Amazon-backed electric vehicle maker Rivian has been sued by a shareholder, after the firm did a quick u-turn over price increases for certain models.
It was back in November when the firm enjoyed a successful floatation on the Nasdaq, raising more than $11bn, which at one stage briefly valued Rivian at more than $100bn.
Rivian’s market value has declined since then, and it is currently valued at $38.5 billion, some way off its hoped for valuation of more than $70 billion (£50bn).
At the start of this month California-based Rivian had raised the base price of its quad-motor R1S SUV and R1T pickup truck, by $12,000 and $14,500, respectively.
With the price increases, the R1T, originally priced $67,500, shot up to $79,500 for the same configuration.
The R1S, originally priced at $70,000, also surged to $84,500
Justifying the price at the time, Jiten Behl, Rivian’s chief growth officer, told The Verge that the company faced “inflationary pressure, increasing component costs, and unprecedented supply chain shortages and delays for parts (including semiconductor chips).”
Behl also stated that the prices were originally set in 2018.
However there was an immediate customer pushback and days later CEO RJ Scaringe released an open letter announcing that it would honour the original price of pre-orders prior to the 1 March announcement.
“The costs of the components and materials that go into building our vehicles have risen considerably,” wrote Scaringe. “As we worked to update pricing to reflect these cost increases, we wrongly decided to make these changes apply to all future deliveries, including pre-existing configured preorders.”
“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,” said Scaringe. “While this was the logic, it was wrong and we broke your trust in Rivian.”
Customers with orders prior to this date who cancelled their pre-order after the price hike could also re-instate the order at the originally-agreed price.
This quick u-turn on pricing has, not surprisingly, triggered a lawsuit from a shareholder, namely Charles Larry Crews.
Reuters reported this week that Crews filed the complaint in the US District Court in San Francisco on Monday. He alleged that Rivian had misled investors in its initial public offering about how it had mispriced its electric vehicles.
Specifically, Crews alleged that Rivian concealed how its R1S SUV and R1T pickup truck were so underpriced that it needed to raise prices not long after its November 2021 IPO.
Crews reportedly said the increases “would tarnish Rivian’s reputation as a trustworthy and transparent company,” putting a large number of 55,400 preorders dating back to 2018 in jeopardy of cancellation.
He called the rollback, including an apology from Chief Executive R.J. Scaringe, a “futile attempt at damage control.”
Rivian did not immediately respond on Tuesday to a request for comment from Reuters.