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

Great. Okay. Good afternoon, everybody. I'm Adam Jonas, a head up Morgan Stanley's Global Auto and shared Mobility team, reaching analysts across 7 countries, kind of focused on the future of this amazing industry and really delighted to have with us RJ Scaringe, Founder, CEO and Chairman of Rivian, founded in 2009. So well before Tesla's IPO.

Yes. Perfect time for [indiscernible] bankruptcy.

Okay. Forged out of fire and so, you're used to a variety of economic environments. Before we get into this fireside chat discussion, I want to say that the views expressed represented by non-Morgan Stanley speakers during this summit that do not represent the views of Morgan Stanley and Morgan Stanley Research. For important disclosures, please go to www.morganstanley.com/researchdisclosures. Any questions, please reach out to your Morgan Stanley salesperson. So RJ, thank you for being here. So much to talk about ESG under the microscope in any way, too. But I want to first kind of share an observation I had. I had the opportunity to visit the Rivian plant in Normal, Illinois earlier this week. I had a chance to test drive VIN No. 48 of the R1S on, I think, a pretty gnarly little track. I would encourage anyone here if you want to test drive those, go ahead and check out the plant. It's got a nice test oval and it's got mountainous features and boulders.

Simulated mountains.

Definitely simulated mountains. I've driven different autos for 26 years, I've driven -- I've driven Bugattis, Lambos, Ferraris. This is being recorded. This thing rips your face off. It's unbelievable. It goes -- R1S [indiscernible].

The SUV.

The SUV, zero to 60 in about 3 seconds flat. It's -- I didn't puke in it, so that was okay. But then shortly after that, I was -- I was going up this -- I don't know what degree pitch it was.

45 degree.

And then it went down and then I went backwards up the pitch, too. So I mean, it's a beautiful product. I encourage anyone who hasn't seen it downstairs to check it out, but the thing that was even more powerful than that was walking around the plant and seeing people making things with their hands, 5,000 men and women in this former Mitsubishi plant, making things in this country that are designed to make our world more efficient, more renewable. How does that feel? Again, what are the kind of -- what's your peak kind of just at the table your messages to the ESG investors?

Yes, I mean you had a chance to see it. The -- when we think of our production plant, we often think of it as 1 line for just, let's say, R1T. But in our plant we actually have 2 production lines. We have a line that's building the consumer vehicles, that's the R1T and the R1S. The R1S is now ramping, which is exciting and starting to see those get out to customers. We also have a commercial vehicle line and the commercial vehicle line vehicle is little less quick in terms of acceleration, but just as important to us, and this is, I think, important from a sustainability point of view, and we're building a 500-cubic foot and 700-cubic foot band. There what we've been able to do in terms of designing the plant is create 2 separate lines where we share a lot of the technology backbone. So the network architecture, the [indiscernible] topology, of course, the software stack, battery systems, high-voltage system. So really high efficiencies in terms of showing these 2 components. But the challenge is ramping those 4 different vehicles in this supply chain environment, that's kind of feel -- that's sort of we wake up every morning focused on getting our supply chain ramp and making sure we have enough parts to fully utilize the team and the staff that we've put in place to run the plant. And that's been well documented by us or on our own challenges, but it's, I'd say, a macro level, just working through those supply challenges in the middle of a ramp has been the central focus for us as a business.

And you talked about line of sight though improving, and you've called out issues like chips and other things. Anyone in the business of making things has, I think, realized some of the challenges in the supply chain. And we're going to dig deeper on some of the structural things. But when you say line of sight, can you give us an example of what you see that gives you confidence that you have some visibility?

