When Rivian (RIVN) said that it would hike prices for its electric vehicle, it faced a backlash from customers. Rivian’s serious blunder will hurt the stock on customer perception and operations.
Rivian said it would raise prices, citing supply challenges and higher costs. It also changed available options for customers. This removed cheaper electric vehicle options for customers. Customers who gave a deposit needed to cancel their pre-order. The public relations disaster is one of many that risks hurting RIVN stock. As the stock market correction intensifies, speculators will exit Rivian. The start-up company trades at an infinite price/sales ratio. Until it ramps up production, investors face uncertainties.
Rivian’s attempted price hike acknowledges the cost of production is higher than management expected. In 2018, the world did not have a pandemic, a supply chain disruption, higher commodity prices, and now war. Instead of negotiating a higher price with customers, the company may produce the final product and sell at a substantial loss.
Investors should estimate that losses could increase by at least 30% per unit sold. In hindsight, Rivian could have delayed production. Customers would have to wait longer before taking delivery.
EV rival Lucid Motors (LCID) posted poor quarterly results. It slashed its production forecast.
The EV bubble appears over.