commercial band volumes as well? We have -- in a couple of instances in terms of some of the chip shortages that we faced as well, have the opportunity to redesign some of the chips in the vans themselves so we could sort of access incremental supply. Again, so we weren't in a position where we needed to make true trade-offs between volumes across the 2 vehicle platforms. But today, it really hasn't been a core constraint yet for us. About 25% of the supplies are shared between the vehicle programs. So there's not as much overlap in regards to sort of the underlying supply chains. But each respective vehicle as well is sort of in the process of ramping each and every 1 of its respective supply chains as well. And that has been, to date, as you've heard us talk about been a constraint as it pertains to ramping R1S volumes and the same has been true with the vans to date.

So one of the things I found most interesting in going through the Normal plant with you guys was, in some ways, it looks fairly similar to other manufacturing plants that have been in -- or general assembly plants. And 1 of the things the mistakes that Elon made was he needed to completely reinvent auto manufacturing. And I think you guys are recognizing, and I think he's starting to recognize auto manufacturing is reasonably good, right? There's always ways to make it more efficient. So I mean, you guys have kind of understood this. You brought Frank Klein in as our Chief Operating Officer. I'm just curious, I mean, that was fairly recent, right? In the last months, I think, or -- so maybe you could talk about sort of his hiring? And then also this recognition of what works, particularly around the old industry on manufacturing and the need for some small innovation but maybe not reinventing a wheel, if you will, no pun intended, and the hiring of Frank Klein as well?

Sure. So what we are really looking for in our new COO was someone that was able to really embody what sort of global scale look like in a best-in-class perspective, but also someone who had been a part of core build-type environment. And that can be more changing amongst sort of the more traditional universe of OEMs, and that was something that we really liked as we looked at Frank, who spent 27 years at Daimler and stood up factories for van plant for them in Hungary he stood up at their Charleston operations here in the U.S. and had really sort of built from the ground up new manufacturing plants and associated sort of infrastructure to support that. He had also most recently been the President at Magna Steyr, and had really led the efforts there in terms of the evolution that Magna Steyr has done to sort of create and build the first EVs in their contract manufacturing regard. And so the combination of growth and scale was something that we found really attractive as we wanted to have him really lead our manufacturing operations, our manufacturing engineering teams, our supply chain efforts and logistics as well. knowing that the depth of many of those relationships that he's had over a multitude of years that we think could be a huge advantage to bring to Rivian. And as we've thought about it, bringing the best of automotive and best of technology together, we've certainly looked to really harness sort of the diversity of different experiences and points of view as we've thought about recruiting kind of the ideal team to help lead the charge for us.

You've often mentioned to the folks at Tesla that they should bring Magna and help them out with their manufacturing and you guys went out and hired the head of Magna Steyr. So I think it was, once again, a smart move from a traditional sense to understand what actually is working in the industry. So I think that was a great hire. If we think about the next leg and maybe getting maybe putting a cart before the horse a little bit by getting out to the Georgia plant. I think it's going to be almost 3x the size of Normal roughly. It's going to be 2 new platforms, ERT and I mean ER2. Maybe you can just talk about sort of the lessons learned in Normal and as you're kind of starting this as a pretty greenfield, right? I mean it was there's land and a building, but like it's pretty kind of greenfield. So you've learned a lot there, sound like you're taking tooling from Mitsubishi to in any way. But I mean, what are the lessons that you've learned from normal that can be applied in Georgia. And if you think about sort of -- I think 1 of the things that RJ talks about of sort of learning how to launch multiple products at a time and then sort of using the learnings across the board. Is there a feedback loop from as you're building out and launching Georgia that then may reverted back into Normal? And is there any kind of system for capturing what is going right on the manufacturing and launch side then will be reverted back into Normal and then into your next facility -- in time?

Sure. No, it's a great question. And it's something that we've really harnessed as we thought about, right, our first production line that we built in Normal, which was for R1 products. And the ability for us in a very rapid succession to take those key learnings and immediately apply those key learnings into our van program. And 1 great example of that is the body shop that we built for our commercial van lines is about half of the square footage and about half of the cost, even though it has the capability of producing 85,000 units versus the 65,000 units of overall installed capacity that we have in the R1 line. And so as we think about Georgia, it's really that next extension of how do we focus on continuous improvement and take the core learnings now of sort of the second stage of our growth, which was driving additional improvements as we thought about the manufacturing equipment and process for the vans and then we take those learnings and apply them to our launch of R2 in Georgia. The other key piece of this as well is the fact that we're going to start to really train ourselves in regards to some of the next-generation technologies that will be including in Georgia and utilizing for the R2 that will first come to market on R1. So things like our new, what we call our Enduro, which is our dual motor, which we'll be building in-house within Normal that will give us sizable lead times to continue to refine and improve production there. And so there are a number of core investments that we're making that we'll be able to really try out from a production perspective that we can again sort of continue to dial in as it pertains to the overall sort of layout and approach that we have in manufacturing operations and manufacturing and engineering in that Georgia plant. The other core learning is the fact that today, as we're designing R2, right, we have a much greater focus around design for manufacturing and obviously also have the benefit of a very large and skilled manufacturing engineering team that is sort of critically partnered and paired with our product development teams as we're in the early stages of designing exactly what that product looks like? And ultimately, how do we think about cost efficiency in both right conversion costs, but also as we think about the CapEx road map for building out Georgia as well.

