Would you sell a product below cost?

[Craigins]

I fully expected the subscription fees to make up for the lower selling price. After the price increase, my only hope is they include more of the subscription services with the vehicle rather than upcharging.

So the problem is they have nothing to subscribe for now.

That means that the expected 10-15k revenue for the R1T/S is gone.

Maybe they thought the RAN would be further along. Maybe they didn't foresee the govt intervention in the charging space which devalues the RAN prospect.

They could have other issues with the items in the subscription model as well.

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[Taycanfrank]

Do I quote someone a price and take a loss when it costs more? All the damn time!!

I'll quote the next customer more but sometimes you just have to eat a loss to maintain a good reputation. Very, very common across industries.

Also the Rivian increase is more than the industry standard increase! Show me another car manufacturer that has increased MSRP by 20%. Not dealer markups, MSRP, since Rivian launched the configuration.

My Taycan would cost less today than it did almost 2 years ago.

 

[frostbit3]

Communication is key. Had they told us along the way that things were looking like a price increase then we'd be more open to it. They knew it was going to happen, but they wanted to get through the IPO and through the first batch of reviewers. They knew all along and kept touting how it's such a great value and so on. And then to just email everyone the price increase with just "Here it is". No regrets, no apologies, nothing.

 

[atR1S]

This above from @frostbit3. Communicate, dangit! I half expected a video from RJ today apologizing for how yesterday was handled and an explanation of how they came to this decision.

 

[mkg3]

Rivian can’t sell these vehicles at 2018 prices and 2022 costs. I cannot understand how people think they *deserve* a truck sold at a loss for the company.

The 20% increase represents four years of inflation, plus the rise in parts costs over those four years, which according to several people on this board who work in the industry have doubled in many cases.

If you dance with the Configurator you can build a Rivian for just a few thousand more than your earlier estimate. I did it yesterday. Free paint, free wheels, dual motor (600hp and 0-60 in 4s!), sans tonneau, sans adamantium underbody shielding, sans tent and kitchen… all told your Rivian will be in the mid to high $70’s.

Want more? Pay for more. Because it costs more.

Except that EVs are more like electronics/PC with wheels than a traditional vehicles. Modern electronics relatively stay the same cost with increased capabilities. Just take a look at your TV, laptop and smartphone.

Single largest cost subsystem on EVs is the batteries. The general trend is downwards, with an exception of current supply issue but this is temporary. Given how little Rivian delivers to customers, its well within their means to absorb and would not be material on their earnings. The battery industry cost/kWh trend is headed down lower - not higher.

Rivian has decided to charge for interior color other than black, and exterior other than silver. Since all makers do something similar, this is nothing more than money grab - pay for preference.

All other options are charged, like any other except that the vehicle was put on to be reserved with large pack and 4 motors, but now both are options. Its like saying "oh, you want a gas tank and an engine too?" They will, of course provide a smaller "standard" battery pack and 2 motors instead of 4 for just a bit more than what you'd signed up for. Don't forget, you'll have to wait extra year or two before you get yours compared to the original reservation model though...

Yes labor cost has gone up and material cost has gone up. Its just that the manner in which they increased the price and what they are charging extra for seems quite opportunistic rather than necessitated by cost impacts.

 

[Canthoney]

There was a better way to do a price increase, it could’ve been a graduated scale depending on when you ordered, whether you had a launch edition, or what your configuration was. They could’ve announced price increases throughout the year to soften the blow, any number of ways they could’ve done this than what they did yesterday.

The way they did this was just a giant middle finger to all of their customers at once even some who’ve been waiting over four years. I suspect they knew the entire time they wouldn’t be able to produce these at this cost, and thought when they first announced it that there’s no way in hell this will sell for under $90,000, turns out I was right.

The only reason I got in was because when they came out with under $75,000, I felt like I could afford it and it was a great value. Now not so much.

And the simple fact that someone here are finalizing orders while getting the before price, and some of us are just days or weeks behind them getting hit with a 20% price hike, is simply fair. Those people are lucky and I don’t want to dampen their excitement, it’s just an unfair situation all around.

 

[No.92]

Rivian can’t sell these vehicles at 2018 prices and 2022 costs. I cannot understand how people think they *deserve* a truck sold at a loss for the company.

