Thank you for standing by, and welcome to Rivian Fourth Quarter Fiscal 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to Tim Bei, Vice President of Investor Relations. Please go ahead.

Good afternoon, and thank you for joining us for Rivian's fourth quarter 2021 earnings call. Joining us on today's call, we have RJ Scaringe, our Founder, Chairman, Chief Executive Officer; Jiten Behl, our Chief Growth Officer; and Claire McDonough, our Chief Financial Officer. A copy of today's shareholder letter is available on our Investor Relations website. Before we begin, I would like to remind you that during the course of this conference call, our comments and responses to your questions reflect management's views as of today only and will include statements related to our business that are forward-looking statements under federal securities laws, including without limitation, statements regarding our market opportunity, industry trends, business operations, strategy and goals, our second domestic manufacturing facility and our expectations regarding vehicle production. Actual results may differ materially from those contained in, or implied by, these forward-looking statements due to risks and uncertainties associated with our business, except as may be required by law, Rivian does not have any obligation to update or revise such statements if circumstances change. For a discussion of the material risks and other important factors that could impact actual results, please refer to the cautionary statements, risk factors contained in SEC filings and today's shareholder letter, both of which can be found on our website at rivian.com/investors. During this call, we will discuss both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures is provided in today's shareholder letter. With that, I'll turn the call over to RJ, who will begin with a few opening remarks.

Hello, everyone, and thank you for joining us this afternoon for our earnings call. Before we dive in, we wanted to first take a moment to address the crisis in Ukraine. As an organization, we are deeply concerned about Russia's invasion and stand by the people of Ukraine. The humanitarian crisis resulting from the current development is clearly becoming a focus of governments and companies around the world. We are inspired by the actions so many have taken and we'll continue to evaluate ways we at Rivian can show or support. As Tim mentioned, just before the call, we published our shareholder letter, which includes an overview of the progress we've made over the recent months. I'd encourage you to read it for additional details around some of the items we'll cover on today's call. We'll touch on our recent achievements, production progress and product development. Before we do that, I want to personally address last week's pricing announcement. We released an update to our R1 product portfolio that included our new dual motor propulsion system as well as our standard battery pack. The dual motor propulsion system consists of a single motor drive axle, where we've integrated the drive unit, the inverter, the gearbox into a really power-dense package. And in the dual motor application, we put one of those in the front and one of those in the rear of the vehicle. And in total, it delivers over 600 horsepower and achieve zero to 60 in less than four seconds. It's really cool. We also use that drive unit in a single motor application as a front-drive unit in our commercial delivery vans. Along with that, our standard battery pack is leveraging LFP and LFP chemistry, and that chemistry not only allows us to offer that pack at…

Thanks, RJ. I want to echo RJ's feeling of encouragement with the progress we're making at the plant, the robust technology roadmap we have in place and the strong backlog of demand from consumers and Amazon. I'll start with a review of our fourth quarter 2021 results. After years of development and design, 2021 was an important year for Rivian as we launched three vehicles across two vehicle platforms and initiated our first customer delivery. During the fourth quarter, we produced 1,003 vehicles and delivered 909 vehicles, which generated $54 million of revenue. As we've discussed in the past, as we ramp our production, the volumes being produced on our manufacturing lines are a small fraction of our current 150,000 units of annual capacity. In the near term, we expect this dynamic of high fixed costs associated with operating and running our large-scale, highly vertically integrated plant, amortized over a small but growing number of vehicles produced across the R1 and RCV platform, will continue to have a negative drag on gross profit. In addition, we experienced higher costs due to inflation and supply chain challenges, which resulted in increased bill of materials and higher logistics costs associated with expediting shipping of certain parts. As a result, in the fourth quarter, we generated a negative gross profit of $383 million. Additionally, we recorded a lower of cost or net realizable value, LCNRV adjustments to write down the value of certain inventory to the amount we anticipate receiving upon vehicle sale after considering future costs necessary to ready the inventory for sale. This expense negatively impacted gross profit in the fourth quarter, and we expect it to also impact upcoming quarters in the near term. Turning to operating expenses. Research and development expense for the quarter was $726 million as compared…

Thanks, Claire. We're no doubt experiencing one of the most challenging supply chain environment the automotive industry has ever seen. But as we look out 10 years from now, our products, our technology and our brand platform will help us capture substantial market share in the transportation space. I want to thank everybody for being with us today. And with that let me turn it over to the operator for questions.