Yes. I mean, you take our R1T truck. There were 2,000 components from 400 suppliers and all those components, you think of production, we think of the line, but before we get to the line, there's a whole upstream set of activities components have to be made often through tiered suppliers. So if you're a seat manufacturer you may not be making the foam that goes into the seat, you're making pieces of it. But all those components ultimately is end components come into us, and they have to be assembled in sort of a symphony, meaning we can't assemble the vehicle with a missing part. So every piece is needed. And that's always a challenge in ramping something as complex as a vehicle. So no automotive launch, no vehicle launch, doesn't have some level of supply chain pickups, challenges, issues. But what's unique here is that specifically is a semiconductor shortage, and it's not as much a supply ramp issue as it is an allocation issue. And for us, grabbing that -- sort of grabbing allocation which means at the cost, it's a zero-sum game, somebody else is getting less of required building confidence with those suppliers. And so the line of sight that we see now is the confidence has been built with those key suppliers -- those key semiconductor suppliers. They're very leaned in to make sure we're successful. They're very bullish on our products. Fortunately, a number of them -- a number of senior executives and a number of those companies are customers. And they've had a chance to experience the product, see what we're building as a brand, see what we're building importantly as a company and want to be part of that and are saying, look, we will make it happen. We're going to make sure we get to supply for the second half of this year. And so it's very different than how it looked as we came into the start of the year, where shortages of parts and the line being done because of that was, of course, a very common thing for us.

Yes. First, I want to remind people on the webcast, please don't wait -- don't hesitate, get your questions in, and I'll do my best to filter through them, and we -- and I will call it for Aaron a bit as well in the room. [Operator Instructions] I want to go into ESG theme now. As we discussed a couple of days ago, a highly complex relationship between the auto industry and ESG. And we all know that fossil fuels, not good, okay? Not sustainable, not secure arguably fighting an energy war, and we fought energy war to perform [indiscernible] and we continue to unfortunately, very tragically. So EV is good. Battery is dirty. Batteries or current battery supply chain, arguably less secure and more ridiculously set up in terms of the kilometers in carbon and human bodies in that supply chain, then the thermal energy and then the fossil fuel supply chain. So how do you reconcile that?

I mean we talked about this. This is one of the, I think, the biggest focus here is we'll need to be one of the biggest focus areas for investors, one of the biggest focus areas for us as a company, which is creating the supply chain to support the electrification of the world. So today, we have a massive global economy that really runs on fossil fuels. And when I say runs on fossil fuels, the things that move, whether they're land-based or air-based, these are powered by fossil fuels, the lights in this building are lit by fossil fuels, the conditioned air is ultimately powered by fossil fuels. Renewables make up a small fraction of our overall energy supply. And in certainly less than the next 20, 30 years, we need to transition that almost entirely. And to do that, storing energy is going to be very important. It's going to be important for the things that move. So our vehicles is going to be important for providing stability to our grid as the grid moves from spinning fossil fuel-powered turbines to nonspinning photovoltaics. Spinning is important because it provides inertia, it provides momentum, makes the grid stable. So as you look at all that and the amount of changes going to be acquired, batteries sit at the center of that solution. And to your point, Adam, I completely agree. Securing not just the cells, which is sort of the easy part to visualize, but the upstream precursor materials all the way back to the raw material is going to be really important. And a lot of that today as big as it may all seem, you think of the largest battery cell manufacturers, you think of the largest precursor of suppliers. This represents -- we were debating exactly how much, but call it, on the order of 5% of what the world will need in the next 15 to 20 years, meaning 95% of the world supply chain still has yet to be built. And the question then becomes, where is it going to be built, who's going to control it? What are the companies that are going to build it? What are the relationships between the end customer or say a vehicle manufacturer like ourselves and the far upstream lithium-mining company or companies doing conversion to lithium hydroxide or lithium carbonate. Each one of those steps, and there are a lot of steps from a lot of different companies need to be secured and need to be ramped. And the challenge we see is just the geopolitical cure is more pronounced than almost anything else within the automotive supply chain. And when I say geopolitical interest, I'm talking in time scales measured in decades. So as we get out to the end of this decade and into the 2030s, making sure that we've made the appropriate investments and built the appropriate relationships, have access to large quantities of lithium carbonate, large ones of lithium hydroxide for both iron-based cells and nickel-based cells. So these are key considerations for us.

So one of the advantages you have of having a capitalization, the liquidity that you have still have any advantage, I would say, an advantage being a small company, a one-plant company, 150,000 unit capacity. Obviously, you have a lot of ambitions and resources and some really ton of people and relationships, and we'll talk about the Amazon relationship. But you can help re-architect that supply chain over a 5- to 10-year plus arc, when a lot of other EV players are kind of more grounded into this unsustainable supply chain. So can you be a little more specific is that what Rivian is doing or what you could do, how will you help re-architect the plumbing all the way up to mining on vertical integration, how to play in there as you go into 2030s to make a supply chain, something that -- who won't roll their eyes at?

