Rivian (RIVN 3.62%) has had a tumultuous ride as a public company, to say the least. The electric vehicle company's share prices spiked shortly after the IPO, but have cratered ever since, trading 69% off their all-time highs as of early Wednesday.
The latest news from Rivian is that it's raising truck and SUV prices by around 20% for all of its consumer vehicle models, shocking longtime reservation holders. The question is whether or not the company can survive what has been a very quick backlash against the announced changes.
RIVN data by YCharts
Rivian's price move
Amid rising prices for all types of commodities, Rivian announced on Tuesday that it's raising prices for its R1T truck and R1S SUV. Increases range from 17% to 20%, and many customers (myself included) got notices of a price increase that pushed the price tag above $90,000.
On Rivian's website, the company advertises an R1T truck for $67,500 and an R1S SUV starting at $72,000, but that's not the same vehicle that could be pre-ordered for slightly lower prices just a few days ago and is dramatically different from pre-orders made last year.
My R1S pre-order, for example, saw a $6,000 increase in price for a quad motor (formerly standard) compared to a dual motor, and another $6,000 increase for a large battery pack with a 320-mile range, which can be replaced with a 260-mile range standard pack that's also not due to reach production until 2024.
The pack difference is substantial because last summer the company advertised the standard battery as getting over 300 miles of range and the larger pack would be over 400 miles. Today, you need to spend $6,000 to get around what those who pre-ordered the smaller pack expected.
Price increases came to the vehicle paint colors too, with "LA Silver" being the only paint without an upcharge that can range from $1,750 to $2,500. Even accessories saw price increases.
Image source: Rivian.
Customers are not happy (to say the least)
The reaction to Rivian's price increase was swift, at least on Twitter. People were posting reservation cancelations and comparisons of their pre-order price estimates to the updated estimates as of Tuesday night.
It's hard to argue with the sentiment. A $70,000 truck or SUV is a stretch from a start-up when compared to similarly equipped gasoline-powered vehicles, but buyers were willing to pay a premium of $10,000 to $30,000, depending on your comparison, for going electric and getting great range and performance for the price. Bumping that premium up by $20,000 and pulling back some of the most important performance features makes the calculus a little different, including for myself.
What we don't know is why the move is happening right now. Does Rivian need to prioritize Amazon commercial truck deliveries, so it's willing to live with a reduced consumer backlog that it can't deliver anyway? Is the company willing to lose 20% of customers if it can charge 20% higher prices because it needs to show better margins? Is inflation pressure really this bad?
The factor to watch in the coming weeks is the public sentiment around Rivian. Tesla and Elon Musk have built die-hard brand loyalty to a level that even missteps can be overlooked. But Tesla never announced a 20% price increase for existing reservation holders! Rivian doesn't have the same goodwill and may have overplayed its hand with this pricing move, and as a result, it could turn off formerly loyal customers.
The Rivian thesis has fundamentally changed
What's hardest to get my head around today is what to think of Rivian's stock. Just 24 hours ago, I would have said this is a compelling company because it has a potentially disruptive product in the truck and SUV market that's being sold at a price point that's hard to ignore.
Today, Rivian is a company that's trying to sell the most expensive mid-size truck and SUVs on the market. An R1S SUV is more expensive than a BMW X7, Chevy Suburban, and even a 7-seat Land Rover.
Rivian may be trying to be a premium brand, but it still needs to compete with traditional automakers building gasoline-powered vehicles. For me, I need 7 seats for a growing family and $70,000 was a stretch, but I considered it worth it to get a cutting-edge electric SUV. For over $90,000, I'll go with a gasoline-powered vehicle for one-third the price for a few years.
With one late-night announcement, Rivian may have lost some of its most loyal customers and supporters. The company can reverse course and honor the previous pricing or risk the market's ire. If it thinks it can survive selling trucks and SUVs for over $90,000, I think that's a tough sell.
I haven't decided if I'm going to cancel my current reservation, but I'm not spending $90,000 on a vehicle. Unless pricing is changed, I'll be one of a growing number of people canceling my pre-order, despite spending nearly a year on the waitlist.
Just as customers should be getting excited about the delivery of their Rivian vehicles, the company has pulled a bait and switch. I don't like the move and right now it doesn't look like the market does either.
