Rivian’s CFO hints the end of EV tax credits means manufacturers are being forced to finally make more affordable electric cars

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

“One of our primary strategies and approaches to offset some of the effects of … eliminating some of the credits for consumers is to bring a product to market that opens up an addressable market of consumers who can now say yes to a Rivian vehicle,” Rivian CFO Claire McDonough said during the Reuters Automotive Conference in Detroit on Wednesday.

Goodbye tax breaks: president Donald Trump’s tax and budget bill ended tax breaks of up to $7,500 on qualifying electric vehicle purchases effective Sept. 30, and demand for electric vehicles 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 have had to rethink how we expand our functionality in the market,” CEO RJ Scaringe wrote to employees, according to the Wall Street Journal.

Pricing starts at more than $70,000 for the electric automaker’s current passenger cars.

“It meant we needed to lower our costs on our vehicle roadmap,” McDonough said of the end of EV tax credits. “The main strategy for us is to bring a more mass market priced product to the market, which will be launched next year.”

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

“When we look at R2, that’s where we open a much bigger opening for potential new customers in the brand and the business,” McDonough told reporters at a previous event. “We’re really excited about the opportunity to appeal to younger consumers and older consumers who 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 plant capacity can reach 215,000 units per year. Rivian plans to break ground on a new factory in Georgia next year to support future R2 and R3 production.

“You will see additional savings when we reduce and spread overhead and costs across a much larger volume of products,” McDonough said.

As for Rivian’s path to profitability, McDonough pointed to the cost savings resulting 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 material costs in half compared to the R1, and reduce manufacturing costs through efficiencies of scale and design. McDonough also pointed to opportunities to increase brand awareness by introducing R2, for a company she admitted is “not yet a household name.”

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

“This allows us to have a closed, end-to-end data loop, integrate vertically across our software stack, across the hardware design of the product, and then build our big driving model as well, which is an internal neural network that captures data from our customers’ fleet over time,” McDonough said. “The R2 is also very important to Rivian as we think about the continued advancement of our standalone growth, given the expansion of our parking lot with a product like the R2.”

This report was originally published by Artistic drink.