Thank you. [Operator Instructions] First question is from Adam Jonas with Morgan Stanley. Your line is open

Hi. Thanks, everybody. So RJ and Claire, during -- in your S1 late last year, you had, at the time, 55,400 orders for the R1. And you stated that you expected to deliver those vehicles by late 2023. Can you confidently reiterate that you could deliver the 55,000th R1 by late 2023 today?

Hi, Adam. Yes, we can confidently say we'd be able to deliver the 55,000th vehicle by the end of 2023. And as you heard from Claire and I, right now, the real constraint for our production is within the supply chain. And this has been a major focus for us. Every morning starts with thinking about which suppliers we need to go speak to and push harder on to make sure they're ramping as fast as the rest of our production line. But ultimately, our ability to ramp this year will continue to be gated by the supplier ramps. And as you know, it's not all the bill of materials. It's just a small fraction of the bill of materials where we're having some of these supplier constraints.

Okay. RJ, I'm interpreting that as that you confidently reiterate that given your visibility on the supply constraints, this is how I'm interpreting that, meaning including the supply constraints.

Absolutely. Absolutely.

Thanks, RJ. Just as a follow-up, how many EDVs have you delivered to Amazon to date have actually been delivered and are in service?

So as you heard, Adam, we're in the process on EDV of ramping the production. And the production ramp on that vehicle is actually going a lot smoother than what we've seen on R1. And it's really capturing a lot of the lessons learned and a lot of the sort of organizational capabilities that we've built on the ramp-up of R1. And so, as we think about EDV, it is outrunning the supply chain by a significant degree today. So the vehicles that we're producing, we're using really to refine, as you heard from us, some of the software and integration, the digital integration with an Amazon system. So, we really look at the second quarter to see significant ramp-up of the EDV.

Okay. RJ, thanks for that. So, I'm interpreting that as there really aren't any significant numbers in the fleet right now. They're being built and up-fitted and improved and optimized in the factory, and we won't expect any -- I won't expect any material amount of EDV deliveries. I won't see them in neighborhoods delivering packages, for example, until sometime in the second quarter. Is that incorrect? Is that correct?

Well, I guess it depends on which neighborhoods you're in. But right now, we have a number of vehicles that are deployed as part of this testing pilot fleet. But in terms of significant scale, that's right, we wouldn't see significant scale until second quarter of this year.

Thanks, RJ.

Thank you. Our next question comes from John Murphy with Bank of America. Your line is open.

Good afternoon, guys. Maybe just to push a little bit harder on this volume number. I mean RJ, as you look at the supply disruption right now, I wonder if you could give us maybe a little bit more color about specific parts, is it semis, or we've heard just general malaise and snarl in supply chains. And then two, why you think this means ultimately for line expectations as we get beyond 2022 into 2023. Because I think generally, there's an expectation to do 100,000 units-plus in 2023. So I mean, I think you're talking about capacity to do 50,000 units right now on a tooled basis. I mean, do you think on a tooled basis, the supply chain gets -- issues get worked out that you could do something like 100,000 units in 2023?

