Emmanuel Rosner: Great. Thank you.
Operator: Thank you. And our next question comes from Shreyas Patil with Wolfe Research. Your line is open.
Shreyas Patil: Hey, thanks a lot for taking my question. RJ, I’m just curious how we should think about the speed at which you could ramp up R2 as we move into ’26. I know it’s still early, but with a lot of the innovations that you’ve already talked about around gigacasting and structural battery packs, the new simplified ECU architecture. Just how should we think about the pace at which you could get to volume production once R2 gets going.
RJ Scaringe: Hey, Shreyas, there’s just three elements I’d call out. The first is just our experience in learning and growth as a company in terms of managing and running a launch. And if I wind the clock back to when we first launched R1T relative to where we are today. The strength of our operations organization, the strength of our launch teams and then the strength of our entire development process as that blends into the launch process is so much higher given the number of products we’ve launched and the number of iterations we’ve gone through there. So with that said, key enablers for a smooth launch are first and foremost, making sure the supply base can support the launch. And so we’ve built a robust supply base, a supply chain team that not only is responsible for curing those supplier relationships and putting in place those contracts, but importantly also ensuring the development of those components and the launch of those components are at the quality levels that will support a the rapid ramp-up of our plan.
And of course, it’s in the interest of the suppliers also have a rapid ramp-up. Everybody wants to ramp as quickly as possible. So the health of not only our process, but the health of the way we’re managing the supply base for R2. And I should say that’s been — should be evidenced by what we will see and what we’ll demonstrate here with the re-ramp post this launch. We’ve also seen it with the ramp of our in-house drive units. We’ve seen it with the re-ramp of our EDV program. But the last item I’d call out is just the nature of the product has been designed from the get-go to also ramp very easily. So really heavy focus on an efficient design and a design that allows us to very easily put the vehicle together and takes away any of the risk items that we’ve either encountered on R1 or have addressed in R1 over the last two years.
Shreyas Patil: Okay. All right. Right. Thanks a lot. And maybe just a point of clarification for Claire. When you talk about a reaching gross profit in the fourth quarter of this year, first, is that a run rate figure for Q4? And then secondly does that exclude the various cost of revenue efficiency initiatives that you’ve talked about? It looks like that’s being excluded from the EBITDA calculation. I just wanted to make sure if that’s also excluded from the gross profit target?
Claire Mcdonough: Sure, Shreyas. As we look to Q4, we don’t expect there to be some of those similar charges as we had in Q1 of this year that were really predominantly related to the Peregrine shutdown and some of the changes in supplier contracts that we mentioned itself. So we do expect Q4 to be gross profit positive for the quarter and that sets us up nicely as we think about achieving positive gross profit for the full year of 2025 on a go forward basis as well.
Shreyas Patil: Okay, great. Thanks a lot.
Operator: Thank you. And our last question comes from Joseph Spak with UBS. Your line is open.
Joseph Spak: Hi. Thank you very much, team. Claire, just to go back to the capacity commentary because I know you said after launch had planned changes. My understanding was that, that 215,000 requires an addition, an additional paint shop. Is that still accurate? And like what’s sort of the timing for that because I like is that going to be in advance of the R2 launch or you’re going to sort of wait to see how the R2 launch is going before you start adding some of that capacity?
Claire Mcdonough: Sure, Joe. As we look at the paint shop capacity in the plant, we’re evaluating a number of different strategies to achieve the 215,000 units of total capacity. And so that, that could be within our existing paint shop that could be adding additional capacity beyond that. So it’s something we’re actively looking at and studying.
Joseph Spak: And remind [Technical Difficulty] in the paint shop or the current capacity of the paint shop then? It’s below that 215,000.
Claire Mcdonough: The current capacity is 150,000 units in the paint shop.
Joseph Spak: Okay. And then RJ just on the demand generation activities like the 28-K demo rides, the 91% increase like that feels significant. And you mentioned that it’s an effective demand-generation strategy. Obviously, getting potential customers in the vehicle is great. Is there anything you could tell us though about conversion or like how should we like measure that? Like in what context should we take the 28-K demos because in the last quarter you mentioned right the guide is dependent on improvement in the order book and it seems like this is what would help drive that. So I think it’s important to understand how we like either conversion or what sort of context we should take that number.
RJ Scaringe: Yeah, Joe. As I said in my opening remarks, demo drives is a really critical focus for us in terms of expanding awareness of the brands, top of funnel demand and then translating that top of funnel demand all the way down through purchase. And so that 28,000 test drives or demo drives that we gave in Q1, that’s roughly a 90% increase over what we did in Q4 2023. So it was a significant step-up in it. It was the result of us also leveraging our service network to administer a lot of those test drives. We’re really encouraged by the results of that program, but it’s one of many initiatives we have. And I do want to just make sure I call out, we’ve also continued to expand our leasing program, which now includes R1S. We launched R2 and the R3, which had an outstanding effect of just creating awareness around the brand. And we were encouraged by the early results that we’re seeing.
Joseph Spak: So you’re satisfied with that improvement in the order book to hit, to hit the guidance for the year.
RJ Scaringe: Yeah, as I said, we’re encouraged with what we’ve done so far. And of course it satisfies a funny word. I’d say my job is to never be satisfied, but I’d say we’re very encouraged.
Joseph Spak: Okay. Thank you.
Operator: Thank you. That’s all the time we have for questions. I’d like to turn the call back over to RJ Scaringe for closing remarks.
