Rivian, admitting broken trust with customers, rolls back price hike after backlash

Rivian Automotive Inc. rolled back price hikes on EVs booked before March 1 on Thursday, days after facing backlash from customers following a 20 percent price hike.

Prices for preorders as of March 1 will roll back to the previous price and customers who canceled orders can reinstate them, CEO RJ Scaringe said in a letter.

"Earlier this week, we announced pricing increases that broke the trust we have worked to build with you," the letter said.

The startup automaker said on Tuesday it had increased selling prices of its vehicles by about 20 percent due to inflationary pressures and higher component costs.

Under the previous plan, the base price of the Rivian R1T electric pickup would have risen to about $79,500 from $67,500, while the R1S SUV to $84,500 from $70,000.

Rivian shares were down 4.9 percent to $50.91 when the market closed Thursday.

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

"I have made a lot of mistakes since starting Rivian more than 12 years ago, but this one has been the most painful."

The automotive industry globally is facing higher input costs while also experiencing greater leeway to increase prices. Average transaction prices hit a record $47,243 in December and Truecar.com, an auto pricing and marketing website, projects they rose 15 percent in February from a year ago.

Irvine, Calif.-based Rivian, a closely followed upstart, is seen as a potential competitor to industry leader Tesla.

While the company has delivered relatively few vehicles -- 920 as of Dec. 31  -- its listing in November was the sixth biggest in U.S. history. Rivian is backed by big names like Amazon.com and T. Rowe Price along with legacy automaker Ford Motor Co.

Rivian only started production and deliveries of the pickup in September after having delayed its release several times due to supply chain challenges. The SUV went in to limited production in December.

Starting 2024, Rivian plans to offer a dual-motor version of the R1T with a “standard” sized battery pack, that allows around 260 miles of range, for $67,500 -- the same starting price that Rivian launched its vehicles at last year.

The price increase also invited comments from Elon Musk, CEO of rival Tesla Inc, who tweeted that Rivian's "negative gross margin will be staggering" and it is "near impossible" for other firms to make affordable electric pickup trucks.

Many customers had taken to social media earlier this week, saying the price increase was a "betrayal" to Rivian's early supporters.

"We think the damage has been done and many customers will be purchasing EVs from competitors instead," said Garrett Nelson, analyst at CFRA Research.

Some potential customers were more forgiving.

"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.

Reuters and Bloomberg contributed to this report.