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.
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.
[Images: Rivian; Amazon]
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