The Rivian founder and CEO expects the small SUV R2, priced from $45,000, to be fully competitive with Tesla’s top-selling Model Y when sales begin early next year.
Rivian has had a rocky time since it began selling electric vehicles in 2021. It missed initial volume goals, leading to back-to-back years of weak sales. Then there have been post-COVID parts shortages, inflation and steel and aluminum tariffs. And now, it’s facing a federal administration that’s no fan of EVs. But CEO RJ Scaringe says he’s more optimistic than ever ahead of the company’s next major product launch: the R2 small electric SUV that will go head-to-head with Tesla’s top-selling Model Y.
“I’m very, very biased, but I think R2 is going to drive a step-change in overall EV adoption,” he told Forbes. “Not too different from what happened with Tesla.”
Rivian is starting up production of the R2, which will be tens of thousands of dollars cheaper and smaller than Rivian’s current R1S SUV and R1T pickup, with U.S. sales to begin in early 2026. It’s priced from $45,000, which is below the current average selling price for all new U.S. vehicles. Rivian will have the capacity to build more than 160,000 R2s annually at its Normal, Illinois factory that currently makes its R1 models and EDV commercial vans that Amazon and other companies use. Aside from being priced in line with the top-selling U.S. small crossover category, Scaringe says the R2 will stand out for both its tech inside the cabin, 300-mile range and ability to actually handle off-road driving.
After the challenges of the last few years, it needs to be as good as he claims and a hit with consumers. It’s Rivian’s “make or break vehicle,” said Ed Kim, president and chief analyst for industry researcher AutoPacific. “The R1 [SUV] was a big and expensive statement piece and an introduction to the brand, but R2 is critical. I would say the company’s survival depends on the success of R2 as its volume model.”
Rivian’s R2 electric SUV goes on sale in early 2026.
Eric Anderson for Rivian
Tesla’s Y has been its core moneymaker and ranks as the world’s best-selling EV. In the U.S. this year through the third quarter, Tesla has sold more than 265,000 units of the small crossover, aided by a spike in sales after the Trump administration phased out a $7,500 tax credit last month. In the electric crossover space, Y’s closest competitor is GM’s electric Equinox, which racked up 52,000 U.S. sales through September–less than a fifth of its volume.
Rivian’s big bet on R2 comes at a tricky time for the U.S. EV market. Last quarter, carbuyers rushed to get the federal discount before it went away, leading to a surge in sales of battery-powered models, which could eat into future demand. Big automakers such as General Motors are tweaking their EV plans for now; Nissan and Honda are discontinuing some electric models; and Ford CEO Jim Farley said U.S. demand for battery-powered autos could drop by half with the end of federal incentives.
Scaringe thinks this will separate the companies that are all in on EVs and those that sold them to comply with federal emissions and fuel-efficiency rules, which the Trump administration has weakened. Going forward, large automakers that offered deeply discounted leases to maintain sales of electric models that weren’t compelling are “just not going to build EVs,” he said. “The benefit of that to us, and I’d say equally to Tesla, is that the market will start to behave more naturally. You won’t have $19 lease deals on vehicles that just create downward pricing pressure on everybody.”
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The five-passenger R2, unlike the Model Y, is designed to look and perform like a more traditional SUV, with a more squared-off body and higher ground clearance, along the lines of Ford’s Bronco or the Land Rover Defender. Like the R1 models, it has the company’s distinctive convex-shaped headlights reminiscent of Japanese anime characters.
It will also have upgradeable software for future improvements to the infotainment system and other features. Rivian’s in-house software tech is a strength among automotive competitors, and “it’s that platform that we licensed as part of the $5.8 billion deal we did with Volkswagen,” Scaringe said. Announced in 2024, the deal includes the formation of a joint venture in which Rivian-developed software EV-specific electrical architecture is to be used in new models across VW’s multiple brands.
Following the model’s U.S. introduction in 2026, Rivian plans to export it to Europe, but he declined to say exactly when that would happen. The company will provide an update on R2 and other developments when it releases third-quarter results on Nov. 4.
Despite an industrywide surge in EV sales in the third quarter to more than 10% market share of new vehicle sales, the U.S. remains a laggard globally. Battery-powered models now account for 50% of new vehicle sales in China, the world’s biggest auto market, and represent 23% in the five biggest EU countries, according to S&P Global. And in 2026, given the pullback by some automakers and loss of federal incentives, Cox Automotive expects EVs in the U.S. to be flat at about 8% of new vehicle sales.
Tesla’s image and sales, which are down about 6% this year despite its third-quarter surge, have been hurt by Elon Musk’s highly public role running the Trump administration’s so-called Department of Government Efficiency in the year’s first half. The billionaire’s right-wing politics and controversial social media comments have turned off many buyers who no longer want to be associated with a brand that was once synonymous with fighting climate change through clean transportation and clean energy.
While Musk remains a polarizing figure on his X social media platform, Tesla is trying to shore up its sales with a cheaper “Standard” grade Model Y, now starting at $39,990. But so far, it’s garnering lukewarm reviews: “Some of the changes feel cheap and somewhat cynical,” according to Edmunds, an automotive shopping and data site.
A Tesla Model Y in front of the company’s store in Colma, California.
© 2025 Bloomberg Finance LP
Scaringe was inspired by Tesla but differs sharply from Musk in style and public image. He’s a polite executive with a PhD in mechanical engineering from MIT, married with three sons (Musk has at least 14 children from three different women) and a vegan with a love of outdoor sports. He talks regularly about the need to transition to EVs for the benefit of society–which Musk does less and less these days–and avoids commenting on politics and posting inflammatory statements on social media.
Just how much people like and buy the R2 won’t be known until sales launch early next year. If it can crack even 100,000 R2 sales annually, that would be a huge accomplishment, said AutoPacific’s Kim.
“There’s a massive chasm between Model Y and second place,” he said. “So the big question is: does Rivian as a brand have the legs to generate six-figure volumes out of R2? Literally no automaker other than Tesla has been able to pull that off.”
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Source: https://www.forbes.com/sites/alanohnsman/2025/10/20/rj-scaringe-is-betting-his-new-electric-suv-will-make-rivian-the-next-tesla/
