Rivian Automotive quickly backtracked from a plan to increase prices on vehicles that had already been ordered by customers.
In a letter to stakeholders on Thursday, Rivian CEO RJ Scaringe acknowledged that Tuesday’s price increases “broke the trust” that Rivian had hoped to build with its customers. He said the company’s original prices will be honored for all preorders placed as of March 1.
Rivian had said on Tuesday that prices on quad-motor versions of its electric R1T pickup and R1S SUV would increase by about $12,000, and that the increase would be applied to pending orders as well as new ones.
The plan led to an immediate outcry from customers.
“In speaking with many of you over the last two days, I fully realize and acknowledge how upset many of you felt,” Scaringe wrote.
Scaringe said that sharp increases in the costs of key components were behind the price increases.
“Since originally setting our pricing structure, and most especially in recent months, a lot has changed,” Scaringe wrote. “The costs of the components and materials that go into building our vehicles have risen considerably. Everything from semiconductors to sheet metal to seats has become more expensive and with this we have seen average new vehicle pricing across the U.S. rise more than 30% since 2018.”
He added: “Given our build lead up times, we need to plan production costs not only for today, but also for the future.”
The price rollback won praise from Wall Street. In a note on Thursday, RBC Capital Markets analyst Joseph Spak wrote that Tuesday’s abrupt price increase was “not a great way to build brand equity” and that Rivian’s decision to roll back the price increase on existing orders was “the right thing to do.”
Rivian’s shares were trading down about 3.1% as of noon ET.