Rivian R1S

Rivian Retreats on Price Hike After Buyers Rebel

Rivian this week raced to damage control after triggering a potentially wholesale exodus of buyers.

Rivian has won plenty of praise since it began rolling out the R1T pickup and R1S sport-utility vehicle late last year. But it heard mostly complaints and condemnations this week when it told customers they would face a 17% price increase for the truck and 20% for the SUV.

The news led to a flood of canceled orders and jarred Wall Street. Those who’ve invested in the startup saw its stock close Thursday at just under $51 a share, down more than 70% from its 52-week high.

As news channels were posting stories describing the mess, Rivian co-founder and CEO RJ Scaringe backtracked.

“Earlier this week, we announced pricing increases that broke the trust we have worked to build with you,” he wrote in a letter to customers shared with the media and investors.

Rivian then said it would reverse the price bump — but only for those who had already preordered.

Rivian R1T and R1S - driving in woods

Broken Promises

According to Scaringe, “a lot has changed” since Rivian first announced pricing last year.

“The costs of the components and materials that go into building our vehicles have risen considerably. Everything from semiconductors to sheet metal to seats has become more expensive,” Scaringe explained.

“As we worked to update pricing to reflect these cost increases, we wrongly decided to make these changes apply to all future deliveries, including pre-existing configured preorders. It was wrong, and we broke your trust in Rivian.”

So those who placed an order for a Rivian will pay what they originally expected. And the automaker noted that it has an all-forgiven policy for those who canceled orders in protest.

They can reinstate their orders in the original configuration and pay the same price they expected.

Rivian R1T - splashing water rear 3-4

Prices Still Go Up for New Customers

For those who didn’t preorder before March 1? That’s another matter entirely. The price hikes will stay in effect. So an R1T Adventure model with the quad-motor all-wheel-drive system and midsize 314-mile battery pack will jump 17%, to $85,000. An R1S Adventure SUV with a similar drivetrain package jumps 20% to $90,000.

What sort of long-term impact the misstep will have is uncertain. “One of the things we learned over time is that when an automaker makes a mistake, the faster they correct it, the easier it is to overcome,” said Stephanie Brinley, principal auto analyst with IHS Markit. “This could be just a blip.”

Perhaps, but an embarrassing one. It even got the mercurial Elon Musk, the Twitter-loving CEO of rival Tesla, to weigh in. He caustically tweeted that Rivian’s “negative gross [profit] margin will be staggering.”

Of course, Musk has pickup-truck headaches of his own. Tesla’s promised Cybertruck has been delayed repeatedly. It won’t reach the market until at least 2023, Musk recently confirmed, while raising some flags that it might not even make it into production.

Limiting Demand

The Rivian models are based aimed at “lifestyle” buyers rather than those who need a truck for work, said analyst Binley. That means pricing is a “little more flexible.” Nonetheless, she said, that does “limit” the brand’s potential market.

Rivian Assembly Line
Normal, Illinois Rivian assembly line; (photo/Rivian)

And that could be a concern as Rivian prepares to move forward with a new plant in Georgia that would have the capacity to produce 400,000 vehicles annually — on top of the 150,000 that can be assembled at its first plant in Normal, Ill.

Traditional automakers will now have a bit more room to undercut Rivian as they bring their own all-electric pickups to market. While General Motors pushed even more up-market with the initial $112,595 version of the GMC Hummer EV, it plans to follow with a Chevrolet Silverado EV that will start at $41,595.

And the Ford F-150 Lightning will launch this summer and carry a base price of $39,974. Of course, both of those Detroit models will be offered with an array of options and configurations, pushing their price tags up substantially.

Rivian R1T - off-road

Rivian’s Tough Spot

Rivian isn’t the only automaker facing challenges with rising raw material and production costs. Automakers, in general, have not only been raising prices but also slashing back on incentives. A recent study by Kelley Blue Book found that buyers paid over MSRP in January on nearly 83% of new vehicles.

But Rivian appears to have been burying its head in the sand until now. In a lawsuit filed against the automaker, former Sales and Marketing Chief Laura Schwab claims one reason she was ousted was because she questioned the wisdom of the automaker’s starting price of $67,500.

Schwab said she felt the products were underpriced. Apparently, Rivian now agrees.

Paul Eisenstein

Paul A. Eisenstein is an award-winning publisher, photographer, editor, and one of the world’s most widely published automotive journalists. His work appears in a wide range of print, broadcast, and electronic outlets, including AutoWise, GearJunkie, NBC News, Forbes Wheels, and his own automotive website, TheDetroitBureau.com. He’s a North American Car and Truck of the Year juror, and board member and past president of the Automotive Press Association. J.D. Power also named him a “Pioneer of the Internet."