The 20% increase represents four years of inflation, plus the rise in parts costs over those four years, which according to several people on this board who work in the industry have doubled in many cases.

If you dance with the Configurator you can build a Rivian for just a few thousand more than your earlier estimate. I did it yesterday. Free paint, free wheels, dual motor (600hp and 0-60 in 4s!), sans tonneau, sans adamantium underbody shielding, sans tent and kitchen… all told your Rivian will be in the mid to high $70’s.

Want more? Pay for more. Because it costs more.

I know it still stings but using a level head to analyze this logically, the cost of things have increase significantly. Here are some charts to understand the increase in costs of raw materials.

 

[timesinks]

I know it still stings but using a level head to analyze this logically, the cost of things have increase significantly. Here are some charts to understand the increase in costs of raw materials.

I don't dispute inflation but I think looking back to 2018 is a bit of a fallacy. They didn't announce any real pricing structure until they launched the configurator at the end of 2020. And they doubled down on both being able to and intending to maintain those prices during the press events during fall of 2021 -- just 6 months ago and well into the inflation spike and supply shortages.

We are of the very lucky few who were spared the increase, but I still think they royally screwed up here.

 

[PAFDenver]

**This is along, rambling rant against the sh&**y stunt Rivian pulled. No great insights or thinking in this - feel free to just just skip over it. I just need to vent**

TL;DR - they should have raised prices gradually over the years for pre-orders. They will lose money because of this.

I don't think anyone here is denying that things have gotten more expensive, but it's how they did this. I put my money down in Feb of '21 and saw nearly a 20% increase a year later. There are people that put it down a couple of months ago and saw the same increase. They offered the product for the same price for 4 years??? That alone is ridiculous - I don't think even McDonald's keeps prices stable that long. Any intelligent company would have been making increases over time. (And I do mean "intelligent" because this move is stupid IMO. Someone really should lose their job over this.) Why were they offering the 2018 prices in 2021? They should have raised the prices over time so that when i ordered in 2021 it was adjusted to costs in 2021.
The way they did this too was just - ridiculous. That email was NOT something that would lead anyone to expect anything like a 20% increase in price. And it certainly is NOT clear that this applies to existing orders. Many others have mentioned just how poorly they did this so I won't rehash it. But I in no way expected to see anything like that price jump when I looked at the configurator. I read the email quickly because I was riled up by it, but I expected I would have to pay a few thousand more for the tonneau.
Then there's the ridiculousness of not having the order prices updated for 4 1/2 hours! So they sent this horrible news in a ridiculously bad email, tell you that the prices have changed, but when you look at your configuration you still see the old prices??? Look at all the confusion that caused on the boards. They have (I should say HAD, they have lots fewer now) less than 100K orders. They couldn't have their IT group either change the prices simultaneously with this email being sent or at least just shown a generic message about pricing changing and updates in process? Incompetent.
And then there's the whole basic financial logic in this. I am sure that when all the dust settles they will end up losing money because of this. First off, everyone that canceled is now not only a lost customer but HATES Rivian. Heck, I am still trying to figure out what to do and I now am so pissed at them that I practically consider them an enemy - less than what you ideally want in a customer. Any company knows that word of mouth is the best advertising there is. But it cuts both ways. Angry customers are even more effective at killing your brand. I would bet that well over 90% of every order holder as of noon yesterday will now have very negative things to say about Rivian - whether they cancel or stay with Rivian. I know I will if i don't throw in the towel. "Yeah, the truck's great, but management is a nightmare. I wouldn't buy one unless there's nothing else you like." will be what I tell people. (FYI - The ONLY reasons I am still on the fence is that I can get 4 motors, it's the size I want and the air suspension.)
If I stay I will strip out everything I can to get it dow as close to my price at pre-order. All the accessories are gone. Too bad that accessories are generally the highest margin items - all that profit just evaporated Rivian. Too bad, so sad! Instead of buying Rivian's crossbars, I will give Yakima my money. All weather mats - gone! Weathertech gets that profit now. I don't like the black interior but I will learn to love it over Ocean Coast because it's $2000 I am NOT giving Rivian. So I expect that the vehicles they do sell will simpler and much less profitable - both in terms of percentage and dollar amount.
I have no idea how to put a dollar amount on loyalty and goodwill but some people obviously do as it's often included in the calculations when one company buys another. That's evaporated.
Rivian has about 100M shares outstanding. They lost $14.08/sh between yesterday and today - that's $1.4 BILLION in value. If you assume they had 100K orders at an average value of $80K and increased the price by 20% and NO ONE cancelled or changed their order, that's $1.6B. So this horrible move only netted them $0.2B in the end - and that's just from this part of it. Again - if no one canceled which we know is not the case. Others are saying that the stock will recover in time and be back to its $67 value. I agree, but I believe that at the same period in time it would be much higher than $67 if they didn't do this. So I think this drop (and likely more over the rest of the week) will be real lost value.
Take all of those costs - as well as the others I haven't mentioned - and I am convinced that is an overall loss in value to Rivian. It might even be bad enough to kill Rivian in the public vehicle sector. I don't think it's crazy to imagine this leading them to exit the consumer market in the next few years to simply become a manufacturer of delivery vans. And then get eaten up by Amazon. Will this become a case study of business failures in the future? I wouldn't be surprised.
And that's why I say this is not something an intelligent company would do. I've had 30 years of working in high tech working for some of the largest semiconductor companies in the world. I have watched how they managed - and mismanaged - some real crises and opportunities - both realized and lost. This was handled so incredibly badly that I expect the board to call management up to explain WTF they were thinking. I fully expect heads to roll - and think they should. There's no way something like this would have NOT resulted in some senior management getting fired in my previous employers. There is only one word I can use to describe this, but I can't say it here. Suffice to say it starts with "cluster" and has 11 letters in total.

