How would you’re feeling should you ordered a meal out and the menu had one value, however the cheque had one other, 20% increased? Worse but, what if it was an $85,000 buy you had been making, and the additional cost rounded the invoice off to $100,000? Nicely, that’s precisely what Rivian (NASDAQ: RIVN) determined to implement final Tuesday, and as you possibly can think about, clients weren’t too completely satisfied about it.
Why did Rivian hike costs?
Nicely, shock shock; chip shortages. Many companies have begun elevating costs for services according to inflation, together with touting what’s develop into widespread say in earnings calls as provide chain points, delivery delays, and, as talked about, chip shortages.
Not that it’s an excuse by any means. It’s one factor to go on prices to current clients that you just make conscious of the change, or incrementally enhance the worth according to these macro occasions, it’s a complete different story when an order was made prior and the settlement had kind of been settled between the client and vendor.
Why did Rivian reverse the worth modifications?
As you possibly can think about, clients had been outraged. A slew of Redditors together with Twitter customers took to the social media platforms to announce they might be canceling their orders. After all, quickly after, Rivian realized the error in its choice simply two days later. What’s but to be seen, is that if it’s too little too late.
How will this have an effect on Rivian gross sales?
There’ll probably be various clients who flip their again on the corporate and stand agency of their choice to cancel orders. Regardless of the saying “all publicity is nice publicity”, this incidence shines a really poor mild on the corporate and its administration — it might trigger irreparable injury to the corporate’s picture and fame, so I wouldn’t be stunned to see patrons look towards different automakers like Ford, or Tesla, who each plan to debut their very own EV fashions to compete with Rivian later this 12 months.
What does it imply for Rivian shareholders?
One of many key benefits Rivan has held over rivals has been having the first-mover benefit within the EV pickup house. Though the corporate instructions a steep valuation nonetheless — even following a monumental market correction — the corporate has solely made roughly 1,000 deliveries. Even with orders skyrocketing in direction of 71,000 on the finish of 2021, that’s nonetheless lower than half of the orders Ford has taken for its F-150 Lightning, and it’s estimated that Tesla’s Cybertruck orders are additionally within the tons of of 1000’s, so it was already severely behind the competitors.
This incident probably received’t assist the automaker’s need to atone for the large gamers, moderately, it’ll wreak havoc. So, I’d be steering away from Rivian till we see a extra optimistic growth each in its enterprise mannequin, and its administration crew.