It is a decision that risks leaving indelible traces.
A decision that the young manufacturer of electric vehicles Rivian (RIVN) would like not to have had to take as it risks having consequences on its ambitions in this very competitive industry where no missteps can be forgiven.
Just days after raising prices, the manufacturer of electric vehicles has just canceled this decision in the face of a violent reaction from its customers.
"Earlier this week, we announced pricing increases that broke the trust we have worked to build with you," said chief executive officer RJ Scaringe, in a statement. "We wrongly decided to make these changes apply to all future deliveries, including pre-existing configured preorders."
He continued his mea culpa, going so far as to say that Rivian betrayed his clients' trust.
"We failed to appreciate how you viewed your configuration as price locked, and we wrongly assumed the announced dual-motor and standard battery pack would provide configurations that would deliver price points similar to your original configuration."
"While this was the logic, it was wrong and we broke your trust in Rivian."
Rivian
Rivian Raised EV Prices By 17% and 20%
Rivian raised the price of its electric pickup truck R1T by 17% and its SUV R1S by 20% this week due to material costs and the ongoing chip shortage, the company said. The price increase applied to all customers, both new and those who had already placed their order.
But the decision was very badly received by customers and led to order cancellations.
"In speaking with many of you over the last two days, I fully realize and acknowledge how upset many of you felt," Scaringe explained. "I have made a lot of mistakes since starting Rivian more than 12 years ago, but this one has been the most painful."
He then apologized: "I am truly sorry and committed to rebuilding your trust."
Rivian does not say the number of cancellations recorded but the group should provide an update when publishing its earnings for the fourth quarter on March 10.
In the meantime, customers who had placed their order before March 1, the date of the announcement of the price increases, are exempt and those who had canceled following the price increase will be authorized to place back their order at the original price.
"For anyone with a Rivian preorder as of the March 1 pricing announcement, your original configured price will be honored. If you canceled your preorder on or after March 1 and would like to reinstate it, we will restore your original configuration, pricing and delivery timing. Our team will be sending an email in the next few days with more details," the company said.
This volte-face comes at a time when Rivian is having difficulty managing the increases in production, which has forced it to lower its production and delivery targets.
TheStreet
Rivian Might Have Given Ford, GM, Tesla, and Lucid Fuel
The company must now try to put out two fires coming from two different fronts, knowing that this latest crisis is likely to significantly affect its image and reputation. It cannot be ruled out that rivals like Ford (F), Tesla (TSLA), GM (GM) and Lucid Group (LCID) will use it in their commercial and marketing arguments.
"This is the right thing to do," said RBC Capital Markets analyst Joseph Spak wrote in a note to clients on Thursday. "Customers who placed pre-orders placed a lot of faith in Rivian and Rivian is trying to build a brand and lifetime customers. Raising the cost significantly on early adopters willing to take that leap of faith is not a great way to build brand equity."
A scan of message boards and online postings indicated there was a lot of anger among reservation holder and cancelations, according to Spak.
"Rivian may have seen this and used that to aid its decision to reverse course.
The Rivian rollback will also have a significant financial cost.
It could cost the company around $850 million in future revenues, assuming no cancellations, Spak wrote.
"So building the brand equity by absorbing the higher cost is prudent, especially considering the capitalization of the company. The new pricing will remain in effect for future pre-orders."
He added that: The debate will now become do the orders slow as the vehicles become more expensive and invite more cross-shopping. The thesis had been that Rivian could sell whatever it could make, but there may now be some more holes in that thesis."
Rivian said it will allow customers who canceled a pre-order after the price increase to reinstate their order with the original configuration, pricing and delivery.
The price of the R1T with a quad-motor, all-wheel drive, and a large battery pack is now at around $79,500, up from $67,500. The R1S with the same specifications will stay at around $70,000 for pre-March 1 customers and increase to $84,500 for new ones.