Yes. Thanks, John. We're working as hard as we can to get the suppliers ramped. And as you said, certainly, the vast majority of our suppliers have been keeping up with the production ramp in the plant. And as the production rates continue to increase within our facility, the constraints within the supply base become even more apparent. And we have resources focused on any of those constraints to make sure we do everything we possibly can to expand our component supply because, ultimately, our goal is to deliver as many vehicles as we possibly can this year. And as you heard from Claire, we’re not for supplier constraints, we're confident we could achieve in excess of 50,000 vehicles this year. So what we've done is on these few areas where we do have constraints, we're working very closely, meaning we have our teams on site with those suppliers, in some cases, helping to operate certain shifts. In other cases where we've had third parties that are coming in to help improve the efficiency and the efficacy of those operations. But the areas that I just point that we're seeing more challenging as we ramp really are within the semiconductor space, the wire harness space and within the electronic space at some of the CMs, the contract manufacturers that are building the printed circuit boards for us. And so in each of those, there's different constraints. As you can imagine, in the semiconductor space, a lot of that is dealing with allocation. In the harness space, for our case, these harnesses are coming out of Mexico. There's a number of labor challenges there, many of which have been exacerbated by COVID. And that's very similar to some of the compute platforms as we start to get to much higher volumes. So there's a bit of a ripple effect of some of the component shortages that then feed into the assembly of those components into printed circuit boards.

Okay. That's very helpful. And then just a second question on the pricing peripheral. I mean, I think you guys have -- from my personal view, underpriced your products even before supply chain issues and inflation and everything because you have a very, very good product. So I think you kind of underestimated your own success here. Have you read anything into the folks that you haven't heard complain about the price increases and the people that have still ordered after the price increases? And do you think -- forget about the input cost inflation, that there might be even more opportunity on pricing on your vehicle. Because I mean, from my vantage point, you're a high-end Jeep Wrangler to somewhere or a high-end Range Rover. And I think you really have kind of maybe undershot structurally what you could do on pricing, forget about market dynamics at the moment, just based on the product itself. So I mean, one, what have you read, which we haven't heard? Two, people you -- have ordered post pricing increases? And three, do you think there might be even more room on pricing just because of the product itself?

Yes, John, we spent a lot of time looking at our pricing model. And as you heard from me, a big part of the new pricing model was to make sure we could really ingest our dual-motor and our standard battery pack within our price range, as you heard, from $67,500 up through $90,000-plus. And so with that now portfolio of three different drive -- or three different battery packs and two different drive configurations, we have a really nice mix of options for our customers and mix of configurations for our customers. And when you take a step back and look at the product at the new pricing levels, it is very competitively priced. If you look at our SUV, this is a three-row SUV with the large pack and the dual-motor, it's 0 to 60 in under four seconds. Over 320 miles in range. A true proper three-row vehicle with a lot of space for storage. I've been driving one now for over three months, incredibly fun. My wife and I love it. So I mean the products themselves, as you said, are exceptional, and we are seeing tremendous demand. Now since announcing the new pricing, we've also seen really no change in the rate at which pre-orders are coming in. And so customers also really see the value proposition, and it's really been validated and confirmed over the last week by seeing the continued influx of demand and, as we like to think about it, the continued growing backlog of demand.

Okay. That's great. Yes. No, I just think there was -- I think you may even have more room than you think, but that's a high-class problem to have. Thanks so much for the time.

Thanks, John.

Thank you. Your next question comes from Rod Lache with Wolfe Research. Your line is open.

Hi everybody. Just on the supplier issues, I understand the types of things that you're doing to help suppliers, but can you give us a sense of the visibility into bringing those constrained suppliers into where they need to be. So the suppliers of semis and wire harnesses and electronics that they are an issue, are they are they giving you a kind of a high confidence schedule at this point? And just give us a sense of the -- what that looks like?