Got it. Okay. Maybe switching a little bit to the demand side. I mean, there was a -- I mean, obviously, a little bit of a pricing snafu in some of the prices that were raised. You guys are going to handle it post [indiscernible] very well in rolling things back and communicating to consumers. I'm just curious as you think about sort of the pricing strategy going forward on new products. What are the lessons learned from this? I think you probably learned that you could charge a whole lot more for a really good product than maybe you would have thought before in your products, like I keep saying, I think maybe better than you think. What are the lessons kind of learned there? And what are the opportunities maybe relative to what you initially thought a few years back on this, maybe not to put you on the [indiscernible] spot for current this year, but like, I mean, just going forward, it just seems like there's a bigger opportunity on pricing than you imagined?

Sure. And I think one of the key learnings that we took away from this pricing was really the fact that we want to continue to put sort of our customer at the center of each of the decisions that we're making collectively as a company. And so we're certainly working with a lot of different focus groups of -- within the Rivian community there's nothing that gives me sort of greater joy than actually going on the Reddit forums and sort of seeing a whole of it sort of outpouring of products, love that's out there with a lot of these earlier deliveries in the market. And so we really want to make sure that we're really embracing kind of the power of community that we're building at Rivian, and sort of leaning into how do we use, right, these early adopters with R1 to build out a core base -- a core user base that can extend ultimately to millions of Rivian owners over time as we bring more accessible price points to the market and really build the brand recognition for the business over the foreseeable future. And so that's 1 of the core learnings that we've had. I think the other piece of it as well is the fact that we did really recognize that right? When -- although we changed that pricing model, the new model that we put in place is working very well. We've seen really strong continued demand from a preorder base for those vehicles. And interestingly, we've also seen high orientation of some of the more premium mix as well. So more people that are selecting our quad motor and our top spec, which is our adventure's trim as well. So it was a meaningful uplift in terms of sort of the ASPs that we were seeing based off of the new preorders that we have in process.

So I mean -- so maybe get into that a little bit more -- I mean, if you can get into a little bit more granularly, post the price increase, which is basically 20% from initial, what has changed in those preorder -- those incremental preorders after it and sort of in pace and then in mix?

So in terms of pace, we've seen general consistency in terms of the overall daily volumes that we've had. And then from a mix perspective, it is the majority of those preorders are sort of oriented around some of the top specs from a mix perspective as well.

Okay. So there's no diminishment at all. So I mean it seems like this is sort of an indication that the demand was far outstripping the supply in a way that maybe you never would have understood. Otherwise, I mean, in some ways, this was a good price. I mean a good test without having the volume out there to be tested with volume, you're actually able to as it with moving pricing around?

No, exactly. And as we look and sort of rack and stack our vehicles and the capabilities that we're bringing to market. As you mentioned, right, there's sizable headroom in terms of the overall value proposition of these vehicles as well. And so there certainly is sort of more room there in the future.

And the driving force behind the price increases was cost inflation also on the raw mat side and purchase parts. If you think about that, the 20% increase, is that straight dollar for dollar, the increase that you're seeing in inflation costs? Or does that encompass a similar unit margin that you would have had before? Meaning, let's say, I mean, without -- to use this as an x variable just say 10% EBIT margin pre this. I mean as you load in the 20% increase in the cost, does your margins stay at 10%, you're actually getting sort of 10% on this incremental content or revenue bump, however you want to say it?

So I won't go into sort of the specific nuts and bolts of sort of exactly what we've seen directly from a bottom cost inflation. But largely speaking, this was really a reaction to the inflationary environment that we've been in and some of the headwinds that we've seen in terms of that bill of materials continuing to increase rate, higher cost from a logistics perspective as well as ultimately, as you think about the overall impacts of lower volumes due to supply chain constraints that does have a large impact in regards to our underlying conversion costs.

And then the other -- the flip side of this is trying to manage these costs, which is difficult because you're in your early days of production and volume ramping. You might not be have the same kind of discussion to somebody that's already doing 5 million to 10 million units of volume. So I mean as you have these discussions with your suppliers on the process draws and raws directly, particularly around stuff like with, what kind of leverage and what kind of mitigation efforts do you have available to you right now to try to deal with this other than raising price?

