Rivian R2 battery one-ups the Tesla Model Y Juniper 4680 cells with higher energy capacity

In its latest quarterly results shareholder deck, Rivian has announced the propulsion system of the R2 compact SUV that is set to compete directly with the upcoming Tesla's Model Y Juniper facelift.

Despite all the upgrades it will bring, the Juniper refresh is expected to be priced along the lines of the current Model Y edition that starts at $44,990 before incentives.

Coincidentally, that is the price tag that Rivian has announced for the R2 as well, indicating that it expects to save big on production costs compared to its inaugural R1 line that starts at $69,900.

Rivian announced that the R2 and R3 will be powered by none other than LG's novel 4695 battery that packs six times the energy capacity of the 2170 cells it now uses in the R1 line and Tesla uses in the Model Y. Rivian and LG have signed a 5-year contract for 67 GWh worth of 4695 cells that will be good to go in up to 700,000 R2 SUVs.

Granted, Elon Musk said at the latest Tesla quarterly results press conference that the company may soon produce 4680 batteries that may be the cheapest made-in-US cells due to a combination of manufacturing advantages like the dry cathode method it mastered, and federal subsidies.

Rumor has it that next year Tesla plans to start making four different 4680 battery pack types - for the Cybertruck, the Model Y Juniper, the Model 3, and the Robotaxi - qualifying each for the federal tax credit.

The 4680 cells it will place in the Model Y Juniper, however, will be smaller than the 4695 cells that LG will be making for the Rivian R2 that have the same diameter, but are taller. Rivian says that the bigger cells will bring 45% improvement in manufacturability and battery pack assembly processing that will ultimately result in "a meaningful reduction in dollar per kilowatt-hour (kWh) at the pack level when compared to the R1 platform."

In short, Rivian will use battery cells with higher energy density than what Tesla will place in the Model Y Juniper in the US, leading to lower production costs and explaining the matching price tag. "Within the first year of production, the batteries are expected to be manufactured at LG's Queen Creek, Arizona plant, aligning with Rivian's focus on U.S. domestic manufacturing and IRA compliance," says Rivian, indicating that the R2 will also qualify for the full federal made-in-US tax credit.

Until recently, Tesla had trouble producing 4680 cells with the manufacturing savings that its suppliers Panasonic and LG were able to produce them. Only after introducing the first Cybertruck with 4680 battery made with the frugal dry cathode production method did it start bragging that it will achieve 4680 cost parity with LG and Panasonic, and may even go lower when accounting for all the federal subsidies involved.

Apparently, LG isn't sitting still, and its 4695 cells innovation could bring some production cost advantages for the Rivian R2 against the Model Y Juniper, depending on how fast LG starts producing them in Arizona to get the federal tax credit of $35 per kWh.

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