Yes. So in the short term, what we're producing today, the vehicles are out on broad way. For anybody that's ordering a vehicle is getting a vehicle in the next, call it, 6 to 12 months. These are -- these vehicles are using cells that come from an existing supplier and for which we put those cells into a battery module, build the whole battery module in house, going to build the battery pack, would be the high-voltage electronics we do at our management system, but the cell itself is coming from the supplier. And that will continue to be the case for us for the next couple of years. But as you start to look at that supply chain and say, what's the right way for this to be structured in the long term. The easy answer is to say we own the full stack all the way back to the mine. But it's not necessarily the right answer, but we do need to participate and have a very strong point of view across the entirety of the supply chain. So some items that are going to a cell are operating at very large scale. There's healthy commodities markets for them. There's low risk. Others are not. And so we focused our energies on the areas where we think there's going to be the most scarcity as we look at the second half of this decade and sort of relieving that scarcity through the right types of partnerships, relationships and investment. Now we haven't announced those specific areas, but for us, I'd say that the ones that stand out is in lithium conversion. So thinking about lithium hydroxide, lithium carbonate, you want to see an interesting plot Google lithium hydroxide pricing, and you'll see the difference in this year versus last year. I mean, there's been substantial reactions in the marketplace around pricing because of what we're seeing in a short term -- from a short-term scarcity point of view. We hope that this represents a short-term spike, but I think the level of volatility that we've seen in lithium precursor materials is likely continue. And it's important that if you're redesigning that supply chain and building it, as you said, from scratch to support our scaling, we need to take an active role in reducing both those spikes but also controlling our own density in some of those areas.

Okay, where does China fit into the ESG puzzle because there's some -- it's complicated.

Yes, it's particularly complicated. So I mean you and I were talking about this. Think of lithium iron phosphate cells, LFP cells, they represent a really good chemistry for base model or standard pack in consumer vehicles. The energy density is lower on a volumetric basis, but the cost is materially lower to produce them. It's a more stable chemistry. The cycle life performance meaning the level of degradation of energy cycle is improved. So great for base pack and consumer and perfect for commercial vehicles. And then above and beyond that, the right chemistry for stationary energy storage. Now all the LFP production today -- an LFP cathode active material production today is in China. And that's not...

All meaning a 100%?

Yes. All meaning all. That's not necessarily bad, but it does represent real geopolitical challenges from a -- at the lightest level from a tariff point view at a more macro level, just from a trade point of view. And so I do think as we look at this evolving over the next several years, the creation of supply chains, either in partnership with companies out of China or in partnership with companies outside of China, the creation of that supply chain domestically is going to be important. And -- and we're going to begin to see that already. We're beginning to see the beginnings of that. And I think what we've seen in semiconductors is a representation of a supply chain environment where there's concentrated scarcity and concentrated risk. So cells, we're working today. We have the advantage of saying, well, we have a long line of sight. We have 10-year line of sight to say let's make the decisions and make -- build the relationships today to ensure that as we get out to 2028, 2029, we're positioned well to continue to scale dramatically as we ramp more products, build additional plants and for us, this scales the business.

You try to control your own destiny, you're going to face in-sourcing versus vertical integration and outsourcing decisions. As you do that with security and supply chain and proprietary IP in mind, what kinds of things do you want to vertically integrate? You're doing -- you want to do e-motors, you're talking about battery cells, you do all your software in-house. You're also bringing ADAS in-house kind of what else within -- why is it important to bring ADAS in-house? And then are there anything else you want to highlight that you think strategically important to do and vertically integrated?

