Skeptical Of Rivian's Prices

[yizzung]

I had similar thoughts. While I also believe the price for the R1T/R1S is low or could be higher based on competition, I do also think they might want to focus on growth in the beginning. Since stocks are really about speculation and potential in the tech sector and I believe, like Tesla, Rivian sees itself as a technology company not a car company, they might want to focus on YoY growth over profits (at least for the first few years). Tons of examples in tech that followed this model and are successful now (and make profits too cause eventually you do need make a profit for investors). Of course probably even more examples of this not working so its a gamble for investors.

Now, all the being said, I still think the price of the vehicles may go up after the IPO. I'd like it not to and the tax incentive limit of $80k is a good reason not to but I have a feeling they will raise it so that the base price is still below $80k. Maybe another $2000-3000 per vehicle.

I also believe that they stated publicly that they eventually want to offer lower-end offerings. Maybe I'm making that up but I got the sense that they weren't planning to concede the low (or mid) end of the market. With a cheaper, less featured truck on the market, they could also charge more for the higher end versions.

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[Sgt Beavis]

GUT FEELING 3: Comparable pricing to Ford Lightning (similarly equipped), despite Ford being able to leverage huge swaths of their existing F-150 production line and supply chain. Despite this, Ford will still only build 20K units in 2022 and will prob not make money on them.

I think all your points are worthy of consideration, but on this one, there really isn't a comparable Lightning. The base R1T Explore is barely more expensive than a basic Lariat. But the Lariat needs the extended range battery to get to the R1T's standard range. That's another $7000 on the Lariat. For that price, you can move up to the Adventure pkg. The Explore package is already more feature rich than the Lariat, but the Adventure pkg just blows it out of the water.

Overall, I do think we could see price increases, but Rivian already knows they have to stay under that $80K mark, for the proposed EV tax credit, or their sales will suffer. Another thing, Rivian is charging quite a bit for add ons like colors, wheels/tires, the Off Road package, and green interior. I think that's going to help their margins quite a bit. They charge $800 for a bloody spare tire. I bet that's at least a $400 profit margin, if not more.

 

[Rivian_Hugh_III]

At some point Rivian will raise prices, but since they plan to monetize the vehicle post-sale, those increases may not come soon.

Rivian plans sell:

• Insurance
• Maintenance & Repair
• Full self-driving
• Rivian Adventure Club (or whatever the name is).
• Future updates that add functionality

If memory serves, the S-1 document lists over 30 ways that Rivian can make money on their vehicles post-sale. Maybe they plan to "'give away' the razor and sell the blades."

 

[bd5400]

Another thing, Rivian is charging quite a bit for add ons like colors, wheels/tires, the Off Road package, and green interior. I think that's going to help their margins quite a bit. They charge $800 for a bloody spare tire. I bet that's at least a $400 profit margin, if not more.

Forest Edge is my favorite interior color but I can't imagine it costs Rivian anything more than it costs them to do Ocean Coast or Black Mountain, yet I'll still be paying $2k for it. I have to imagine that the profit margins on the upgrades is pretty big.

 

[jplblue]

At some point Rivian will raise prices. That said, they have many plans to monetize the vehicle post-sale.

• Insurance
• Maintenance & Repair
• Full self-driving upgrade
• Rivian Adventure Club (or whatever the name is), which will be free for 1 year, then will cost some subscription.
• Future Sale of updates that add functionality
• Future Sale of Full Self-Driving

And those are just off the top of my head. If memory serves, the S-1 document listed over 30 ways that Rivian plans to make money on their vehicles post-sale.

Therefore, they may choose to keep the price low to "give away the razor but sell the blades."

Relatedly, if there are plans to raise prices in the near future, wouldn't that have to be disclosed in the S-1? Seems like it'd be a material fact for investors.

 

[3l3c7r1c]

If the price increase, which I think it will come post IPO, is applicable to both existing and new reservation holders. Like yourself, i plan to cancel and get me a Tesla Model Y

For people looking for utility, Model Y and R1S are not apple-to-apple comparison. You might compare with model X. I currently drive a 3 row SUV and getting lot of utility for going to camping, skiing, with 2 kids. In-laws visit me occasionally as well. Two rows won't fit in my lifestyle anymore other than daily commute. Try to compare with other 3 row ICE cars with similar features. Even there Rivian is very price-competitive.

 

[kommonplace]

If the price increase, which I think it will come post IPO, is applicable to both existing and new reservation holders. Like yourself, i plan to cancel and get me a Tesla Model Y

Same. I'm already very on the fence for a few reasons, but any price increase would be the end of my current R1S dreams and would put me in a Model Y.

I think both Rivian models are an excellent value when compared to their competitors (such as they are), but it would just mean it's not for my family and me personally.

I feel like a price increase is inevitable and likely imminent, so to me the question is: Do they increase the price for current reservations, or just future ones?

 

[Zoidz]

I also believe that they stated publicly that they eventually want to offer lower-end offerings. Maybe I'm making that up but I got the sense that they weren't planning to concede the low (or mid) end of the market. With a cheaper, less featured truck on the market, they could also charge more for the higher end versions.

