Rivian’s CFO hints the tip of EV tax credit means producers are being pressured to lastly make extra inexpensive electrical vehicles

That’s not an option for pure-play EV makers like Rivian. Instead, the Irvine, California-based manufacturer has its sights set firmly on the launch next year of its second-generation product: a midsize SUV called the R2 that’ll start at $45,000.

“One of our core strategies and approaches to offset some of the impacts of the…elimination of some of the credits for consumers is to bring a product to market that opens up the addressable market of consumers that can now say yes to a Rivian,” Claire McDonough, Rivian’s CFO, said during a Reuters automotive conference in Detroit on Wednesday.

Goodbye, tax credits: President Donald Trump’s tax and budget bill ended tax credits of up to $7,500 on eligible EV purchases as of Sept. 30, and EV demand is expected to cool without federal incentives. Rivian recently cut 4.5% of its workforce, or about 600 workers, The Wall Street Journal reported.

“With the changing operating backdrop, we had to rethink how we are scaling our go-to-market functions,” CEO RJ Scaringe wrote to employees, per the WSJ.

Pricing starts above $70,000 for the EV maker’s current passenger vehicles.

“It meant that we needed to reduce our costs in our vehicle roadmap,” McDonough said of the end of the EV tax credits. “And the key strategy for us is to bring to market a more mass-market-priced product, which is coming out next year.”

R2: Rivian employees have been building R2 prototypes in California, and the vehicle is now going through various validation and durability tests, McDonough said. The manufacturer has added a 1.1 million-square-foot expansion to its Normal, Illinois, plant to support R2 production. The company remains “on track” to launch production in the first half of next year, according to McDonough.

“As we look at R2, that’s where we’re opening up a much larger aperture of potential new customers into the brand and business,” McDonough told reporters at an earlier event. “We’re really excited about the opportunity to take younger consumers, older consumers that don’t necessarily need a three-row SUV, for example.”

The Illinois plant delivered just over 50,000 R1 units last year. With R2, the capacity of the plant can go up to 215,000 units annually. And Rivian plans to break ground on a new plant in Georgia next year to support production of the R2 and the future R3.

“You’ll see additional savings as we reduce and spread our overhead and cost across a much larger volume of products,” McDonough said.

As for Rivian’s path to profitability, McDonough noted cost savings derived from the launch of the second-generation R1 last year, and said the company will achieve further reductions with the R2.

Rivian employees were able to cut the material costs in half compared to R1, and to reduce manufacturing costs via scale and design efficiencies. McDonough also pointed to opportunities to raise awareness of the brand with the introduction of R2, for a company that she acknowledged is “not yet a household name.”

Execs also see opportunities to advance the company’s autonomous features with the R2, which will feature in-house-designed cameras.

“That allows us to have a closed, end-to-end data loop, and being vertically integrated across our software stack, across the hardware design of the product, and then the buildout of our large driving model as well, which is an in-house neural net that’s capturing data from our customer fleet over time,” McDonough said. “R2 is also really important for Rivian as we think about the continued progress of our autonomous growth, given the proliferation of our car park with a product like R2.”

This report was originally published by Tech Brew.