By Hyunjoo Jin
SAN FRANCISCO (Reuters) -U.S. electric vehicle startup Rivian Automotive Inc said on Tuesday it has increased selling prices of its vehicles by about 20% due to inflationary pressures and higher component costs, angering some customers.
The price increase also invited caustic comments from Elon Musk, chief executive of rival Tesla (NASDAQ:TSLA) 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.
Rivian, in which Amazon.com Inc (NASDAQ:AMZN) holds a 20% stake, said the starting price of its R1T electric pickup trucks has gone up by about 17% and its R1S sport utility vehicles by about 20%. It said the price increases would affect most of the customers who have already placed pre-orders for the vehicles.
“Well, it’s a sad day for me. Cancelled the Rivian order. So bummed out,” “Zach Jump-Start Marino”, who said he lives in Georgia and holds Rivian shares, said on his Facebook (NASDAQ:FB) posting.
“Price increase was astronomical and unfair to pre-order holders and early supporters. I’m not paying 94k+ for a “mid-size” truck,” he said, adding he could buy gasoline pickup trucks such as Ford Motor (NYSE:F)’s F-150 at much lower prices.
He told Reuters his R1T price has gone up by $15,000, including options.
Tesla Inc and legacy car makers have also raised U.S. vehicle prices to offset high costs related to logistics and supply chain disruption, and dealers often mark-up prices because of vehicle shortages.
“Like most manufacturers, Rivian is being confronted with inflationary pressure, increasing component costs, and unprecedented supply chain shortages and delays for parts (including semiconductor chips),” Jiten Behl, Rivian’s chief growth officer, said in a statement.
The California-based startup fell short of its production target last year due to supply-chain constraints.
Rivian said the cost of certain options including paint and wheels and upgrades like reinforced underbody shield have also increased.
The base price of the Rivian R1T is rising to approximately $79,500 from $67,500, while the R1S is starting at $84,500, up from $70,000.
AFFORDABILITY
Rivian said it will introduce an R1T model with a lower-range battery pack and dual motors in 2024, pricing it at the original $67,500.
Rivian’s former head of sales and marketing, Laura Schwab, said in a lawsuit against the company in November over alleged “gender discrimination and retaliation” that Rivian has acknowledged a need to raise the vehicle prices “after the IPO”.
“The vehicles were underpriced, and each sale would result in a loss for the company,” she said in the lawsuit. Rivian, which went public in November, declined to comment on the lawsuit.
Musk, who tweeted his comments late on Tuesday in response to a story on Rivian’s price increase, was asked about the pricing of Tesla’s upcoming electric pickup truck, the Cybertruck.
“Our primary challenge is affordability. Creating an expensive truck is relatively easy. If it is extremely hard to do so for Tesla, despite our much greater economies of scale & better technology, then it is damn near impossible for others,” he said.
Musk said in January that Tesla is delaying the launch of the Cybertruck to next year, prioritizing production of its existing models due to parts constraints.
Source: Reuters
