We couldn’t be more excited and bullish on this product. And we think the timing of it works out beautifully, in terms of the brand buildup that we’re driving with R1, and off the back of that to then have a product that is sized physically in terms of its footprint, as well as priced such that it can really capture the hearts and minds of buyers but also give customers a real choice. There’s an extreme vacuum of choice we feel in the sort of $45,000 to $50,000 price range for midsize SUVs. There’s just not a lot of great options. And as a result, we see very highly concentrated market share with Tesla, but we believe there’s a need for alternatives, and those alternatives need to be very robustly developed, with vertically integrated software electronics and deeply seamless user experience, user interface, which is, of course, what we’re developing with R2.
Henry Roberts: Awesome. Thanks for that. And then kind of just piggybacking off the software space, could you just update us again on some of the monetization opportunities you all see in the software segment kind of into next year and then kind of longer term?
RJ Scaringe: We’ve spoken about this before, but we really believe in terms of the large-scale opportunities to monetize, I think the most – the model that we think is going to fit and has shown to fit the most is around autonomy. And as we look at higher levels of autonomy, the ability to charge for that. And there’s a variety of ways that can be done, monthly payments, as well as upfront payment for access to a higher level of autonomy. We do think there’s been an over there’s been over – it’s been overestimated how much vehicle manufacturers can charge for every software feature. So the way that we think about it is, the features that have a lot of complexity and require a lot of development, autonomy being a great example of that, some of what we think of – as some of the really interesting immersive user experiences, particularly as you start to think about AR, and the way that the vehicle can interact with its environment.
We think those represent opportunities for an incremental charge above and beyond the base platform. But like the idea of charging for heated seats or charging for sort of a binary 1 or 0 like turning a feature on and off, we don’t think that, that’s going to land well with consumers, and we don’t think that that’s going to be a sustained model for charging for software. We think it really ties to the much more complex, much more heavy development platforms.
Operator: Thank you. Our last question is from Alex Potter with Piper Sandler. Your line is now open.
Alexander Potter: Perfect. Thanks a lot. I was wondering if you could give us an update on your battery strategy. I know that historically, you’ve been working in-house, potentially and having your own chemistry, your own cell. You’ve spoken relatively favorably about LFP. Any changes in your thinking there about what you’re doing now and also looking forward to R2?
RJ Scaringe: So this is a space that’s rapidly evolving. And as we if we look out over the next decade, one of the things that’s become very clear through both the lens of policy, but also through the lens of securing long-term supply, is the upstream supply of some of the raw materials. So lithium hydroxide, lithium carbonate, of course, nickel, thinking also very much and more recently about graphite. And each of these upstream raw materials has different implications around the cell manufacturing itself. So something like graphite, of course, has very closely tied relation to the anode chemistry, whereas, let’s say, lithium hydroxide is a little bit more commoditized and easier to integrate into a downstream supply. And so where we’ve been spending a lot of time is building a very robust strategy around each of the components of the cell and each of the raw materials of the cell from an upstream relationship point of view, and also making sure that those upstream relationships and the way we want to engage with those upstream suppliers integrates with the way we’ve structured our deals with battery cell suppliers, and in the case of R2, this is really important given the role that IRA is going to play, in terms of driving advantaged pricing with the consumer-facing tax credit and the effect that, that will have in terms of consumer behavior.
So we’re incredibly focused on upstream supply. I also think that the last 18 months have been a really challenging environment in that, particularly if you think about what happened in 2022 and into the beginning of 2023, where there was, I would say, a lot of bad deals done in the upstream raw material supply, where people are overpaying and inflating the market and it made it hard to do a good deal. We sort of watched some of that play out. And I’d say in the aftermath of some of that exuberance, there’s now a lot more rational deals that are on the table in terms of securing some of that upstream supply of raw materials.
Alexander Potter: Great. Okay. That was going to be my next question. So I guess maybe one last one, just a simple one. How many pre-March 1st orders do you still have in the backlog, presumably, there shouldn’t be very – many of them left, at what point is that going to be completely cleansed? Thanks.
Claire McDonough: Alex, we’ll continue to work through the pre-March 1st preorder base as a whole. And as we’ve talked about in the past, they’ll be feathered in both new orders as well as pre-March 1st orders, especially as we expand our production to include more Dual-Motor units, which weren’t available to those pre-March 1st consumers originally, and will introduce Max Pack, and there’s a variety of new introductions over the course of 2024 as well. So you’ll continue to see both new orders, as well as our pre-March 1st preorders feathered in together.
Operator: Thank you. I’d now like to turn the call back over to RJ Scaringe, for closing remarks.
RJ Scaringe: Well, thanks, everyone, for joining us on the call today. We’ve spent the – or the time, over the last quarter, really continue to focus on things we’ve said, we’re going to focus on driving up production volume and achieving better fixed cost leverage, achieving meaningful reductions in our material costs from a bill of materials point of view, working on building out our commercial and go-to-market operations to allow us to, not only continue driving demand, but to continue driving up our ASPs. And importantly, focused on developing our next set of products around the R2 platform, which, as you heard me say, we couldn’t be more excited about and really looking forward to showing to the world in the early part of next year.
As we now look out and particularly with all the discussion around long-term EV penetration and the timing for EV penetration, I want to just end by saying, we remain deeply convicted around the transition of the entirety of our transportation space, and we’re committed to building customers – or building products that our customers absolutely love, and building a brand around those products that continues to resonate across a variety of price points in a variety of form factors, which, of course, the R2 platform will really help deliver on. So with that, thank you, everyone, for joining. Look forward to our next call.
Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.