Sure. I mean I think 1 of the key levers that we have is ultimately, right, drawing double alignment with the supply base around those suppliers that are going to be long-term partners for Rivian, and so it's much more around how do we think about sort of the future vehicle programs and the desirability that we have for suppliers to say, I want to be a part of that. And that we can, again, continue to push the supply chain on the need for us to drive accountability in terms of production rates so that they're not limiting our overall growth in supply. And then importantly, as we think about a pretty significant commercial cost-down road map over the course of 2022 and 2023, which is something that we're starting on as well.

Got it. There's a lot of product coming out in the EV sphere. Some cool stuff. I mean the R1s are pretty amazing. So I mean you put the kind of up there with anything. But we're you're seeing some cool stuff come out of Hummer or GM with Hummer, the F-150 Lightning is a pretty interesting product. There's a lot of stuff coming over the next few years. I mean, how do you position the product and the company to remain differentiated versus competition? Because just -- there is some -- I mean, product is amazing. So -- but I mean, there is some other really good stuff coming out as well. I mean, how do you -- how do you go sort of head-to-head or shoot the gap, so you not have to go head-to-head with some of these products to differentiate the product and the company over time?

I think 1 of the distinct advantages we have as a company is the fact that we're able to start truly with a clean sheet of paper, right? And so we knew being electric and having a fast car was table stakes and sort of this transition to electrification that was going to happen. And so we knew we needed to really build core points of differentiation as it pertains to our technology stack that was going to truly differentiate our launch vehicles, but also importantly, what that future state road map looks like for the company. And so I think the couple that I would call out in this context are really electronics, right? So our network architecture and software capabilities that is essentially sort of that central nervous system of an EV, right? And as you think about the transition to EVs, right? You now have it incredibly powerful connected vehicles that are able to deliver incredible amounts of data and insights that enable new revenue streams as it pertains to software-enabled services that we can provide. And you have a vehicle that doesn't just depreciate off the lot, right? These are vehicles where we're driving over-the-year updates in a regular frequency to provide new vehicle attributes week in and week out that really surprise and delight the customers as well. And so that's 1 of the core points of differentiation as you think about, right, really sort of truly all-encompassing OTA capability set that we're able to consistently improve the quality of the vehicle and the capability set of that vehicle over time, which is really important as well.

I've got a couple of more important questions, but if there are any questions in the audience [indiscernible] rest of the time. questions? One over here. Just we've got -- mic's right behind you. Sorry. Thank you.

Yes, I have a question about kind of your thinking about like popular models versus long tail models in the EV space, right? I mean, like whether it's like Ford F-150 or some of these other things. Do you think there's going to be room for EV models that are like 500,000 or like kind of very, very high numbers? Or is it going to be portfolios of 50,000, 25,000 kind of unit kind of pieces that are -- that find scale through a portfolio versus kind of a very large 1 model kind of strategy?

So the way I would characterize our philosophy and approach there is that we don't believe that the vehicle is an iPhone and that everyone is willing to drive the exact same, right? Everyone has sort of the same iPhone in their pocket. And we don't think that, that will be the case in the form of sort of the automotive space where there's obviously sort of different lifestyles, different form factors that people are going to want to have. But we also believe that if you look at some of the larger OEMs in the space, right, there hundreds of different variants that are driving large volumes. We think that there's a significant drive towards the need for fewer overall platforms that can deliver great volume at scale. But today, right, the F-150 is sort of the largest -- or the greatest selling model out there and is just under 1 million units. And so we also don't expect that every new vehicle model is going to be multiple millions of units of overall volume, but we think there can be sort of multiple vehicle platforms that have that sort of a million-plus potential as well. And I think 1 of the core advantages that we see, and this is sort of part of why we went to market with this multi-program approach is the need for us to ensure that we're bringing newness to the market, and we're able to really leverage all of the horizontal capabilities from a technology suite perspective so that each of those vehicles leverages the same network architecture, all of the insights from a battery and propulsion perspective, right, all of the software capabilities we're bringing to bear in terms of infotainment or ADAS features that allow us to really leverage a lot of similarities within the core points of differentiation but do that in a way that we're bringing different form factors to meet different consumer or commercial needs as well as part of that.

And sort of a related follow-up, as you think about ramp and the constraints to growth, how do you balance the commercial side of the business with the passenger vehicles business over the next couple of years? And given some of the leverage that you get from obviously adding more lines to the passenger side of the business, does that sort of also help with the commercial ramp?