Yes. Thanks, Rod. It really depends on the commodity area and on the supplier. And something like a wire harness or an ECU that's being built at a CM, at a contract manufacturer, in those situations, we have teams that are on site. We have very incredibly high -- an incredible high level of visibility into their operations, into the way in which they're running their business. And we have very close and transparent relationships with them. And on those, we're able to essentially build crisp line of sight, over the next several quarters of production. Now with that said, the challenge within the semiconductor space is there's a lot more unknowns there. And it's very different than, let's say, a wire harness production facility where we can put key members on the ground at the wire harness facility where we can actually help, we can actually assess. We're not able to send folks into foundries or send folks into semiconductor manufacturing sites to do the same type of hands-on support and/or auditing. So in that regard, I'm spending a lot of time and the rest of our senior leadership team is spending a lot of time with our semiconductor suppliers, and making sure we're securing the right allocation. And that allocation, as we start to get into higher production rates, especially in the back half of this year, is where we see risk. And it's what's caused us to make the adjustments to what we're guiding to in terms of production for this year. But I want to be very, very clear. We are pushing very hard on those suppliers. And if any of those suppliers are listening in here, you're going to continue to -- those suppliers will continue to hear from us. And we're going to be continuing to push very hard to get those numbers as high as possible, because they are constraining us. And it's quite painful when we see our production plants, really ramping and the lines running as we intend to have to throttle production because of those shortages of those parts. So this is something we're laser-focused on. A morning doesn't go by, where it's not a topic of conversation for us as a management team.

Okay. And you said that you're now at 2x the 2021 exit rate of production. Can you just tell us specifically what that means? What is the production per day? And what kind of cadence are you expecting over the course of this year? So if I look at 50,000 units a year, it looks like it would correspond eventually to something like 170 per week, on a -- or 770 a day on a six-day week and 50 weeks a year. Do you think you would get there towards the end of this year?

Again, ultimately, the rate at which we can produce is going to be gated by the number of components that we have. One of the things that's given us the confidence around the production ramp is the way we've been validating our production equipment, production lines and also making sure we're training our teams whilst accumulating enough parts to run the lines at their intended rate. So we may have not run one day during the week or we may finish a shift early because we're operating the lines at a much higher rate. So because of that, our lines are sitting still far more often than we'd like because we're waiting on components. So that gives us the confidence to state here that we see the ramp continuing to improve, but it is going -- or continuing to climb, but it's going to be limited, as I said, by unlocking some of these key components.

Okay. But there surely is some schedule that you have in your own mind and embedded in that 25,000 unit forecast. Can you just give us a sense of what that cadence looks like just so that we can get a sense of what your expectations are for the ramp of your suppliers?

So as you said, we're running at twice the rate of what our exit velocity was, our exit rate was for 2021. We will continue to climb. But ultimately, that 25,000 implies that we're up against a ceiling of supply, if you will. But that ceiling is something we're working very hard to remove so that we can continue ramping and continue getting more vehicles to customers.

Okay.

Just chiming in and provide a little bit more color on that point as well. As we think through the volumes for the year, we'd expect that those volumes would be more back half-weighted as we think about where we are in the S curve today and the trajectory of the manufacturing plant and making sure that our supply chain partners are also ramping their weekly output in lockstep with Rivian's, so that we can hold the rate that the production facility can deliver across the board. And so as we think about the cadence of the quarters for the year, I would think about us in this next quarter closing out Q1 and moving into Q2, starting to prioritize more of this and has been build into -- so that's sort of also part and parcel of slope of the curve that you could expect as you see us accelerating into the back half of the year. And the other important dimension here as well is really the cadence of the RCV platform as well, given some of the seasonality of Amazon, there's a heavy push for us to really ramp production throughout the course of Q2 and Q3, and then taper as they think about sort of their high season, which is sort of heading into that holiday period. So very much kind of a big push as we think about building up production into Q3 to deliver on that 25,000-plus unit.

Okay. Just to clarify, two times your production rate from the exit rate, are you talking something like 50 or 60 a day? Just to put some kind of a metric on where you're running right now. Can you share that?

