Rivian started March announcing prices would go up. All vehicles that were not delivered until that point would get the price hike, which Reuters said could be as high as 20%. It seems RJ Scaringe heard what furious reservation holders had to say: the Rivian CEO decided his company would honor the prices preorder holders already had.
In an email message to these customers, Scaringe said that increasing the price “broke the trust” the company worked to build with them. After all, until Rivian started delivering its EVs, giving it $1,000 to reserve a vehicle was a leap of faith. Sure, Amazon and Ford were among its investors, but nobody could ensure Rivian was more than just a promise. People would have a hard time going after Ford or Amazon if Rivian simply vanished.
Scaringe then states that Rivian “wrongly decided to make these changes apply to all future deliveries, including pre-existing configured preorders.” The executive did not spare words in his apologies to his customers. He acknowledged that they “failed to appreciate” how customers saw reservations as “price locked” and “wrongly assumed” people would be ok to buy an inferior product for the same amount of money two years from now.
The executive then states that “this was the logic” that led to the decision and recognizes that “it was wrong” and that the measure broke the trust customers had in the brand. Between us, the logic was that people would be really mad with that logic. Whoever proposed doing that they are now the perfect candidates to be fired, just like Laura Schwab was.
Photo: Rivian
According to Reuters, the former Rivian VP (vice president) of sales and marketing said in her lawsuit against the EV maker that prices had to be higher even before the first R1T was delivered. In other words, either Rivian already knew prices had to be higher or decided that would not be the case despite what Schwab told the other executives. She is suing Rivian for gender discrimination and retaliation.
Scaringe admits they did not communicate well with customers, failing to explain why it was necessary to raise the prices. The executive begins his email message by doing precisely that:
“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 and with this(,) we have seen average new vehicle pricing across the U.S. rise more than 30 % since 2018.”
Photo: Rivian
Noting that “trust is hard to build and easy to break,” Scaringe said he made many mistakes and that Rivian will make many more. However, “this one has been the most painful” since he started the company 12 years ago. The executive states that he is “truly sorry and committed to rebuilding your trust.”
What he proposes to do that is to keep the original configured price for customers that made a reservation as of March 1, when Rivian announced the pricing increase. That implies that the new price tags will be the ones people willing to buy Rivian’s EVs will find right now.
On the company’s website, the price seems to remain at $67,500 for the entry-level Explore trim. Still, there are two buttons that make it necessarily more expensive: a $6,000 plus for the quad-motor AWD system and another $6,000 bump for the large battery pack. These additional $12,000 represent a 17.8% price climb.
In other words, the cheapest new R1T now costs $79,500. People will only pay $67,500 for it in 2024 when it gets a dual-motor AWD system and a smaller battery pack.
Photo: Rivian
The same happens with the R1S. Instead of costing $72,500 in the Explore trim, it costs $12,000 more, or $84,500. That’s a 16.6% price increase. Reuters calculated its price based on a $70,000 starting price. In that scenario, the $14,500 hike would represent a 20.7% increase.
The $70,000 price tag is what we had on November 12, 2020. We have no idea when the R1S went from $70,000 to $72,500. Unfortunately, the Wayback Machine does not seem to have registered the configuration page to present the prices in each capture. That means that the actual price increase for the R1S may be higher than what Rivian’s page currently shows: 20.7% instead of 16.6%.
With this decision, Rivian must be thanking that it did not have as many pre-orders as Tesla has for the Cybertruck. Committing to honor the prices people got before means Rivian will lose money in each vehicle it delivers until that backlog is cleared. When we last checked, Rivian had 30,000 reservations. When the R1T deliveries began, that number must have increased.
Although it may not make sense from a financial standpoint, Rivian has a lot of cash to spend. Scaringe may consider that a strategic investment, especially considering that the company is “focused on building a brand and products that will continue to scale to different vehicle sizes, use cases, price points and markets.” As the Rivian CEO states, “this growth will only be possible with your support and continued feedback.”
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