How Rivian’s new batteries will cut EV costs

• Rivian will use LG Energy batteries made in Arizona for the R2 to meet US tax credit rules.
• Rivian expects a substantial drop in costs per kilowatt-hour and a 45% improvement in the assembly process.
• R2 production is set to start in 2026, helping Rivian stay competitive amid changing EV policies.

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What happened

Rivian announced its R2 SUV will use batteries made in Arizona by LG Energy Solution, shifting from South Korean production to meet IRA requirements. The Inflation Reduction Act (IRA) encourages US battery production for tax credits, a move supported by Elon Musk, who advocates “localization” for lower costs and higher efficiency.

The R2’s battery packs will be larger and more efficient, with Rivian expecting lower production costs and 45% faster assembly. These changes aim to boost Rivian’s competitiveness amid shifting subsidies and tariffs. Production of the R2 is set for 2026, aiming to offer a more affordable model to a broader customer base while meeting regulatory standards.

Also read: Who is R.J. Scalinger? Founder of Rivian, an engineer with a conscience

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Why it’s important

This shift is crucial for the EV industry, marking a broader trend toward US manufacturing driven by the IRA. By moving battery production to the US, Rivian aims to qualify for tax credits, making EVs more affordable and aligning with local production—a strategy that could give it an edge over Tesla and Ford.

This also highlights a surge in US battery investment, with companies like GM and Ford forming joint ventures to meet IRA standards. As policies shift, Rivian’s proactive approach could be key to its long-term success. This decision impacts Rivian’s costs and shows how government policies are reshaping the EV industry, spurring innovation and greener technologies.