And all of this stands in contrast to where we could be if they decided to stick with the pricing when ordered and instead sent out an email stating that they are regretfully raising prices on FUTURE pre-orders but are going to tough it out and honor their pre-purchase pricing because of the wonderful company they are. Imagine getting a letter like that? How many of us would add an accessory or 2 to our orders and sing their praises even louder?

I'm not sure what stage of grief I'm in - probably depression - but it really helped to just say all of this. If you read this, thank you and I'm sorry!

 

[Jnz]

How do you calculate whether you're selling at a loss or not? What costs go into it? Just the raw materials actually in each truck? Well, those vary based on how many trucks you're producing. Do you also try to amortize and recoup the costs for rebuilding the Normal factory? Building out the Rivian Charging Network? The Service Centers? The Georgia Factory? In order to "turn a profit" they need to eventually make enough money to recoup all of those costs. Everyone that's apologizing for what they did is focusing on inflation and the cost of materials, but that's only part of the cost of the trucks. They could've and should've spread these cost increases out over the past 4 years - they announced base prices in 2018? Well, they should've increased those in 2019 and again in 2020 and again in 2021. And the price you pay is based on the price listed when you handed them $1,000. Instead, they advertised a specific product at a specific price for as long as they could, until 70,000 people handed over $1,000 to reserve one and the market cap of the stock was off the charts, but only delivered what, a few hundred to actual, arms-length, paying customers at that price?? I know the agreement "allows" them to do what they did, but that doesn't mean it's the right thing to do.

 

[johnking]

No one wants to sell a product below cost unless you are like AMZN or Samsung you do that to capture the market share. They did that with the Kindle and Samsung TVs about 6 or 7 years ago.

Certainly Rivian is not gonna do that to capture market share.

I have ready Elon's biography and when Tesla was building the original roadster, they went through multiple price rises for their initial Roadster. Their challenge was the lack of maturity to manufacture a car. The core team was a bunch of battery enthusiasts who wanted to build a car for hobby and Elon pumped money and they decided to form a car company. When they would calculate how much it would take to build the car, every iteration brought about a different number. Someone would say '70K' another would say 65K and so on and at one point $92K which was almost twice their initial estimate. Finally, he stepped in, took an in-depth look, stuck deals with suppliers and then finally delivered the cars to customers a little more than $105K a piece albeit with a delay of more than 2 to 3 years.

His clients who had placed the orders were mostly Silicon Valley elites who had enough money to part with. There wasn't another EV manufacturer around and Tesla was the first one to do so at scale and the customers put up with it.

