Rivian has decided to roll back price hikes on its electric vehicles that were booked before March 1 after facing intense backlash from customers following a 20 percent increase in prices.
Rivian Chief Executive Officer RJ Scaringe made the announcement in a letter to clients on Thursday, March 3, saying that vehicle preorders as of March 1 will not be subject to the new prices, and customers who canceled orders because of the sudden price hikes can now reinstate them with the original price.
The Amazon-backed company shocked its customers on March 1 when it increased the base price of the Rivian R1T electric pickup from $67,500 to about $79,500. Rivian also applied a huge price hike on the R1S SUV, with its base price going from $70,000 to $84,500.
The decision to increase prices drew the ire of customers, some of whom decided to cancel their Rivian orders. They expressed their frustration in social media postings, accusing Rivian of "betraying" its early supporters. Scaringe was forced to admit his wrongdoing, saying "It was wrong and we broke your trust in Rivian."
The CEO then issued a stunning U-turn, saying "For anyone with a Rivian preorder as of the March 1 pricing announcement, your original configured price will be honored." Scaringe added that if a customer canceled his or her preorder on or after March 1 and would like to reinstate it, Rivian will restore that buyer's original configuration, pricing and delivery timing. Scaringe said that Rivian will be sending an email to the affected customers in the next few days with more details.
Scaringe added that he had made a lot of mistakes since starting the EV company more than 12 years ago, but this one has been the most painful yet with Rivian. He surely is feeling the pain right now as the customer backlash resulted in Rivian's shares plunging in the stock market. Rivian stock dropped over 13 percent on Wednesday and further extended its losses on Thursday, with share prices going down 4 percent.
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Scaringe reiterated in his statement that Rivian's price increase was prompted by higher component costs and inflationary pressures. He noted that the company has to plan for future production costs, with prices of materials such as semiconductors, sheet metal, and seats continuously rising.
The average transaction price for a new vehicle hit record levels last year, with its value topping $47,000. That figure is up by more than $6,000 compared to its 2020 numbers. Aside from parts, labor has also gotten more expensive for automakers, which is not helping Rivian's cause.
It remains to be seen whether Scaringe's apology will help Rivian get its footing back. Garrett Nelson, who is an analyst at CFRA Research, told Reuters that he is not that confident, saying that they think the damage has already been done by Rivian and that many customers will be purchasing electric vehicles from other competitors instead.
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