By on March 3, 2022

On Tuesday, Rivian announced it would be increasing vehicle pricing by roughly 20 percent to account for higher inflationary pressures and higher component costs. It’s not the first electric vehicle startup to do so, or even the first automotive business that realized the hectic economic situation has created a window for expanding profit margins. But it was one of the few to get slapped in the face, metaphorically, after trying to get away with it.

Shares of the company began plummeting almost immediately as it endured widespread criticism, then people started canceling reservations. The plan would have made the $67,500 Rivian R1T electric pickup an $80,000 vehicle, while Rivian would have tacked on an additional $10,000 to the R1S SUV for a new ballpark total of $85,000. This included preorders, which would help to explain why everyone went bananas. But that particular aspect of the plan has been abandoned in an effort to save face and money. 

Prices for preorders (as of March 1st) will roll back to their previous sum. Rivian CEO R.J. Scaringe even issued a formal apology, adding that customers who decided to cancel their orders can have them back at the original rates.

“Earlier this week, we announced pricing increases that broke the trust we have worked to build with you. Since originally setting our pricing structure, and most especially in recent months, a lot has changed. The costs of the components and materials that go into building our vehicles have risen considerably,” wrote Scaringe. “Everything from semiconductors to sheet metal to seats has become more expensive and with this we have seen average new vehicle pricing across the U.S. rise more than 30 [percent] since 2018. Given our build lead up times, we need to plan production costs not only for today, but also for the future.”

If we’re going to suddenly start tacking five-figure price adjustments onto vehicles that already seemed kind of expensive due to inflation, we might as well all start buying bicycles and digging victory gardens. EVs were supposed to be less susceptible to economic pressures, all while offering lower manufacturing costs and lessened manpower. Has Rivian’s smaller size made it impossible to conduct business in a cost-effective manner? Are EVs not all they’re cracked up to be? Is the economy really in such a bad state? Or is cooperate greed just at an all-time high, with Rivian accidentally pushing people past their financial breaking point?

“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,” Scaringe continued. “We failed to appreciate how you viewed your configuration as price locked, and we wrongly assumed the announced Dual-Motor and Standard battery pack would provide configurations that would deliver price points similar to your original configuration. While this was the logic, it was wrong and we broke your trust in Rivian.”

How silly of people to assume the price they were told would also be the price they’d end up paying.

Rivian

In an attempt to be fair, I suppose we can mention that automotive transactions have been stuck at record highs for months. Regardless of who is doing the math, new vehicle prices have skyrocketed over the last twelve months and are averaging near $48,000. While this is largely the result of dealers gouging customers while inventories have remained brutally low (a trend several automakers, including GM, said they would continue indefinitely), inflation has played a relevant factor in obliterating factory incentives and public stupidity acceptance has allowed markups to continue.

A lot of companies don’t want to see this tainting their profit margins and have come up with a few interesting solutions, the worst of which is to simply make products substantially more expensive in a surprise announcement.

Tesla CEO Elon Musk quickly took to Twitter to insult the company, stating that Rivian’s “negative gross margin will be staggering”, adding that it would be practically impossible for other firms to make affordable electric pickup trucks if this is how business needs to be done. Though Tesla’s Cybertruck has also been delayed, allowing legacy manufacturers to beat it to the punch with models like the Ford F-150 Lightning and GMC Hummer EV, and the company likewise has a habit of making sudden pricing changes.

Considering Rivian’s existing business relationship with T. Rowe Price, Amazon, and the Ford Motor Company, I’m a little surprised to see it freaking out about finances. The company has been expanding like wild and currently has facilities scattered across the United States, with additional locations in Canada and the United Kingdom. I’ve even seen a couple of Rivian R1Ts on the road. But the company’s share price has been on the decline after an impressive IPO in November of 2021. This could be due to fears of the Fed raising interest rates or people losing faith in tech-focused stocks. Whatever the case, it’s hard to imagine its latest decision turning things around as quickly as it screwed them up — apology or not.

Amazon

[Images: Rivian; Amazon]

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48 Comments on “Rivian Rolls Back Price Increase After Making Everyone Angry...”


