If Rivian meets demand for the R2, it may shake up the U.S. electric vehicle market like no EV since the Tesla Model 3.

After test-driving the mid-size Rivian R2 Performance for a week ( see my review ), I see a shakeup coming. I test a lot of EVs and no electric car has seriously challenged Tesla in the U.S. since Model 3 deliveries began in 2017. But if any EV is capable of being a disrupter it’s the R2. It’s comfortable, fast, versatile, rugged, and future-proof. (The Tesla Roadster , set for a big Oct. 1 reveal, doesn’t count: at an expected $200,000, it’s not a mass-market car.)

Despite Price, R2 Demand Is Strong: Morgan Stanley

Morgan Stanley had a lot to say about the R2 at its Autos & Shared Mobility event, held September 15-17 in Dana Point, California. “The discussion reinforced our view that [R2] demand is not the primary near-term concern. Launch Edition conversion has exceeded management’s expectations despite the ~$57k starting price,” Morgan Stanley said in a September 18 research note following the event, which included discussions with Rivian CEO and founder RJ Scaringe. “Test-drive activity is running at roughly 2x prior levels and the customer base is broadening beyond early EV adopters,” Morgan analysts added.

The biggest question is: can Rivian deliver. “We believe the debate is gradually shifting away from demand uncertainty…toward a ‘show-me’ story around the production ramp, cost reductions, and improvements in autonomy functionality, which admittedly reduces our conviction in the call,” the investment bank said.

Morgan Stanley is upbeat – mostly. “We fundamentally believe that R2 has all the right characteristics to be a true game-changer for RIVN, and await clear evidence that execution on BOM and margin improvement will follow,” Morgan said, referring to bill of materials or the total cost of all the parts, components, and raw materials that go into building each vehicle.

The “price-leading R2 model won’t be available until 2027,” Car and Driver Editor-in-Chief Tony Quiroga told me in an email. The Launch Package Performance R2 “price lines up with the 510-hp Model Y Performance,” said Quiroga, referring to Tesla’s priciest Model Y. The R2 Launch Package is an exact price match for the Model Y Performance at $57,990. But the “R2 has the ground clearance to venture off road, something Model Y owners don’t do on purpose,” he added. Rivian is promoting future 2027 trims on its website that start at $44,990. The R2’s long-term success is contingent on Rivian following through with cheaper R2 trims over the next 12 months, according to Quiroga.

My Take: Lots Of R2 Upside But Autonomy Is Not (Quite) There Yet

Newer vehicles – let’s say, post-2012 Model S – are truly computers on wheels that require regular software updates. Just like an iPhone. Tesla understands that. While I believe the R2 and upcoming R3 will be future-proof (e.g., having the necessary sensors and processors, including upcoming front-facing long-range lidar), Rivian has to make that future happen. That means following through on software updates that enable, for example, fully automated highway driving and, eventually, city-street smart AI similar to Tesla’s Full Self-Driving.

That said, Rivian’s commitment to update transparency reflects how seriously it takes autonomy: Rivian owners get a notification on the center display and in the Rivian app when an update is available. This is crucial. By comparison, legacy automakers don’t fully understand the importance of transparent, timely, regular Over-The-Air (OTA) updates yet. Tesla, of course, makes frequent updates a centerpiece of its vehicles.

To recap, based on my testing the R2 for a week, the R2 excels at seamlessly switching between off-road toughness and on-road polish. This is something the Model Y does not have. I won’t rehash my review here but just reemphasize that the R2 appears to be an extremely competitive rival to the Model Y and I expect it to be the first major challenge to the Y’s dominance.