I would just say we're not going to get into the habit of providing daily production rates. And I think as you rightfully have seen on our last earnings call, we gave you numbers and you could sort of benchmark until the overall daily production in those last handful of weeks of last quarter. But I just wanted to make sure we were providing sort of that overall visibility into the progress we're making.

Okay. Got you. Thank you.

And next question comes from Ryan Brinkman with JPMorgan. Your line is open.

Hi, thanks for taking my question. Relative to the earlier planned 17% to 20% price increase for current reservation holders, is this price increase needed to offset inflationary pressure, since the time of the IPO in order to meet the financial expectations you may have had at that time? And does that imply then that margin might now be lower than previously contemplated, at least until such time as you begin selling the new orders that you take at the higher price? And does this mean that prices, yes, in the out years will now be higher than previously contemplated, which could imply that volumes might be lower than previously contemplated? Or maybe because there's a general inflationary environment, including for battery metals and competitor vehicles, too, that kind of offset the impact of volume? How are you thinking about these different factors?

Sure. As your question indicates, there are many different factors that are driving what we both experienced over the last handful of months, in regards to the inflationary pressures in the market. But I think, as you heard in John's question as well, right, there's still a phenomenal value proposition for the vehicles, even at the revised pricing levels that we put out to the market, which, again, as RJ mentioned and touched upon, is really reinforced by the overall demand that we've seen post-pricing increase for those vehicles across the board. And as we think about, what's changed since that time of IPO right, we have both the largest factor here in these early stages of production is actually volume and rate. And so as you think about the fact that we have 150,000 units of annualized capacity at our plant in Normal, Illinois, and instead of higher volumes, as we had indicated, right, we have the ability to produce 50,000 units this year, the fact that we're supply constrained to 25,000 units this year is actually the most highly sensitive variable as you think about the impact on our gross margin. And so the supply chain environment is a key factor in regards to the margin rate that we expect to have. Inflation also has clearly been a factor here as well. Rivian is not alone in regards to the overall raw material input prices that are obviously impacting EVs across the board. And will continue to impact this base overall. I think that the important takeaway here is, right, our long-term targets are unchanged. We still have tremendous conviction around our ability to deliver against our 25% long-term gross profit margin, and we'll continue to see that opportunity. And importantly, as we think about the components of that margin, as we've talked about in the past, it's not just the vehicles we're providing, but importantly, it's the software and services and recurring revenue streams that we can earn, our post-initial purchase that helps us deliver that 25% margin and the opportunity to move overtime even beyond those levels. So in closing, I would just say that, right, we feel as though our vehicles are competitively priced today. We see tremendous demand in that backdrop. And as we look at the long-term, we see really no change to the overall margin trajectory and opportunity we have.

Great to hear. Thanks so much. And then just lastly, what are your thoughts on that battery and metals cost inflation? How do you think the increase in the price of nickel, which seems like it could be, hopefully in large part, temporary, but some of the other metals, too? How do you think that impacts the competitiveness of EVs versus ICE vehicles, understanding, too, that ICE vehicles have their own palladium and platinum and catalytic converter inflation problem to worry about as well. Do you have a sense for how these like competing inflationary cost pressures might net out and what the resulting impact could be on EV sales or EV penetration of total industry sales?

Ryan, as you said, we hope the inflation that nickel pricing very recently is short-lived. But the reality is there's going to continue to be movements around commodity pricing and it's going to be across a variety of commodities, whether you're looking at some of the commodities that go into catalysts, as you said, in an ICE vehicle versus, let's say, nickel and a battery cell. But I'd also point out, and I talked about this earlier, that we're developing a portfolio of battery solutions, inclusive of lithium ion phosphate and LFP pack. And one of the nice things about having multiple different chemistries across our portfolio is it essentially provides a bit of a hedge around some of the different materials that go into different battery chemistries, in this case, of course, referring to nickel. But these are -- this is something we're paying very close attention to. We fully recognize and fully analyze the implications of some of these different materials and the pricing of those materials, how that will be translated into our margin structure.