  • avatar
    Mike Beranek

    It’s still early. EVs have a long way to go. They’re not there yet.
    We’ll have to get used to this sort of shell game until the industry settles into the new paradigm.

    • 0 avatar

      And the new paradigm will be subscription model. New vehicles will be too expensive (and/or incomes too low) for consumers to afford unless they take 15 years loan which no one will give them. Subscription will not mean that you get the new vehicle – in most cases it will be a used car like long term rental. Subscription for new vehicle will be too high for middle class to afford. That is the new normal we are transitioning to. Billions of new consumers joining middle class around world and resources are limited on our devastated planet.

      • 0 avatar
        28-Cars-Later

        “Billions of new consumers joining middle class around world and resources are limited on our devastated planet.”

        Now that we’ve identified the problem, lets find a solution.

        • 0 avatar

          The solution is for white people to stop reproduce.

          • 0 avatar
            28-Cars-Later

            Not sure I agree with that solution.

          • 0 avatar

            It is called “Inclusive Capitalism”. According to facts they propose one billion population as an optimal for the planet Earth (see Duran Duran). That’s why Musk offers for the rest of people to move to Mars (it is a joke do not ask me for source or “fact checking”).

          • 0 avatar
            28-Cars-Later

            SS-18s on key targets is so much cheaper and easier.

          • 0 avatar

            @ ILO: According to the Guttmacher Institute, black Americans are experiencing a negative population growth rate in some areas of our country due to the high rate of abortions for that group so they are doing their part. It is statistically higher compared to any other people group.

            Have you stopped to consider who will be the firemen, garbage collectors, doctors, nurses, clerks, stock people, etc. when you’re old and can’t work any more if the world restricts population growth?

            A small contributing factor to the US tax base (not enough tax income to accomplish the lofty goals of government) is the 60+ million abortions that have been done since 1973 further making things more difficult compared to if those children would have been allowed to live and contribute to society. (And don’t give me the sorry excuse about those of that 60+ million that would have been ‘problems’ due to health concerns – it would, in essence, be statistically insignificant.)

        • 0 avatar
          ToolGuy

          “SS-18s on key targets…”

          Be extremely careful to stop short of threshold for nuclear winter. May seem “cheaper and easier” ahead of time, but requires [very] careful planning (and execution).

          Also be sure to allow for ‘competitive response’ [kind of like new vehicle incentives, back when those were fashionable].

          All of ‘yours’ + all of ‘theirs’ + all of ‘everyone else’s’ < threshold; otherwise we will [vastly] overshoot your ideal population goal.

          Thanks in advance.

          (Remember threshold is theoretical. Also could see unintended consequences [always a risk]. Good luck.)

          • 0 avatar
            28-Cars-Later

            We’ll be careful.

          • 0 avatar

            To learn more about long term goals of Inclusive Capitalism and have some fun too please read “Childhoods End” by Arthur Clarke. Arthur Clarke’s books contain answers to all questions, just like “The Godfather” does. And in long term USA as well as other nation-states will not exist.

          • 0 avatar
            28-Cars-Later

            Pretty sure that is the plan.

          • 0 avatar
            Lou_BC

            Population growth is slowing down. Logical immigration rules is a simple solution to lower birth rates in developed countries.

        • 0 avatar
          dal20402

          The solution starts with reforming our current land use and transportation laws that effectively mandate that nearly everyone in the US and Canada, whether they want to or not, must occupy at least a quarter-acre of land and drive a car for all transportation. (Right now you only get an exemption from those rules if you can afford to pay $1.5M or more for one of the few available existing dwellings in a city center.)

          Save those things for the people who actually want them; don’t force the people who don’t even want them to incur the environmental price for them.

          • 0 avatar
            Art Vandelay

            Most people don’t want 700 square feet, street parking (if they can swing a car), crummy urban schools for their kids and schlepping groceries up 4 flights of stairs. Suburbia is a thing because people.prefer it. We know…you have plays and restaurants. That’s great. Most people prefer square footage. Get a couple teenage boys and that little condo in the city becomes even smaller

          • 0 avatar
            28-Cars-Later

            “Get a couple teenage boys and that little condo in the city becomes even smaller”

            I agree but the Kool Kidz are not supposed to reproduce, they have pets instead.

