Rivian (RIVN) has a knack for getting into trouble.
The upstart manufacturer of electric vehicles has been in a not so encouraging situation for several months.
The firm is indeed going through a very difficult and delicate period for any young vehicle manufacturer: being able to mass-produce vehicles. It is in this phase that many suitors give up and go bankrupt.
For Rivian and its rival Lucid Group (LCID), this phase is complicated by the disruptions caused to supply chains by the covid-19 pandemic which has led to lockdowns in China, a country home to factories of many suppliers. There is also the Russian war in Ukraine which caused the price of raw materials such as nickel to soar. All of these factors have contributed to driving up Rivian's costs.
"Supply chain continues to be the limiting factor of our production," the company said on August 11 in a letter to shareholders, detailing its second-quarter earnings. "Throughout the quarter, our cost of materials was impacted by inflationary pressures, which we believe will continue to be an impact for the near future."
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Rivian Cancels Its Most Affordable Vehicles
Quarterly net loss tripled to $1.71 billion from $580 million in the second quarter of 2022. The automaker also said it expected to lose a little more money than initially expected this year. Its annual adjusted loss before interest, taxes, depreciation, and amortization should come at around $5.45 billion. The company had previously said that it was expecting a full-year EBITDA of negative $4.75 billion.
As if managing these problems were not enough, Rivian has just created a new one and this risks impacting its reputation and its image. The automaker has just canceled cheaper versions, or entry-level versions, of its R1T electric pickup and R1S SUV. The announcement was made by an email sent to customers regarding the models known as the Explore Package.
"We appreciate your excitement for our company and our products. We have an update that affects your preorder and want to make sure you hear about it directly from us," Rivian wrote in an email reviewed by TheStreet. "In order to deliver as many vehicles as possible, we have made the decision to discontinue the Explore Package. We realize this news is unexpected and apologize for how it impacts your plans."
The company added that: "When we initially launched our vehicles, we planned for two packages, Adventure and Explore, to offer more variety to our customers. The Explore Package was designed as our entry option and it was our expectation that a large number of customers would choose it. To date, only a small percentage of customers have chosen this configuration, with the vast majority selecting the Adventure trim. By focusing on the Adventure trim package, we're able to streamline our supply chain and ultimately deliver vehicles more quickly."
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The package option has disappeared from the Rivian site, TheStreet has seen. Only the Adventure version is available. This decision leaves customers who have booked the Explore option with two choices: either cancel their reservation and get a refund, or upgrade to Adventure.
Upgrading to Adventure, however, means an additional $5,500 price hike since the Rivian Adventure starts at $73,000. The Explore started at $67,500. The increase will be $7,500 if they upgrade to the Rivian Adventure quad-motor with large batteries that costs $87,000. The equivalent in Explore was worth $79,500. Ditto for the R1S SUV with quad-motor with large pack which is worth $92,000. The Explore equivalent was $84,500.
'I'm Out'
Customers who haven't done anything by September 1 will be removed from the queue. The company, however, does not say what will happen to customers who have recently converted their posit. It's unclear what will happen to those preorder holders who recently converted their refundable reservation fees to non-refundable binding agreements in order to qualify for the old federal tax credit.
The company did not immediately respond to a request for comment.
Rivian planned to start delivering the first R1T and R1S Explore units from 2023.
Rivian's decision was very badly received by some customers.
"Now the base price is 78k with dual and standard pack.... Looks like I'm out. I need the long range, 260 standard won't do it, that'll give me like 220 real world driving. Not paying 82k for the long range model without the tax credit, Just to be a beta tester for Rivian," criticized one user on Rivian Owners Forum.
This is not the first time that Rivian has made an unexpected decision that could tarnish its image. At the end of February, the brand suddenly increased the prices of its vehicles without warning its customers. In the face of outcry and cancellations, Rivian apologized.
Rivian has also decided to cancel an interior option: customers will no longer be able to choose the original Ocean Coast/Ash Wood trim.
"We’re excited to introduce the new Ocean Coast interior with dark-stained ash wood. It's a new look you can configure, and a design update that means we can begin making deliveries to customers who ordered Ocean Coast. 🌊" the company said in a tweet.
