Rivian Faces Rising Costs and Supply Chain Strains Amid New U.S. Auto Tariffs

U.S. electric vehicle maker Rivian is facing mounting supply chain and cost pressures following the announcement of new tariffs on imported vehicles and auto parts set to take effect later this year.

The measures, introduced last month by former President Donald Trump, include a 25% tariff on imported vehicles starting April 3, 2025, and additional levies on auto parts beginning in May. Rivian, which produces its R1T pickup, R1S SUV, and commercial vans at its plant in Normal, Illinois, said the global complexity of the automotive supply chain poses compliance challenges, despite efforts to rely on domestic sourcing.

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“One of the things with automotive is the supply chain is so complex, where we have hundreds of suppliers providing parts… but those suppliers have suppliers, and then in turn, those suppliers have suppliers,” Rivian CEO RJ Scaringe told Fox Business. He described Rivian’s sourcing as “very U.S.-centric” but acknowledged the industry-wide reliance on international components.

In addition to tariff pressures, automakers are contending with tightened Chinese export controls on rare-earth materials, which are essential for EV motor magnets and battery production. The restrictions were introduced after the U.S. imposed a 145% tariff on Chinese imports. Scaringe described the trade barriers as “a real challenge for electric vehicles.”

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Battery costs, which make up roughly 40% of an EV’s price, had been declining, with Goldman Sachs projecting a 50% drop between 2023 and 2026. However, the shift in trade policy could reverse that trend. “A U.S. car made entirely with U.S. parts is a fictional tale,” said Wedbush analyst Dan Ives, who called the tariffs a source of “pure chaos” for the auto industry.

Analysts warn the policy changes could lead to vehicle price hikes of $5,000 to $10,000, squeezing margins for automakers such as Rivian, whose vehicles currently start at around $70,000. With costs rising and global trade tensions evolving, Rivian’s growth outlook may be affected by potential production slowdowns and tighter margins.

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