EV maker Rivian takes bold bet with higher-priced vehicles amid heating competition

Reuters · 05/11/2023 03:00
EV maker Rivian takes bold bet with higher-priced vehicles amid heating competition

By Abhirup Roy

- Rivian Automotive Inc RIVN.O is betting it can keep prices high for its debut lines of electric pickup trucks and sport-utility vehicles even when competition swells, its CEO said, a bold move that may be if the startup wants to make a profit.

And one some see as risky, since Rivian products will soon face more rivals at a time when market leader Tesla Inc TSLA.O is slashing prices to spur demand in the face of souring consumer sentiment, and traditional automakers are tightening competition with lower-priced electric vehicle (EV) models.

Rivian calmed investor this week by sticking to its 2023 production target and reporting better-than-expected quarterly revenue in a sharp contrast to peers Lucid Group LCID.O, Fisker Inc FSR.N and Nikola Corp NKLA.O.

The Irvine, California-based startup said it was focusing on rolling out higher-priced, feature-packed models of its R1S sport-utility vehicles (SUVs) and R1T pickup trucks to meet customer demand in the term, bumping up the average selling price (ASP) even as it offers some lower-priced variants.

"We see demand from customers for what we're building" Rivian CEO R.J. Scaringe told Reuters on Wednesday.

Rivian is confident of maintaining prices in the face of growing competition, he said, adding that extra-large batteries, better performance and premium features would distinguish the company from rivals.

"Given the data that we have on customer behavior, the aggregate result we see is a continued upward shift in ASPs," he said. "We will offer a lower priced variant, but lower prices on the things we're offering today."

Rivian does disclose its ASP, but the R1T starts at $73,000 while Ford Motor Co's F.N F150 Lightning electric truck is priced from about $60,000.

The R1S starts at $78,000, compared to just over $47,000 for Tesla's Model Y and about $97,000 for the more premium Model X.

"These are flagship products," Scaringe said of Rivian's offering. "These are the products that are building our brand. They're meant to sell hundreds of thousands of units."

Rivian aims to produce 50,000 vehicles this year.

The premium pricing strategy, however, is still seen as risky.

"Rivian to be careful to increase its price tag too much while more established competitors are rapidly gaining momentum in the market," said Orwa Mohamad, an analyst at investment research firm Third Bridge.

After multiple production snags, Ford is opening orders for its F-150 Lightning as it plans to scale to annual production of 150,000 units by the end of this year, while Tesla is expected to start mass production of its much-delayed Cybertruck year.

Any immediate impact on Rivian's demand will be difficult to gauge as the company, along with rival Lucid, stopped disclosing current orders in a move that has concerned analysts.

Extending the pricing plan and doubling down on cost cuts are seen key to the company's target of turning a gross profit in 2024 for the first time.

"I think they'd be crazy to raise prices, simply because they have more demand than they have supply," said Elliot Johnson, chief investment officer at Evolve ETFs, which manages over $4.5 billion in assets, including investments in EV startups such as Rivian.

"You'll absolutely see prices come down when they're able to have more economies of scale and when there's more competition. It'll be a little bit like Tesla," Johnson added.

Scaringe said the company expected to address a mass market with its R2 family of smaller vehicles, targeted to launch in 2026 rather than 2025.

For , he said, Rivian's focus is on ramping up production and driving costs down even though the company said supply chain issues, sparked by the pandemic, continued to be the main limiting factor.

(Reporting by Abhirup Roy in San Francisco; Editing by Peter Henderson and Jamie Freed)

((abhirup.roy@thomsonreuters.com; +1 415 941 8665; @abhiruproy30;))