Sure. And as you think about the vehicle, it's on different components, some of the most important decisions we take as a company, certainly, I think some of the most important decisions that I'm really, really close to are the areas we do vertically integrating. So that's from a CapEx and production point of view, it's from a technology, team, skill set point of view. And as we've looked at that, there are certain things we've said we don't need to own. So we're going to buy tires from tire suppliers, that's fine. We can buy headlights from headlight suppliers, that's fine. But as it pertains to the entire digital ecosystem within the vehicle, we feel very strongly that, that's among the most important things to control and own. And when I say control in and I don't mean contract that to a Tier 1, I mean, actually own it from the hardware up. So own the electronics, own the base level OS, own all sort of layers, all the way up to the application layer of the software. And then because we own all the electronics and the software stack, own the network architecture within the vehicles, and that facilitates the creation of lots of very unique features. Those features can be in vehicle cabin experience, but they also extend into the way the vehicle drives. And so thinking about self-driving platforms that go from Level 2 to Level 3, platforms that enable you to get time back on the highway or time back on your commute. We think these are really important and differentiated and benefit from the ability to look at the system holistically, meaning your cameras in the aggregate are training a centralized platform from a recognition and a centralized platform in terms of how we think about AI or ML from a vehicle point of view. So that's something we've developed in-house in our vehicle's safe. If you drive one, we have something called driver plus, today it's really limited to highways where the vehicle can drive itself. But of course, that will be extended and grown over time as the vehicles continue to learn and continue to get better because it's a stack that we've designed. It facilitates that happening and improving over time.

Just one more on onshoring and ESG, and I'll open it up here. Do we need to mine and/or refine battery materials in the United States?

Well, the mine -- let's start with the mine question. The challenge with the material side is you're going to want to go to the lowest cost locations for those materials. We do have some sites, certainly in the United States. But at the quantities we need as a country, we'll need to build relationships outside the U.S., and those relationships are going to become, I think, very important from a trade point of view. And fortunately, there are a lot of great resources that exist throughout South America. So there's going to be lots of interesting relationships built in places outside the U.S., but for which there is, call it, friendly trade relationships that either exist or need to exist. In terms of the conversion of those materials, a lot of the conversion will want to naturally happen close to the mine just because we don't want to ship medium concentrate lithium and that's primarily you're shipping like 5% or 6% lithium and the rest is just rocks. We'd want to move to shipping white powder, you want to be shipping lithium carbonate or lithium hydroxide ideally because it's just much more efficient to move. So that naturally pulls some of the conversion to wherever the mine sites are. Now saying that, I do think it's important from a technology point of view and a skill set point of view that we, as an industry, build those skills that can then be deployed in many locations and -- it's a surprisingly early stage phase. There's not a lot of companies that excel at scale at some of these conversion processes and so over the next 10 years, those companies need to scale. Those companies present lots of opportunities for partnership. We do see a pretty vibrant start-up environment in this space as well. it is very capital intense. I think there's a lot of things that are exciting in this startup environment. There's only a very small fraction of those, which will make it to at-scale solutions. So for us, as Rivian, we're navigating that very carefully. It's like with the right partners, where the right projects for the right locations. And I think avoiding the -- there's a tendency sometimes to sort of pursue the press release and to get projects that generate a press release, but don't create long-term strategic at-scale supply with advantage cost. And cost ultimately is going to matter. It's going to drive the adoption of vehicles and drive the structural ranges we may have in terms of our ability to grab market share.

Questions from the audience? I'll be showing. One up here. Mic coming. Sorry. Sound first. Good.

Appreciate it. I guess one of the questions top of mind is, right now, you have a market environment that is definitely penalizes growth versus profitability but you're also in a situation where you have a 2-year backlog for vehicles that are in very high demand. So how do you weigh deferring CapEx and focusing on near-term profitability to survive a period where it might be difficult to raise equity or debt at a decent cost versus pulling forward new lines, pulling forward factory leases and getting vehicles to customers and really just riding the growth in product demand.