In Rivian's case, RJ and team definitely did their planning, hired mostly veterans from the industry and had an 'A' team with him compared to Elon. Their output is expected to be of great quality. After moving the target date for delivery by 2.5 years, finally they delivered the R1Ts at the price they had set for the launch edition.

As I have stated in one of my earlier posts, I made my Model X reservation before the refresh in early 2021. After the refresh, Tesla reached out and said that they will give me a $2K discount on the new price which was $10K more (net increase was 10%). After that, they have increased the price twice but only for new orders and we who made the orders prior were spared.

Rivian knew the prices would increase. They knew they had problems perfecting their battery for production. The cost was definitely bound to go up but going up by 22% can breach the affordability of customers.

If they had forecasted and announced that they will deliver the vehicles 2 years from now and built-in the inflation in the cost of the vehicle, we would've known earlier on the price. If it was $94K then only those who could afford it would've placed the order.

Quoting the price at $70K made many people stretch their budget, plan for saving some money and dream of affording an EV truck/SUV with advanced features. No wonder orders were placed by many who thought they could afford it at $1K . In comparison Tesla asked for just $100 at the same time in 2019, 2020.

Rivian used the pre-orders for having a great IPO and if they had quoted $94K for the R1S, they would've had lesser pre-orders. Of course the 100,000 AMZN Vans would've been instrumental in the IPO.

Lack of communication, delivering some of the vehicles at the quoted price and then making the existing reservation holders pay more than 22% cuts thru the roof of affordability.

Tesla advertised the dual motor Cybertruck at $59K. Definitely they will not be able to meet that price given how the exoskeleton architecture is gonna cost more. But if it goes to 80K, $90K then obviously folks are gonna drop off.

The reaction from this forum members is normal. Given that many of us have been cheering for Rivian all along. Transparency early on would've been better. I would've made my decision early on to cancel the order.

Not saying anything, but using my order to account for one of the many orders in the run-up to the IPO only to increase the price makes me feel cheated.

<End of Rant ! >

 

[Bobthebuilder352]

Rivian can’t sell these vehicles at 2018 prices and 2022 costs. I cannot understand how people think they *deserve* a truck sold at a loss for the company.

The 20% increase represents four years of inflation, plus the rise in parts costs over those four years, which according to several people on this board who work in the industry have doubled in many cases.

If you dance with the Configurator you can build a Rivian for just a few thousand more than your earlier estimate. I did it yesterday. Free paint, free wheels, dual motor (600hp and 0-60 in 4s!), sans tonneau, sans adamantium underbody shielding, sans tent and kitchen… all told your Rivian will be in the mid to high $70’s.

Want more? Pay for more. Because it costs more.

Oh how the sheep blindly defend what they don’t even understand. I love how the majority hear “supply chain” and naively just accept the price increase. Guess what, contractors, manufactures, and suppliers all figured it out months ago so while some price increases are real many are made up arbitrarily.

 

[Rivian_Hugh_III]

Having given it 24 hours my mind has changed somewhat.

I have a lot more compassion for those of you who had a reservation for years, were cheerleaders and *real* leaders, leading the rest of us to this amazing vehicle.

You put your hearts and souls into caretaking this brand and dreaming about what the vehicle would bring into your life.

Then on the eve of taking ownership you get taken for granted, tossed to the curb, treated like a mere customer instead of what you truly were: participants in the dream and the vision. Rivian‘s supposed love and care for you turned into a steely-eyed transactional relationship. Give another 20% or we walk away from you.

That’s right and I get it. You’re not walking away, they are. It’s a divorce and you’ve been blindsided. Rivian has been eying richer, more naive partners all along, stringing you along until the last minute.

It totally sucks. I’m sorry I didn’t get that before.

 

[Ralph]

Those prices had been sitting still for quite some time, and were based on projections, not realities on the ground as these are.

You mean including the options they refuse to actually describe in detail or show? The pricing is based on actual facts right?

 

[Dark-Fx]

My Taycan would cost less today than it did almost 2 years ago.

It probably costs porsche considerably less to make as well. Ignoring all of the upfront cost recovery involved in making the first ones more expensive.

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