RJ Scaringe bets his new electric SUV will make Rivian the next Tesla

Rivian’s founder and CEO expects the R2 small SUV, priced at $45,000, to be fully competitive with Tesla’s best-selling Model Y when sales begin early next year.

---

A.Ivian had a difficult time since it began selling electric vehicles in 2021. It failed to meet its initial volume targets, leading to consecutive years of low sales. Then there were post-COVID parts shortages, inflation and tariffs on steel and aluminum. And now he faces a federal administration that’s not a fan of electric vehicles. 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 take on Tesla’s best-selling Model Y.

“I’m very, very biased, but I think R2 is going to drive a step change in overall electric vehicle adoption,” he said. Forbes. “Not much different from what happened with Tesla.”

Rivian is starting 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 beginning in early 2026. It is priced at $45,000, which is lower than the current average selling price of all new vehicles in the United States. Rivian will have the capacity to build more than 160,000 R2s per year at its Normal, Illinois, factory, which currently makes its R1 models and EDV commercial vans that Amazon and other companies use. In addition to being priced in line with the best-selling U.S. small crossover class, Scaringe says the R2 will stand out both for its technology inside the cabin, its 300-mile range, and its ability to actually handle off-road driving.

“The benefit for us, and I would say also for Tesla, is that the market will start to behave more naturally”

After the challenges of recent years, it needs to be as good as it claims to be and be successful with consumers. It’s Rivian’s “breakthrough vehicle,” said Ed Kim, president and chief analyst at industry researcher AutoPacific. “The R1 (SUV) was an expensive showpiece and introduction to the brand, but the R2 is essential. I would say the survival of the company depends on the success of the R2 as a volume model.”

Rivian’s R2 electric SUV will go on sale in early 2026.

Eric Anderson for Rivian

Tesla’s Y has been its main source of revenue and ranks among the best-selling electric vehicles in the world. In the United States this year through the third quarter, Tesla sold more than 265,000 units of the small crossover, helped by a surge 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 had 52,000 U.S. sales through September, less than a fifth of its volume.

Rivian’s big bet on R2 comes at a delicate time for the US electric vehicle market. Last quarter, car buyers rushed to take advantage of the federal rebate before it disappeared, leading to a surge in sales of battery-powered models that could eat into future demand. Major automakers such as General Motors are fine-tuning their plans for electric vehicles at the moment; Nissan and Honda abandon some electric models; and Ford CEO Jim Farley said U.S. demand for battery-powered cars could fall by half as federal incentives end.

Scaringe believes it will separate companies that are betting entirely on electric vehicles and those that are selling them to comply with federal emissions and fuel efficiency rules, which the Trump administration has weakened. In the future, major automakers that offered deeply discounted leases to maintain sales of electric models that weren’t compelling “simply won’t build electric vehicles,” he said. “The benefit for us, and I would say for Tesla as well, is that the market will start to behave more naturally. You won’t have $19 leases on vehicles that just create downward price pressure for everyone.”

---

For the latest news on clean technology and sustainability, register here for our Current Climate newsletter.

---

The five-passenger R2, unlike the Model Y, is designed to look and operate like a more traditional SUV, with a boxier body and higher ground clearance, like Ford’s Bronco or Land Rover Defender. Like the R1 models, it features the company’s distinctive convex-shaped headlights reminiscent of Japanese models. animated characters.

It will also have upgradeable software for future improvements to the infotainment system and other features. Rivian’s in-house software technology is an asset among auto industry competitors, and “that’s the platform we licensed as part of the $5.8 billion deal we did with Volkswagen,” Scaringe said. Announced in 2024, the agreement includes the formation of a joint venture in which the electric vehicle-specific electrical architecture developed by Rivian is to be used in new models of VW’s multiple brands.

After the model is introduced in the United States in 2026, Rivian plans to export it to Europe, but it declined to say exactly when that would happen. The company will provide an update on R2 and other developments when it reports third-quarter results on November 4.

Despite a surge in electric vehicle sales industry-wide in the third quarter, reaching more than 10% market share of new vehicle sales, the United States continues to lag behind globally. Battery-powered models now account for 50% of new vehicle sales in China, the world’s largest auto market, and 23% in the five largest EU countries, according to S&P Global. And in 2026, given the withdrawal of some automakers and the loss of federal incentives, Cox Automotive expects electric vehicles in the United States to stagnate at about 8% of new vehicle sales.

Tesla’s image and sales, which are down about 6% this year despite the third-quarter rise, have been hurt by Elon Musk’s very public role as head of the Trump administration’s so-called Department of Government Effectiveness in the first half of the year. The billionaire’s right-wing politics and controversial comments on social media have turned off many shoppers who no longer want to be associated with a brand once synonymous with fighting climate change through clean transportation and energy.

“There is a huge gulf between Model Y and second place”

While Musk remains a polarizing figure on his social media platform But so far, reviews have been mixed: “Some of the changes seem cheap and somewhat cynical,” according to Edmunds, an auto sales 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 polished executive, with a doctorate in mechanical engineering from MIT, married with three sons (Musk has at least 14 children by three different women), and a vegan and lover of outdoor sports. He regularly speaks about the need to transition to electric vehicles for the benefit of society – something Musk does less and less these days – and avoids commenting on politics and posting inflammatory statements on social media.

We won’t know how much people like and buy the R2 until sales launch early next year. If it could sell even 100,000 R2s a year, that would be a huge accomplishment, AutoPacific’s Kim said.

“There’s a huge gulf between Model Y and second place,” he said. “So the big question is: Does Rivian, as a brand, have the means to generate six-figure volumes from R2? Literally no automaker other than Tesla has been able to achieve that.”

More from Forbes

ForbesTesla’s sales surge is a sugar high fueled by less musk and Trump’s electric vehicle tax credit cutBy Alan OhnsmanForbesVolkswagen invests up to $5 billion in RivianBy Alan OhnsmanForbesHow RJ Scaringe Leads Rivian Straight to Elon MuskBy Alan Ohnsman