Note: this case has been adapted from multiple sources

Rivian backtracks electric vehicle price hikes after customers cry foul
Rivian Automotive pegs itself as a high-end Electric Vehicle (EV) maker for an adventurous crowd — sort of like
what Land Rover is for gas-powered vehicles.

The company has only two

consumer vehicles: the R1S SUV and
the R1T pickup truck. Both vehicles
have all-wheel drive and claim to be
extremely capable off road.

The R1T starts at US$67,500; the

R1S, US$70,000.

Founded by Robert "R.J." Scaringe. Rivian is an upcoming, high-profile electric carmaker that’s quickly become
a credible rival to Tesla Inc. As Tesla has done, Rivian is taking an AI-focused approach to its vehicles. It has
invested heavily in its hands-free, semi-autonomous driving technology with a suite of features called Driver +,
which (arguably) sounds remarkably like Tesla’s Autopilot. In a lawsuit, Tesla even accused Rivian of stealing its
trade secrets after hiring its former employees.

Amazon.com Inc., which owns about 19% of Rivian, has a deal to buy 100,000 electric delivery vans from
Rivian. The start-up has said it anticipates fulfilling that order by the end of 2025.

Largely unknown outside of automotive circles, this maker of premium electric sport-utility vehicles (SUVs) and
pickup trucks recently produced its first 1,000 electric vehicles -- mainly its R1T electric pickup truck -- since
production began last September.

Price Hike

On March 1, however, Rivian angered its customers when it alerted them to a retroactive price increase of 20%
on pickup trucks and SUVs pre-ordered by customers. It cited higher inflation, commodity and component
costs for the change.

The price hike triggered a backlash, leading to cancellations. It also resulted in a 25% drop in its stock price in
the days after.

Three weeks later, Rivian changed its mind. Prices were rolled back for vehicles booked before March 1, 2022.

The California-based truck maker said that it expected to produce 25,000 vehicles in 2022. The company said it
would be able to double that output if it weren’t for constraints on getting parts and materials.

Production Curtailed Due to Supply-Chain Disruptions

Rivian chief RJ Scaringe said costs of components and materials that go into building vehicles have risen
considerably, for everything from semiconductors to sheet metal to seats. Average new vehicle pricing across
the United States rose more than 30% since 2018, he said.

He blamed the disruption on “a small number of parts,” including semiconductors, circuit boards and wire
harnesses coming from Mexico, where the pandemic is exacerbating labor challenges. He said batteries aren’t
in short supply.

“As we worked to update pricing to reflect these cost increases, we wrongly decided to make these changes
apply to all future deliveries,” he wrote.

Rivian had planned to raise the base price of the Rivian R1T electric pickup to about $79,500 from $67,500,
before deciding to backtrack following the barrage of customer complaints.

“We need to plan production costs not only for today, but also for the future.”

The Reaction

The price increase also invited comments from Elon Musk, chief executive of rival Tesla, who tweeted that
Rivian’s “negative gross margin will be staggering” and it is “near impossible” for other firms to make
affordable electric pick-up trucks.

Scaringe said the price increases “broke the trust” the company worked to build with customers. Many users
had quickly turned to social media, saying the price increase was a “betrayal” to Rivian’s early supporters.

“I’m back on with Rivian. Super sincere apology from RJ and they are making it all good,” Zach Jump-Start
Marino, a Rivian customer who had previously canceled his reservation after a $15,000 price increase, said on
his Facebook page.

Post-apology, Rivian executives said that more than half of those who canceled chose to reinstate. The
company currently has about 83,000 pre-orders, up from about 71,000 in mid-December.

Adapted from:
https://www.businessinsider.com/what-is-rivian-ev-startup-amazon-backed-tesla-challenger-2021-2

https://electrek.co/2022/01/11/rivian-produced-over-1000-vehicles/

https://www.investopedia.com/what-is-rivian-4692084

https://nypost.com/2022/03/03/rivian-backtracks-on-ev-price-hikes-after-customers-cry-foul/

https://www.vox.com/recode/22649283/rivian-ipo-tesla-suv-pickup-electric-vehicles-ev

https://www.wsj.com/articles/rivian-automotive-curtails-production-in-2022-due-to-supply-chain-disruptions-
11646951126?mod=Searchresults_pos3&page=1