• Donald Trump’s tariff proposals and his refusal of electric vehicles could have a significant impact on auto manufacturers.
• Rivian CEO RJ Scaringe said during an earnings call that the company was preparing for the tariffs.
• The fate of the $7,500 electric vehicle tax credit granted under the Biden administration remains unclear.

Electric vehicle company Rivien says it is already preparing for the impact that President-elect Donald Trump’s proposed tariff increase would have on its supply chain.

RJ Scaringe, CEO of Rivian said that to prepare for the potential customs tariffs proposed by Trump on foreign products, the company has been thinking about sourcing materials for its next product at a lower cost. SUV, the R2.

“The R2 procurement process is something that we looked at very strategically and certainly considered even before the election, what the impact would be, if the overall approach to tariffs changed,” Scaringe said during the company’s third-quarter earnings conference call Thursday — a day after the election was called for Trump.

“So we’ve focused largely on finding suppliers who won’t be subject to significant tariffs.”

The CEO said Rivian also structured its partnerships with foreign suppliers that could be subject to tariffs so that the company “doesn’t bear a lot of the risk.” He did not specify where the suppliers are based.

Still, analysts say uncertainty surrounding the new administration could already be harming slowdown in demand for electric vehicles.

Shares of Lucid and Rivian – small automakers dedicated to electric vehicles – saw a brief jolt. Rivian’s stock fell as much as 9.7% on Wednesday before recovering some of the losses the next day.

During his election campaign, the president-elect also targeted leaders of the Biden administration. Inflation Reduction Act, which includes a $7,500 tax credit for electric SUVs and pickup trucks that cost $80,000 or less.

Claire McDonough, Rivian’s chief financial officer, said on the call that Rivian customers eligible for the tax credit are largely those who rent. The CFO said “lease penetration,” or the percentage of total cars sold as leases, was 42%.

The Rivian R1S and R1T pickup trucks have a base price of $75,900 and $69,900 respectively, while the company plans to sell the R2 for $45,000.

“Given the price of our vehicles and overall income levels, most of our customers do not qualify for a financed or cash purchase,” she said.

Tom Narayan, an auto analyst at RBC Capital Markets, told Business Insider he was concerned Rivian could lose the tax credit under the new administration.

A Rivian spokesperson declined to comment.

Scaringe said on the call that Rivian is also watching for potential policy impacts on the “upstream supply chain,” which includes raw materials.

In addition to the uncertainty that accompanies the second Trump administration, Rivian continues to face profitability hurdles – a challenge many new automakers face, with the exception of Tesla.

Rivian reported negative gross profit of $392 million in the third quarter, compared to negative gross profit of $477 million for the same period last year.

Total third-quarter revenue declined 35% from last year to $874 million, driven by the delivery of 10,018 vehicles, the company reported. Regulatory credits, or credits automakers receive from the government to produce electric vehicles, accounted for $8 million of total third-quarter 2024 revenue.

Scaringe said he was optimistic about Rivian’s path to profitability, noting an expected 20% reduction in material costs to produce Rivian’s pickup truck, the R1, between the first and fourth quarters of this year.

“Looking forward, we’re excited to work with the new administration,” Scaringe said in an interview with CNBC before the earnings conference call, “but really our goal is to make sure that vehicles can really help customers transition from the internal combustion engine to electrification.”