Rivian Automotive Inc. (NASDAQ:RIVN) CEO RJ Scaringe, during the automaker’s second-quarter earnings call on Thursday, shared his view on why Chinese auto companies were hard to compete against, and it all comes down to the cost structure.

Chinese Cost Structure Differs From the US

Scaringe was asked about how benchmarking Chinese platforms could help develop future Rivian products like the R3 and so on. The Rivian CEO said that Chinese vehicles, like Rivians, were probably purchased not just by automakers, but also by benchmarking companies to take apart.

He then said that there was not much of a difference in “how a Chinese vehicle is built relative to a vehicle built in the West in terms of the manufacturing approaches.” He added that methods like “high-pressure die castings” and more were deployed across all “best-in-class vehicles.”

Scaringe then weighed in on the differences between the manufacturing costs between China and the U.S., saying that there was a “much lower labor cost in China,” as well as a lower capital cost structure. “In many cases, the capital cost is zero, meaning it’s being provided by the local government,” he said.

The result is, according to Scaringe, a much lower production cost compared to the West. He then said these factors raise questions around supply chain strategy.

Scaringe outlined that if the world was operating on completely open trade, Rivian would optimize around countries with the “lowest input cost structure, the lowest labor cost, lowest energy cost, lowest land cost, lowest cost of capital.” He then said that given the current situation, Rivian thought it best if certain components are “sourced from the United States.”

Rivian’s Uber Partnership

The CEO was also asked for his views about Rivian’s partnership with Uber Technologies Inc. (NYSE:UBER), which he called “fantastic” during the earnings call and that the automaker was “encouraged” by the partnership. Scaringe said Rivian plans on deploying fully-autonomous Robotaxis across cities by 2028.

Rivian’s CFO and Executive VP, Claire McDonough, also shared that Rivian received an additional $250 million investment from Uber. Rivian is targeting Level 3 eyes-off self-driving capabilities in its vehicles by 2027 and Level 4 robotaxi functionality in 2028.

Rivian reported its second-quarter revenue of $1.66 billion, up 27% YoY and beating the market consensus of $1.51 billion. The automaker also recorded an EPS loss of 63 cents per share, beating a Street estimate of a loss of 74 cents per share. The automaker expects to deliver 65,000 to 70,000 vehicles for the full year.

Benzinga Edge Rankings show Rivian scores well on the Momentum metric, while also providing a favorable price trend in the Short, Medium and Long term.

Price Action: Rivian Automotive shares were up 3.15% to $17.36 during overnight trading on Thursday.

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