            “crummy urban schools for their kids”

            When this occurs, our social betters use private schools.

            “We know…you have plays and restaurants.”

            Between rents, urban crime, and Bidenflation I don’t think too many urban proles less than mid upper class status are enjoying these with any regularity.

          • 0 avatar
            dal20402

            I live with two kids in a 1300 sf townhouse in the heart of an urban neighborhood. Life is good.

            Getting groceries is easier than it is in suburbia. Walk 400 feet, buy them, walk 400 feet back, you’re home. No ridiculous parking lots or 3-minute traffic lights that you miss.

            There’s plenty of room and privacy for everyone. I have a home office in the basement, my wife is often working at the kitchen table in the middle level, and the kids are upstairs playing with their toys or (too often) their iPads.

            If you are so secure that people like suburbia better, try un-banning cities, and see what happens. Under current law, it is literally illegal to build new city anywhere in my state. The result is that property in the city is outlandishly expensive, while property in any suburb that doesn’t have Microsoft neighboring it is somewhat reasonable.

          • 0 avatar
            ajla

            There are degrees of suburbs.
            I know some people that live in suburban neighborhoods outside Grand Rapids or Lexington and it’s perfectly quaint and wonderful, largely allowing the best parts or rural and urban living.
            Then I know some people in suburbs outside Orlando or Chicago that live in pure gridlock mega-sprawl hell.

          • 0 avatar
            dal20402

            ajla – absolutely, and if you look into what makes the difference between the pleasant suburbs and the ones that are pits of hell, you’ll find the answer has to do with how good conditions are for people outside a car. Where the streets aren’t too wide, there are continuous sidewalks, there are walkable commercial areas, and logical non-circuitous routes are available for walkers and bikers, things are good. Where you have nine-lane roads with few sidewalks, nothing but big-box stores, and just one entrance to massive subdivisions, the atmosphere gets really unpleasant.

  • avatar
    JMII

    “We failed to appreciate how you viewed your configuration as price locked”

    This entire thing breaks down the above quote.

    They took orders at price X. Since then costs have increased to X+Y. This would be like buying a plane ticket a year ago when fuel prices were low and nobody was traveling. Then showing up to the gate and getting hit with “fuel and ride surcharge” to account for current conditions. I bet the fine print said price subject to change but people don’t read that stuff and thus got upset at the new price.

  • avatar
    Luke42

    For me personally, and EV is worth about twice what a comparable ICE car costs.

    In person, the Rivian R1T feels like a Tacoma — but with some luxury features to help justify the doubled price.

    The R1T is a sweet ride, but it was appropriately priced before the price hike.

  • avatar
    Kendahl

    Raising the price on people who have already placed orders was a dumb move. The bad will created exceeds the additional revenue. It would be fair to raise the price on those who have yet to order even though it would drive some of them away.

    I’d be willing to consider Rivian if they built a sedan or coupe similar to the Tesla Model 3 or smaller. It’s not the price; it’s the size. Think Golf R or Audi RS3. I don’t want a pickup and I don’t want an SUV.

  • avatar
    BEPLA

    This isn’t about electric or ICE – This is about a startup vs an established companies, and hedging on your materials & supplies. Established companies carry contracts on the financial markets for futures in steel, aluminum, rubber etc – the same way Southwest and Carnival hedge on jet fuel, fuel oil, new-builds, etc – so that fluctuations on the spot market don’t affect their costs of doing business as dramatically as it could. Just as you would raise your prices if you were a restaurant owner and the cost of Beef went up, Rivian can’t just sell at whatever was profitable last week when prices go up dramatically for future orders. It’s clear Rivian have focused on the engineering and not on the financial side of production – and they let themselves get burned – That’s all.