Yes, it's a great question. We talked about this in our most recent earnings call. And we've -- we're in a really fortunate position to have a set of products that have generated huge interest from consumers. On the commercial -- on the consumer side, as you said, more than 2 years backlog, and it continues to grow really rapidly, high ASPs, tons of excitement for the product and that's just in the U.S. alone. So with that as a backdrop, we've also built a production plant that we have installed capacity of 150,000 units. And so that represents a really nice growth platform for us to now harvest, so to speak. So we built the plant. We've put a ton of investment time into it. And we're in the middle, as we speak of the period of time where bringing up those lines, ramping the lines to 100% utilization is -- it's a costly process. And we're doing it not on 1 vehicle, but across 4 different vehicles between the R1T, the R1S and the 2 different commercial vans. But as we look at 2023 and then beyond as the plant is now starts to be in the state where it's running at capacity, that starts to produce positive cash flow in a meaningful way that starts to then support growth as we look at our R2 program. And our R2 program is -- essentially allows us to move to a much larger addressable market with the lower price point vehicle, slightly smaller form factor. And this will ultimately be what we produce in Georgia. And so to your question, the market has changed, Adam, and I talked to your question in our last earnings call -- called this out. I mean it's just a different environment. So we've adjusted our spend and adjusted how we're building the business to say, we're going to leverage the installed capacity we have today, we're going to use that capacity, while we go build the most important vehicle in our portfolio, which is R2, which will represent ultimately a vehicle that's produced in many plants around the world, not just the plant in Georgia, but eventually across the world to get to that roughly 1 million units a year at a platform level.

Josh here from Electron. Can you talk a little bit more about the supply chain, particularly what government potentially could do to help that happen. There's been discussion obviously with build back better and some discussions going now, but certain centers have said, maybe they're not so supportive of EVs, but then also, there's manufacturing credits that could come out of it. What -- it seems like that's really important to give visibility of that supply chain. What do you think could be done? And what do you think is what will happen with this whole Washington effort that's happening as we speak?

I think there's 2 things to keep mind. So one is I really hope, I truly hope that our policymakers recognize the scale of what needs to be built and the importance of what is needs to be built, meaning as you said, Adam, this is going to create more constraints and more challenges than what we know in the fossil fuel world. It's a more complex supply chain, and it's one in which skill set concentration and capability concentration could become very challenging to catch up on. So as a country, and I think is for the Western world, it's important to have some of that localized supply chain. Now that's what I hope in terms of what the government can do is sitting here today. It's hard to comment on how effective our policy makers are going to be driving that. But fortunately, we also have -- we have the ability to drive some of that ourselves. So regardless of what happens from a policy point of view, this is a very important matter for us and for this industry. So we're spending a lot of time in this space. Since we've built a very strong team that's specifically focused on essentially from raw material through selling vehicle, understanding that supply chain and then building core competency around that. And from that core team, creating and building the right relationships or creating and building the right technologies to derisk as much as possible across that stack. Now I do think the first category of what policymakers do to creating some tailwinds is helpful for us, helpful for others, whether that's existing OEMs, whether it's Tesla, the policy tailwinds, I think, could be very good. We're certainly making that case as others are. But this is like how the rest of the supply chain gets build out, so to speak, the 95% of that doesn't yet exist. The players that are doing that, the geographies that's done, the companies that participate in how those companies are structured, the offtake agreements or supply agreements, that all has to be built in the next 15 years and the participation of investors. It's arguably the biggest investment opportunity the world has ever seen. We have to rebuild the global economy that's been built over 120 years or on fossil fuel, we have to rebuild it in less time than that. So it is a massive, massive I mean you've talked about is a multitrillion dollar set of investments that have to happen as an industry. And we, of course, intend to participate across that as well.

I mean it seems like my read on the EV portion of the bill is it's a lot of stimulus for demand for and for charging stations. I thought it over-indexed a lot on charging stations I am like what's the point of having showing megawatts at a call stack, if you're going to take out the grid and we don't even have the metals securely sourced for the vehicles. Like demand doesn't seem to be a problem right now, right?

Charging is a short-term pain point. We're building high-speed DC charging network as Rivian -- Auto Rivian Adventure Network is going to be great. It's super exciting. But that's not what ultimately is going to constrain the market. It's something you can build the materials, the processes to build those as we've designed the chargers ourselves, you build them in-house. What's the challenge that the industry faces is -- and what I would like to see policymakers push more on is the upstream supply chain. It's where are we getting enough lithium carbonate as an industry, where is the lithium hydroxide coming from, how are we thinking about nickel-based cells, how we're thinking about nickel supply. So there's a lot of big challenges that need to be answered that are very different than something as easy to understand as a charger, but it's not actually solving the core problem.

