Rivian (NASDAQ: RIVN) has a lot going for it right now. The company is charging ahead toward positive gross profits in the fourth quarter, starting a pre-owned program to generate new revenue, expanding its leasing program, building delivery vans for Amazon and AT&T, and most of all preparing its upcoming product pipeline of the R2, R3, and R3X, among other things. Despite the excitement surrounding the R2, there’s a crucial step that Rivian is taking that investors might not be fully considering.

Headed overseas

Most investors understandably think of the upcoming R2, set to launch in early 2026, as the key driving force to boosting sales in the U.S. market. It’s true; the more affordable R2, which is targeting a price tag around $45,000, far less than the low to mid-$70,000’s for its R1T and R1S, will raise sales in the U.S. market, but it also has a huge upcoming role overseas.

Rivian has no plans to sell the R1T and R1S in Europe, at least not to date, but they have planned to launch the R2 in Europe, and they are already testing the waters with a rental program. While the R1S doesn’t sell in Europe, the electric SUV is now available to rent in the U.K.

Rental firm EVision is offering the Rivian R1S, which can be rented for one day to three years. For context, EVision is the U.K.’s first and largest pure EV rental company, and it offers many popular names including Tesla models and the Porsche Taycan, among others.

The R2’s move into Europe will be a big step for Rivian, which will face stiff competition including from highly subsidized and well-received Chinese EVs, which might not be slowed much by steep tariffs from Europe and the U.S., and different consumer preferences.

Tariff speed bump

In fact, using the U.S. and its 100% tariff as an example — Europe’s tariffs on Chinese EVs are a bit more gentle — China’s leading EV producer, BYD, is likely to remain unaffected by these tariffs and continue business mostly as usual.

Even with a 100% tariff, BYD would remain the U.S.’s cheapest option for EVs and could undercut American brands. EV industry at a price tag of $25,000 or less. The story is similar in Europe, where Chinese EVs are already trying to take market share.

That’s because BYD’s cheapest electric car, the Seagull EV, which does well in China, starts at under $10,000. One reason Chinese EVs are so far ahead is that the government has highly subsidized the companies to spur an early-mover advantage — which it has successfully done. Already, Chinese automakers have an advantage with supply chains, technology, and production, which have combined to enable much lower prices.

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The Chinese EV market is simply years ahead of the United States’ EV market, especially considering that in July, EVs generated over 50% of passenger vehicle sales in China for the first time, while in the U.S., EV market share was only 8.5%.

The good news

Fortunately, for Rivian investors, Rivian will rarely compete directly with Chinese EVs overseas, as many of those models are passenger cars, while Rivian has stuck with its strategy for trucks and SUVs, with the R2 being a crossover. Rivian’s R2 will be a massive boost to U.S. sales and a driving force to the company working its way toward profitability. Yet it will also be a doozy of a step for Rivian to expand sales overseas, where it will face stiff competition and different consumer preferences.

If Rivian’s R2 is a smash hit, here and overseas, the start-up EV will certainly have separated itself from other start-up EV makers.

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Rivian’s Next Step Will be a Doozy was originally published by The Motley Fool