  • avatar
    SCE to AUX

    “…a window for expanding profit margins”

    For dealers, certainly, but in Rivian’s case, it’s a matter of survival. Most people thought their excellent truck was priced too low to begin with, and they were certainly losing money on it.

    “Tesla CEO Elon Musk quickly took to Twitter to insult the company, stating that Rivian’s “negative gross margin will be staggering”, adding that it would be practically impossible for other firms to make affordable electric pickup trucks if this is how business needs to be done.”

    Mr Musk knows better than anyone about staggering negative gross margins; Tesla didn’t make a profit for 15 years. And the Cybertruck lives in a glass house – both prototypes, I mean. Its design choices will make it a money loser unless it gets a *substantial* price increase. That $39900 Cybertruck will never exist.

    • 0 avatar
      BEPLA

      Tesla didn’t make a profit as an entity because it was building out its Supercharger and Battery plant infrastructure, plus design and factory lines for new models. The cars themselves earned a profit which enabled all that – there’s an article someplace where the analysis was done telling us what each car cost to build, and it was well under the sales price.

    • 0 avatar
      jeanbaptiste

      “ or even the first automotive business that realized the hectic economic situation has created a window for expanding profit margins”

      As someone with first hand experience in dealing with supply chain issues with electrical components, please take a minute to hear me before you continue to think that the price increases are about “expanding profit margins”. The supply chain situation is so bad that every product that requires various chips are being slammed by this crunch. It’s more about maintaining existing margins and to cover the 100x increase in chip cost (if you can find them) and then all shipping has gone crazy with 10x increases in container and air shipments. Saying that this is about expanding profit margins is inflammatory and shows that you don’t have an understanding of what is going on. You imply it’s a “greed” thing and simply not the case. Company’s just want to maintain the margin that they went into the transaction with.

      This situation is a no win for everyone involved with Rivian. Without profit dollars to help fund the purchase of future parts and components and without any $$ to expand the company into the necessary support side of the vehicle market, Rivian will not be able to sustain itself. Anyone owning a Rivian will take a huge drop in vehicle value if the manufacturer goes out of business. Remember when deawoo went out of business?

      • 0 avatar
        Matt Posky

        Spoiler alert: Rampant government overspending, money printing, foolish trade restrictions, and companies thinking they could get away with using a bare-minimum of employees while they closed down offices for two years is what kicked off this disaster. Dealers made record profits last year by gouging everyone while they were desperate. Several automakers are now saying they’ll be pursing higher margin vehicles, fewer employees, and lower production figures overall because it’s more profitable. Greed has and will forever continue to play a factor in this kind of stuff.

        I’m not blind to the laws of supply and demand either. But I would suggest that demand is about to dwindle down to nothing if we’re going to see $15,000 surprise price adjustment and nobody but the executives working at these companies will care that they were just trying to maintain their margins. I’m not reveling in this, just trying to point out how ridiculous it’s all getting.

    • 0 avatar
      Matt Posky

      I bashed Tesla for being unprofitable without carbon credits for years and still don’t like how it operates. That latter bit can be applied to most automakers.

      I’ve not had a chance to examine Rivian’s finances in great detail. If it’s just trying to tread water, then it has my pity. Considering that its nearly impossible to launch a new auto company, I would like to see any burgeoning brand succeed. However this particular increase remains absolutely ridiculous, made more so by the possibility of Rivian intentionally pricing the car too low prior to launch. Meanwhile, other automakers are indeed saying they’re trying to find ways to become more profitable and are plotting staff cuts, spicier MSRPs, and reduced production schedules. They want to make more money per car while slashing overhead. It’s not implausible to assume this could become an industrywide trend.

      • 0 avatar
        SCE to AUX

        @Matt Posky:

        High prices are definitely a trend. But IMO Rivian’s dramatic price increase is just a reflection of two realities: initial underpricing, and actual COGS increases.

        This would be a non-story if Rivian’s introductory prices had been 10% higher than they were.

        By any measure, Tesla is profitable now. But it is spending gazillions on infrastructure, which is something any serious EV mfr will have to do. This means they’ll all be losing money on these adventures for a long time. Rivian just wants the party to last longer than a year.