Just getting back to the financial question again. It was very, very relevant. I mean, there's in order for Rivian to be in a position to help make the world more sustainable, the company has to be sustainable financially. And the other day, we discussed we're trading just above cash value, which is you could say the market is right or wrong. Market is the market, and you were trading at a level where you're going to spend all your cash but no asset value. So you reiterated the full year EBITDA and CapEx guide largely even with the message of kind of dialing back some of the -- growing into the 150,000 units. You're still in-sourcing. I realize that you're vertically integrating faster than perhaps Tesla was at a similar size. But I'm kind of left with the impression that you're maybe you left yourself some room because every $1 billion that you don't spend in a way is a cap rate. And so is that -- I'm not asking to changing or you're [indiscernible] your partners, but is that the right -- am I wrong in saying that like over the next couple of years, you at least, with the dialing back of some of the growth initiatives you give yourself a bit more room for error and control of things?

Yes, exactly. We haven't printed any updated guidance, but that is absolutely how we're thinking about it. And the actions we're taking in terms of focusing the product set around the products we've installed and built are building in normal. And then R2 really facilitates that. Not to get too into the weeds, we had additional products planned for our facility normal, as you know. And -- and some of those products, we've said, we actually don't need them. There's so much demand for R1T, R1S, certainly more demand than we can produce that there's not a need to develop or launch new products for normal in the short term. We can leverage what we have and really focus investments around our next-generation vehicle. And importantly, as you alluded to, some of the next-generation technologies that will make their way into R1 as well. That will improve performance, improve range, but of course, also drive increasingly positive unit economics.

So Amazon, a shareholder, a customer, also a strategic partner. That fair?

Yes.

Help unpack that. Aside from -- it's quite obvious. They have a massive logistics operations, final-mile delivery you're providing a vehicle that when it scales up will make a real dent in that. Just our calculations for here, Amazon's U.S. revenues are roughly 2% of U.S. GDP. Emissions might be closer to 3, 2 or 3, depending based on their own Scope 3 emissions growing. So help us understand more of that strategic relationship with Amazon and through an ESG lens how that can help make a real impact?

Yes. I mean, as we sort of decided to go after the commercial side of our business, we sort of said, well, what's the ideal way to launch a fleet-based business, a business in which we're building lots of vehicles, but importantly, we want to participate in helping to operate all those vehicles, so fleet services, charging management, energy management. And as we made that list, Amazon's as the very top is sort of the perfect partner to go build out with. And what makes Amazon so interesting is the scale of impact that we drive in terms of not just the fleet that they operate, but by demonstrating to other large fleet operators, what can be done in terms of sophisticated and holistically managed large pools of vehicles, in terms of creating really easy sort of driver usage of those vehicles. And so certainly, there's a vehicle component to this, but as we've looked more broadly with Amazon, we've also been so wonderfully aligned in just thinking about the overall sustainability of the products and as part of their climate pledge they are so committed to that, that some of these questions we think about in terms of battery supply chain, it's key questions we get from them as a partner, they say, what are we doing to make sure we're securing the supply in the right way. So it's a great relationship. We could be more excited about seeing those vehicles on the road well. They're awesome. They're so cool and seeing them out -- they're now -- we're ramping there. So we're starting -- we'll soon start seeing a lot more of those delivering packages on the road, but they are remarkable products, and it really serves as a sort of the most visible part of our relationship with Amazon.

There's another question back here. Mark?

Yes. I guess just listening to the earlier conversation about the pinch points and where we're looking at the supply chain and having to move perhaps the South American markets for raw material availability. I guess as I take a step back, why not further localize production even closer to these mining regions, right? I mean, respecting that the U.S. is short on a lot of these minerals are leased in the scale that we need. How do you think about the localization of production relative to demand, right? I mean we're seeing this undoing of the globalization that we've had for the last few decades, and a lot of talk about near-shoring, but everything I'm hearing here would incentivize actually production perhaps even close to the mine and then products shipped out from a lower-cost region.