Very helpful. Thank you.

And your next question comes from Joseph Spak with RBC Capital Markets. Your line is open.

Thanks everyone. I guess to start, maybe -- can you just give us some color on what you actually saw in terms of cancellations and recouping of those orders from the pricing decision. I mean, I know reading message boards can lead you to a dark place, but you probably have better information than the rest of us. And then it's good to hear about the good rate on preorders since the pricing change. But can you give us some context? Is that in more for the new dual motor standard pack? Or are customers still also opting for the original cloud motor?

Yes, absolutely. So on 31, when we announced the new prices, we did see increased rate of cancellations in that 24-hour period between the price announcement and when we roll those prices back. But right after the reversals, we got massive reinstatement requests, and more than half of our customers requested to reinstate. So what we basically saw was the demand continues to be very robust and -- both from a reinstatement point of view as well as from the new orders point of view, as RJ mentioned. The rate at which the new orders are coming in is very comparable and similar to the rate at which the orders were coming in before our pricing announcement. So we -- it sort of validates the pricing model that we had shared with the world. And I think we continue to be very confident at the competitiveness of our product and how it's going to result in the growth of our backlog and demand going forward.

Joe, just to add a bit to that. I want to be clear that certainly, as you said, if you look at some of the online surveys, you come out with a very different perspective on what the canceling rate was. The decision we took was to ultimately honor the original configuration pricing, wasn't due to any cancellations, but rather was really because we have such a focus on our brand and the relationship we have with customers. They're -- this wasn't driven by some mass cancellation, but rather the recognition that the brand we're building is the foundation, is the platform upon, which ultimately we're going to be selling millions of different vehicles per year across different vehicle types and of course, across different markets. And these early customers are such a critical part of what we're building as an organization.

Yes, I would agree with that sentiment. As a second question, with the standard LFP packs that you mentioned in the opening remarks, will those be the Rivian-produced packs? Or are those still going to be sourced?

So great question, Joe. And we've talked about this a bit in the past. The way we've approached our battery cells and I'd say broadly, our approach to battery packs is you could really look at it across two arms. On one side, we're developing relationships with cell suppliers where we co-invest in capacity. And that may be high nickel cells like what we've launched with in the vehicles thus far. But it also includes LFP cells, which is actually what we're going to be launching later this year. But in parallel to that, and as your question implied, we're also developing in-house battery chemistries and in-house production capability. When I say in-house, that's entirely in-house, not through a joint venture or through a partnership structure. But the LFP that's first launching later this year, that's a cell that we've sourced through a partner and a cell that we're going to be building in that close partnership.

Okay. Thank you.

Thank you. And your next question comes from Alex Potter with Piper Sandler. Your line is open.

Okay, great. Thanks guys. So maybe first question, a quick one. Any chance you'd be willing to give a general idea of the mix breakdown, R1 versus the Amazon van in that 25,000 units?

What I would say is that the overall mix relatively hasn't changed from our original thoughts or forecasts overall.

Okay. Fair enough. So I hate to harp on this, I mean you're probably sick of talking about it and thinking about it. But obviously, supply chain, this is pain, it's coming through very clearly. I'm just wondering, if you take a step back and think about this strategically, philosophically, if you would have known everything that you know today, if you would have known this two years, three years ago and you were initially formulating your supply chain strategy, what would you have done differently? And looking forward to the plant that you have coming up in Georgia, how will you apply those learnings to that future product rollout? Or maybe you won't. Maybe you don't have any regrets about the way you've approached things. And I'd just be interested in hearing how you address that question? Thanks.