        • 0 avatar
          JMII

          “initial underpricing, and actual COGS increases”

          Truth. They launched at the worse possible time. The fact that they actually made this thing, and by all accounts it works well, is amazing. I thought it was more vaporwear.

  • avatar

    The problem is that Rivian does not have unions. It is a joke.

    • 0 avatar
      Art Vandelay

      Man you just don’t know what to do without Slavuta around, do you? Glad you haven’t been sent to the front like him yet. Don’t get too comfortable though…doesn’t look like.it is going well for you guys

      • 0 avatar

        Art, what “you guys” supposed to mean? Are you going to start a war on assumption that we are Russians? If that is the case Slavuta is not Russian but Ukrainian, he said so himself. Probably you do not know but “Slavuta” is a city in Western Ukraine, “Western” means “anti-Russian”. It had sizable Jewish population during WW2 and was occupied by Germans. I will stop right here. I am not a Russian too.

        • 0 avatar
          mcs

          @ilo: I’m not even sure which side he would end up on. All bets are off when someone invades your country. I had some surprises. One friend’s father who had deep contacts inside the russian military got out of Kyiv to Poland about a month before things started. I was surprised. I didn’t think he was still connected. I had a couple of non-Ukrainian friends at the border near Kharkiv. I was in frequent contact with them until they were out. Since then, I’ve been busy with other stuff.

          By the way, this is a war that there has been a big technological shift with the russians trying to use obsolete methods. Tanks are obsolete. No match for a Javelin. There is also a lot of use of TB2 and Punisher drones. Another factor has been the fact that the russians stupidly bought cheap Chinese “yellow sea” tires for their vehicles and are paying the price. Thanks China!

          • 0 avatar

            If anything Russians achieved by poorly executed invasion is to alert sleeping giant (Germany), revitalize NATO, possibly unite USA and warn China against invading Taiwan or other Asian countries.

            But what we are actually observing is the transition or attempt of transition to the new World Order – from Pax Americana to the multipolar world of 21 century. Post Cold War world demonstrated the rise of new world powers: EU, Anglo-Saxon union (a.k.a five eyes, a.k.a Anglosphere) led by USA which also includes Eastern European allies and some other countries, China, Trans-Pacific union led by USA and Euro-Asian union led by Russia with post Soviet Union states forced to join. Russia is simply demonstrating that Eastern part of Ukraine belongs not to Anglosphere but to Russiasphere.

  • avatar
    Imagefont

    But but but…. Moores law something! Batteries are getting cheaper because… some reason! Or maybe battery components have reached scale and they’re getting more expensive like, I don’t know,… everything?
    Price elasticity if demand.

  • avatar
    MitchConner

    Gee, if manufacturers all just adopt a direct to consumer sales approach — everything will be so much better. The savings by eliminating those evil dealer middlemen will be passed along to consumers. We’ll have fixed pricing that will never, ever change. I can go on my computer and order the exact car I want with the click of a button — and it’ll be delivered to my door in 15 minutes. The lion will lay down with the lamb. The rivers will flow with milk and honey. Elon Musk will figure out how to turn depleted batteries into Hershey bars — with your choice of nuts!

    One day, the simple minded will figure out the dealer model is the best way for consumers to buy a car — as long as they have a functioning brain and a spine.

    • 0 avatar
      dal20402

      An idealized dealer model where the manufacturers and dealers are on equal footing, maybe.

      The one we have today is a straightforward case of legislative capture, where the dealers have sufficient political power at the state level to maintain anticompetitive franchise laws that allow them to extract economic rents without providing any value in return except surplus foursquare worksheets and a bad image for the entire auto industry.

  • avatar
    JD-Shifty

    look at all the fox news grandpa’s sticking up for Trump, Gene Simmons, Mike Pillow and Putin

    • 0 avatar
      Art Vandelay

      Look at you making more nonsensical and unrelated political posts like the uninformed fnckhead you are.

      Troll somewhere else, then go fnck yourself cheese d!ck

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