This. We tend to look at the "here and now" regarding Rivian. But I'm convinced they are looking 5 - 10 years down the road, as evidenced by their plans for additional factories. Comparing vehicle price to Ford, GM, etc. is misleading. Legacy manufacturers have tons of legacy overhead, plus higher labor costs, dealer margins, huge advertising/marketing expenses (reportedly as much as $1000 - $1500 per vehicle). Rivian has none of that, so Rivian likely makes more gross margin. But yes, price hikes are part of life, so it's coming sooner or later.

 

[Sgt Beavis]

Forest Edge is my favorite interior color but I can't imagine it costs Rivian anything more than it costs them to do Ocean Coast or Black Mountain, yet I'll still be paying $2k for it. I have to imagine that the profit margins on the upgrades is pretty big.

I'm right there with you. I was going to get Rivian Blue but I wanted to get several off road goodies and stay under $74K. If the new EV credits pass, I'll be sticking with green, but I'll be moving up to the Adventure pkg.

 

[dleepnw]

I also believe that they stated publicly that they eventually want to offer lower-end offerings. Maybe I'm making that up but I got the sense that they weren't planning to concede the low (or mid) end of the market. With a cheaper, less featured truck on the market, they could also charge more for the higher end versions.

Yup, good point. I'd be shocked if they didn't eventually build lower cost consumer vehicles. I'm thinking of ones that compete in a similar space as Subaru and Jeep. As well as a space like Highlander, Pilot, Rav4, Escape or Tacoma, Ranger. And there's the ancillary markets like ATV, dirt bikes, Arcimoto-type vehicles. And they should also think about larger vehicles like vans: cargo, utility, camper conversions. They've already got the makings of the platform with their commercial van. There's an untapped market there for EV versions.

 

[Diddy123]

They’ve effectively raised the price multiple times by continuously removing previously announced standard features. I’m not sure why this always gets overlooked. The price has remained mostly unchanged, but what you’re receiving in exchange has seriously diminished.

No LIDAR
No photochromatic roof (several thousand dollar value)
No 180 tailgate
No powered tailgate
Significantly reduced level Of finish in the frunk
No level 3 autonomy without a subscription
Probably others I’m forgetting right now

They’ve eliminated many thousands in cost/value without reducing the price.

 

[Thierry]

All this is fair. OP raises some good points.

A few thoughts:

1. I don't know much about manufacturing/selling vehicles but in tech (my domain) it's not uncommon to fiddle with price as a lever to manipulate demand. There's 55K preorders right now but it might be 35K orders if they cost $100K. Or 20K if they cost $130K. I think they want to be a bit niche-y but not too niche-y. Just my gut.
2. Why is it normal in tech to price something lower than cost but not at a place like, say, Honda? Because Honda grows at 3% YOY. It's not a growth stock and it's equity does not get valued as such. Honda would lose a ton of value if it ran at negative margins because there's no growth to make up the gap. Rivian is/will be a growth stock and is/will be valued accordingly.
3. That means that it's far more important for Rivian to demonstrate huge growth in demand than it is to demonstrate a good income statement. Rivian will be able to run at a loss for years without paying a price on Wall Street, if they can continue to justify it with big YOY growth.
4. Lastly, there are adjacent businesses/income streams that Rivian wants to pursue, as indicated in their road show (e.g. electrification of the home, the fleet stuff, the software, the subscription models, etc.) The car itself could just be a loss leader that enables them to generate more revenue elsewhere.

I'm actually less concerned about them jacking up the price than I am about #4. I worry a little that they'll hand me the keys and then inform me that I need a Rivian wall charger and Rivian solar panels and Rivian OTA updates and Rivian driving gloves to make it work effectively, pushing the total cost of ownership well north of what we thought it would be.

All Great Points- but Rivian has to know they they are selling/marketing to an educated well researched client base in an increasingly competitive space - the choice is just other e-vehicles, its also some newer super efficient gas and diesel powered vehicle - if they raise their cost of ownership, the options for the consumer become greater and they are likely to loose tons of market share - first company to really ramp up production will win this battle - I for one have deposits with 3 different companies currently - so I'm hedging my bets

 

[sub]

I predict that <brand> will raise the price of <product> in <year>.

Fill in the blanks however you want and most likely the prediction will come true.

 

[fromSf]

Lyriq Debut edition is priced at 60K$, it has 100KWh battery, 300+ miles range with all the luxury features (massaging seats, active noise cancellation, premium audio, awesome interior and exterior lighting, super cruise as standard etc and solid warranty), only missing feature in Debut edition is AWD. Don't think Rivian under priced it by wider margin.

Since Tesla has great demand and they knew EV tax credit is coming Musk wanted to keep all the dollars instead of passing the savings to customers. So I wouldn't compare the pricing to Tesla Y. Feel currently Tesla products are over priced since customers are flocking to Tesla due to lack of solid competition.

Also, Rivian is new brand and not proven, pricing higher before establishing any credibility would alienate potential customers.

For sure Rivian will raise prices in near future as the demand picks up.

 

[kommonplace]

I predict that <brand> will raise the price of <product> in <year>.

Fill in the blanks however you want and most likely the prediction will come true.

Sure, but when it's $70-80k+, is a long way from release, and has no price guarantee... I think it's reasonable to speculate as to when we will see those increases. Will they honor the price "estimates" given at preorder? They're certainly under no obligation, just as we're under no obligation to complete the purchase when the time comes.

It makes little to no difference for some, but sticking with my order if there's a price increase just isn't feasible for me.

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