Rivian cancels price increases for pre-orders after outcry

Friday, 4 March 2022

Rivian Automotive Inc. rolled back price increases on its debut electric vehicles for existing customers, marking an embarrassing about-face for the EV maker as it ramps up production and seeks to win over more car buyers.

The automaker was hit by customer cancellations this week after it raised the sticker prices of its battery-electric R1T pickup by 17 per cent and its R1S SUV by 20 per cent, citing higher input costs and a shortage of semiconductors.

Rivian declined to specify how many cancellations it received.

'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,' Chief Executive Officer R.J. Scaringe said in a letter to customers Thursday.

'We made a mistake in how we approached our pricing changes, and what is important now is that we fix it.'

Rivian upped the price of the R1S SUV by 20 per cent, leading to a number of customers cancelling orders.

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Rivian said it would honour the original price for customers who placed preorders prior to March 1, when the increase was announced. Buyers who subsequently cancelled will be allowed to reinstate orders at the original price, timing and configuration.

Shares of Irvine, California-based Rivian reversed gains after the announcement, paring a drop of as much as 6.6 per cent to trade down 2.6 per cent to US$52.13 as of 11:58 a.m. in New York. It was part of a decline in many automaker stocks amid supply chain disruption concerns due to the conflict in Ukraine.

The roll-back on pricing could cost Rivian around US$850 million in future revenues, assuming cancellations, RBC Capital Markets analyst Joseph Spak wrote in a note to clients on Thursday.

Spak, who has a neutral rating and US$116 price target on the stock, said the higher prices going forward could make it more difficult for the startup to attract new consumers.

'The thesis had been that Rivian could sell whatever it could make, but there may now be some more holes in that,' Spak wrote.

Preorder customers of the debut spec R1T with a quad-motor, all-wheel drive and a large battery pack will pay the original US$67,500 cost.

With the increases, new customers who didn't place an order before March 1 will pay around US$79,500. The R1S with the same specifications will go back to around US$70,000 for early customers and rise to US$84,500 for new buyers.