Sure. So as we think about sort of both sides, the Consumer and Commercial sides of the business. Today, we've talked about through 2022 being about 2/3 Consumer and 1/3 Commercial. Over the long term, we see our business really reflecting more of the industry, which is about 80% Consumer and 20% Commercial overall. But I think there's beyond a lot of the in-vehicle share technologies. The other core component there is really how we leverage all of the sort of post-purchase service opportunity between those 2 end markets. And that's where we see a huge opportunity on the Commercial side of the business. Because Commercial operators are used to today paying a hodge podge of third parties that are helping them with all of their in-fleeting, they're helping them with that sort of true end-to-end service of the vehicle as well. And so we've been able to really through our partnership with Amazon build out what we call FleetOS, which really helps Amazon in that sort of end-to-end management of the fleet. And so we're able to take a lot of that software development and investment on the Commercial side and apply them to the Consumer. So while it will look very different to you. But in the context of your Rivian app, right, we're really managing a fleet of 1 for a consumer that's really driven off of the same backbone that's pulling out sort of all of the core connectivity and insights that are coming off the vehicle, and that's where we get sort of added levels of synergy, especially as we think about not just within the vehicle, but importantly, right, the end-to-end service infrastructure that's supporting both of those vehicle programs or really the charging infrastructure and charging software that's supporting this adoption of electrification across the board.

I'm going to ask 2. Hopefully, we can get through the next 2 to 3 minutes real quick. I'll ask them. I'll ask them together. Direct-to-consumer is something very different than what we've heard from a lot of companies or dealers. What are the advantage of that and running sort of a closed-form solution? And as you think about that, you're taking vehicles back in trade, I mean how many trades or how long do you hold on to this vehicle before you think it drops into the secondary market? And then sort of the second thing is, along with that, with the insurance, I mean, basically the direct-to-consumer subscriptions, upgrades to the vehicle and being involved in the second and third turner of the vehicle. There's a lot going on here, right? I mean there is the product development, there's the start of production. There's, I mean, there's the ramp to whatever 50,000, 100,000 units where Normal is working, you got Georgia launching. But then you're doing all of this other stuff that the auto ecosystem does outside of a traditional automaker, right? And I call on an Autotech company, I agree with that, I may not just a traditional automaker at all. But you're getting into almost literally everything else in the auto ecosystem. So it seems like that even when we're looking at this ramp here in Normal, that's getting Normal ramped completely is like the opening meeting of a game of ramping this entire company. And it all makes a lot of sense. But it does seem, and I've asked RJ, this question, too, is that it pushes escape velocity maybe further out, right? And I guess the question is, when do you think you reach that escape velocity and how would you define it? I mean, I guess we could call it cash flow or EBITDA positive. But like what -- how do you really kind of conceptually think about that because there's a lot here? And it all makes sense, right? So we're not being critical. It just may push out that ultimate escape velocity point further out.

Sure. So the way that I think about it and part of the core advantage as we see it from being direct-to-customer is really the fact that we can look at our business through the lens of lifetime value, right? We don't have to look at the business in regards to what am I going to sell the vehicle for instead? And this is sort of critical as you think it's actually about the commercial side of the business, where the vast majority of the profit comes post purchase in that regard. And so while you can have very different price points and automotive vehicle margins that -- and a lifetime value can be quite similar between the consumer side and the commercial side of the business. And so being able to really have this closed-loop ecosystem to support that ownership from end-to-end, we think is critically important as you think about right, the longer-term margin potential. And that's where, as we've talked about in the past, right, we see our automotive gross profit margins being 20%, but we see our software and services long-term margins being 65%. And so as you think about, right, the sort of long-tail DCF analysis that you may run in the business as you build and compound that car park over time, right? The pull-through effects from the software and services is really meaningful as you think about sort of the long duration cash flows. And certainly, as we think about the core levels of vertical integration that we started with as a company, right, today, we bear the weight of sort of all of those investments but there certainly is a path for us to continue to drive towards gross profit positive in 2024 and then ultimately to EBITDA positive afterwards, and we often talk a little bit about sort of our business holistically as we think about it on a plant-by-plant basis from sort of the lens and concept of vintage analysis thinking through each plant a sort of a 3-year sort of path to more of those mature automotive margins. And so that's a little bit of the context your lens would provide as you think about really sort of the stacking of that incremental capacity that ultimately will impact that path to future free cash flow. But I see it, these are incredibly high ROI investments for us to be making as we think about to this sort of material shift to electrification in the market and the global opportunity that exists for Rivian.

That's incredibly helpful. Thank you so much for the time. And I would suggest everybody go check out that R1T. I mean if you haven't seen it yet or ridden in it, hopefully, you can. So go enjoy it. And Claire, thank you so much for the time. We really appreciate you coming here in person.

Thanks for having us. It's good to be back in New York.