Yes. It's a great question, Alex. And we certainly have spent time saying how do we avoid some of these supplier constraints going forward. There's a couple of things I'd note here. And in the context of semiconductors, one of the challenges is we have a supply-demand imbalance as an industry. And as a result of that, suppliers are providing platforms or components on an allocation basis, and those allocations are largely being set at some multiple of last year's demand. And, of course, what we've seen is all the sources of demand, all the OEMs, in this case, are asking largely for more than the need. And so the semiconductor suppliers are then developing their own allocation models that essentially reference what they believe the real true demand is. So the challenge we have in this regard is we have to -- we don't have something to look back to, to say what was Q1 of 2021, like in terms of our demand profile. And with each of these semiconductor providers, we need to give them the confidence that we're capable of ramping. And of course, each semiconductor supplier asks, well, how -- if I'm semiconductor supplier X, how is semiconductor supplier Y doing, and wanting to sort of make sure that, their rate of supply and the allocation that they're providing to us is roughly equal to the rate of allocation that's coming from other semiconductor suppliers. So, it's a bit of almost like a game of scheduled chicken, if you will, between these different suppliers. And so, we've taken the approach of being very transparent and I guess, to be explicit, to being very aggressive with these suppliers to make sure we're driving them. And it's why I said earlier, for any of those suppliers that happen…

Thanks RJ, and that’s super helpful. I’ll now pass on.

Thank you. The next question comes from Mark Delaney with Goldman Sachs. Your line is open.

Yes. Good afternoon and thank you very much for taking the question. I was first hoping to better understand the production outlook of 25,000. One of the things we've seen for the industry broadly is a lot of unexpected issues have come off, suppliers can't meet the forecast that they provided. So, I'm hoping to better understand to what extent you're incorporating additional unexpected disruptions that may occur this year within that 25,000 production target? And I guess, if everybody delivered to plan, would the number actually end up being more than 25,000?

Yes. Thanks, Mark. We're certainly working as hard as we can to exceed that 25,000. And when we put that guidance together, we did it fully contemplating all the constraints that we see today as well as the -- where we see potential issues over the course of the next year. Of course, saying that and given the large number of unknowns and uncertainty in the system, it's impossible to predict everything, especially in this environment. But again, we're very focused on achieving as much as we can and fully utilizing the plant capacity that we have installed and the plant capacity that we've demonstrated thus far.

Understood. My second question was on the materials inflationary environment. I'm hoping to better understand that as well. Can you talk about to what extent you've been able to lock in any of the pricing, either in terms of financial hedges or fixed-price contracts? I think typically, in the industry, there's a lot of commodities pass through. And so it sounds like Rivian would be exposed to the higher materials cost if they do, in fact, stay at current levels. But hoping to better understand if you've been able to offset any of that? Thank you.

It's a good question, Mark. I think as we think about structuring and as we -- I should say, as we structured our supplier contracts leading into our launches across all three products, the R1T, the R1S and EDV, a lot of those contracts are tied to a component or a part or a system at a fixed price. So there's not a raw material pass-through. Of course, there are some contracts that have raw material pass-throughs, and it's really dependent on the type of contract and the type of component or system. The component of our systems, where a vast majority of the price of that item is carried by the commodity price, there may be those pass-throughs. But a lot of systems, most of the price is actually carried in the value-add on top of the raw material. So take, for example, a headlight as an example. Much of the headlight cost is actually the processing of the materials as opposed to the raw materials themselves. Now exceptions to that and examples where that's a bit different, of course, and we've talked about this already, really around the battery cell and so we see this with nickel. It's one of the reasons we're so focused on nickel. And I think I'm sure all of our colleagues across the industry are also very focused on this, because those types of contracts typically do have some level of some level of commodity pricing baked in.

Thank you.

Thank you. And ladies and gentlemen, this concludes our Q&A session. I will pass the call back to RJ Scaringe for his final remarks.

Thank you. Well, I appreciate everybody joining us for this call, and we enjoyed the questions and the discussion. We look forward to future discussions. Thanks so much.

And with that, we conclude our program. Thank you for your participation. And you may now disconnect.