You're saying localized of vehicle production?

Localized vehicle production.

Yes. Well, is it with anything that's complex supply changes like the cost of shipping something, the type of workforce that's available to build the product so in a lot of cases where you would be shipping let's say raw material for batteries, you're shipping one element of that material. So maybe lithium hydroxide which we've talked about. But there needs to be other materials that ultimately go into the cell, so that may be copper foil, that may be electrolyte. So as Adam said, these supply chains are very, very complex and they do come from lots of different places. And then as it relates to that -- or actually, because of that, there's not a single location that's going to provide all the raw material for the cell. Essentially, you want to process to the level appropriate to ship. And recognizing what talent is available locally. And as it pertains to vehicles, the challenging part from a supply chain point of view, the ship is not, let's say, lithium carbonate or lithium hydroxide, it's shipping a wire harness or shipping seats or shipping tires for the vehicles. So the traditional automotive supply base actually tends to be more advantageous in terms of determining where a plant should be located. Now notwithstanding everything I just said, there's also needs to be real consideration on tariffs and given the job density that's created with vehicle production, what we may continue to see is increasing tariffs around driving localized assembly or production of vehicles given the preponderance of job creations at the vehicle level.

And then just given the recent inflationary environment as well, has that informed your perspective on how you're looking to model out the R2 platform, just given raw material costs from steel on down, have all escalated, does that change how you're thinking about your future iterations of the vehicle?

I think in some cases, there are some materials that we're seeing heightened volatility around and we're seeing spikes, but you can protect against that through appropriate management of the [indiscernible] market. They're also -- they're not representative of any systemic scarcity, they're representative of short-term anomalies. What we tend to focus on in terms of our material strategy is where are the areas where there's a true systemic shortage where what we produce today represents 5% of the global need in 20 years. And that's what makes the battery supply chain so unique different than, let's say, steel or different than, let's say aluminum. Aluminum and steel, you're going to see them spike up and down. But there's not the need to completely recreate those supply chains or I shouldn't say real recreate, completely build those supply chains where you have that a lot of the components that go into a battery. So in terms of how we think about the R2 product, we're very, very focused on making sure we have the right supply chains and the right partnerships across -- from semiconductors down to raw material. And then as we think about that product long term in the life cycle of that product, the -- making sure we have access to low-cost battery cell materials is a focus.

Just the last one for me to send it out. You established an initiative called Rivian, the Forever Initiative, where you donated 1% of the company. It's a philanthropic effort to observe open spaces and more like -- where is that money going exactly because they're now a shareholder of the company?

Yes. It's awesome. So just prior to our IPO, we took, as you said, 1% of our equity and placed into this -- into this broad effort around extending what we can do in terms of climate and what we can do in terms of creating natural carbon sinks and it's something we now call forever. And so we haven't announced any projects yet. But we are -- the team that we've put together for that is starting to look at those. And what's exciting is that if you think about impact you can have impact in a variety of ways, sort of think of a few key metrics. One is directly the products we build are more efficient, more sustainable than the alternative. So it's very direct. Somebody picks our product over something else, obvious. The second way, which is really important is to help essentially drive competition or instigate competition or inspire competition. So to the extent that the products we build raise the bar to the extent that they motivate others. So in the case of our truck, that was something we talked about a lot. We said we hope a lot of other manufacturers also electrify and that bar raising activity will drive more rapid electrification of this space. And then the same was true with what we've done with Amazon versus not lost on us that by them committing to electrify their fleet -- of their large fleets essentially had to respond to that bar raising activities. And the third area, which is -- question came before, policy matters a lot, and it's something we're focused on. We hope others are also continually pushing on this. We hope our policymakers respond accordingly. And then last is what forever was set up for, which is to say above and beyond the products we build, what can we do as a company that fits with our overall brand, but it's separate from the business, and that's what the preservation and conservation of some of these natural spaces, these natural carbon sinks that exist in the world today. And that's -- I'm really excited about what's to come there, but no news today.

No news today. We'll stay tuned. RJ, thanks so much for taking some time with us to discuss these important issues. It's such an important time. Appreciate that so much.

Thanks very much.

Yes. Got it. Thank you.