by Essential Case Details
Background of the Conflict
For Rivian’s first customers, time became an expensive lesson. In early 2022, the young electric vehicle manufacturer caused outrage among those who had placed pre-orders by announcing a sharp price increase for the R1T pickup and R1S SUV just before their launch. As it turned out, this decision cost the company itself a considerable sum.
This week, Rivian confirmed it will pay $250 million to settle a class action lawsuit filed shortly after the price hike announcement.
Price Increase Details
In March 2022, Rivian announced that the price of the R1T would increase from $67,500 to $79,500, and the R1S from $70,000 to $84,500. While price adjustments in the automotive industry are not uncommon, such sharp jumps are rare, with the exception of certain surprises from Tesla.
The real mistake was that Rivian initially applied the new prices to existing orders. This hit the brand’s early supporters the hardest, those who had placed deposits months before, and sparked a wave of outrage among them.
The company reversed its decision within a few days, leaving existing customers at the old prices and limiting the increase only to new buyers. However, the consequences were already irreversible.
Legal Consequences
Shortly after these events, a lawsuit was filed accusing the company of including misleading statements and cost estimates in the documentation prior to its IPO in 2021, concealing the real production costs of the R1 series models.
Now Rivian has agreed to a settlement. The total payout will be $250 million, of which $67 million will be covered by directors’ and officers’ liability insurance, and the remaining $183 million will be taken from the company’s cash reserves. The settlement still awaits final court approval.
Rivian insists that it denies all allegations and states that the settlement “is not an admission of guilt or wrongdoing.”
Settlement Terms and Company’s Current Status
The settlement class includes everyone who purchased Rivian Class A shares between November 10, 2021, and March 10, 2022.
The settlement comes at the worst possible time for the automaker. Although the company had $4.8 billion in cash and its equivalents at the end of June, it needs all available funds for the successful launch of the mid-size R2 model, which could be a turning point in the manufacturer’s fate.
This case serves as a reminder of the importance of transparency in communication with investors and customers, especially for young companies operating in highly competitive industries. The price increase, although partly justified by rising costs, caused significant reputational damage, and the financial consequences are now tangibly affecting the company’s resources at a crucial point in its development. The success of the R2 model now depends even more on effective financial management and restoring market trust.
