In the last couple of years, over fifty six thousand people placed $1,000 fully refundable deposits to buy either an R1T or R2T.
The Irvine, California startup, got the attention of Amazon who entered into an agreement to build 100, 000 electric delivery vehicles. In addition to Amazon, who invested 700 million into Rivian, Ford, Cox Automotive are just some of the companies who invested into Rivian.
Its CEO and Founder,39 year old Robert Scaringe, raised over US$13.5 billion in financing following its Initial Public Offering (IPO) last November. Investors believed it was the first company that could become a major competitor to Tesla.
Its headquarters is located in Irving, California and the vehicles are manufactured in Normal, Illinois at a former Mitsubishi plant.
Rivian, has received rave reviews and Motor Trend recently named the R1T is Truck of the year. Deliveries of the R1T were to begin late last summer. Rivian projected it would build 1200 trucks by December of 2021, however they were far short of that number. The company delivered less than 400 trucks in December, and reports indicate those trucks went to employees.
Last week, many of those customers were outraged when Rivian raised prices on both the R1T and R1S by significant amounts. To get a truck with the same specifications, customers were now being asked to spend $12,000 more for an R1T and $14,500 more for an R1S. These prices represent increases of 17 percent and 20 percent, respectively. When announced, the price hikes applied to nearly every preorder—only customers whose vehicles were in or near production were exempt. Production has been slow to ramp up, so few customers were likely to be grandfathered.
Public Relations Disaster
In less than 24 hours, thousands of Patient customers were outraged, many taking to social media as some customers placed their fully refundable $1000.00 deposits in 2018. Within a day, the company partly reversed course by allowing customers to keep the initial pricing that had been advertised when they placed their $1,000 deposit. Customers who had canceled preorders placed before March 1 could have them reinstated if they chose.
The price hike revealed, Rivian intentionally priced the vehicles too low. Laura Schwab, the company’s former VP of sales and marketing.it was clear that the vehicles were underpriced, and each sale would result in a loss for the company.” After Schwab repeatedly raised the issue, one senior executive “agreed that they would need to raise the vehicle prices after the IPO.
A Rivian shareholder filed suit earlier today. The Shareholder, alleges that the company’s surprise 20 percent price hike tarnished Rivian’s reputation and violated US securities laws.
The company made “untrue statements” in its IPO about the pricing of its R1T truck and R1S SUV, the lawsuit says. “Unbeknownst to investors,” the suit says, Rivian’s filings for the IPO contained statements that were “materially inaccurate, misleading, and/or incomplete because they failed to disclose, among other things, that the R1T and R1S were underpriced to such a degree that Rivian would have to raise prices shortly after the IPO.”
The lawsuit alleges that the surprise price increases would “tarnish Rivian’s reputation as a trustworthy and transparent company” and risk the cancellation of a “significant number” of the nearly 56,000 preorders the company had accumulated.
Rivian’s CEO RJ Scaringe as well as its chief financial officer, chief accounting officer, and its board of directors are named in the lawsuit along with the underwriters of Rivian’s IPO, including Morgan Stanley, Goldman Sachs, and JPMorgan Chase.
OVER PROMISED UNDER DELIVERED
Thousands of workers being laid of, as General Motors were closing a plant that built Chevy Cruise in Lordstown, Ohio. Despite a lot of pressure to keep the plant, GM simply didn’t have a need for the plant.
Enter, Steve Burns former CEO of an electric vechicle company called Workhorse, where he would build an Electric Pickup at GM’s Lordstown Plant. GM simply signed the plant to the new owners : Lordstown Motors: Where a new electric pickup would be assembled. GM loaned the company 40 million dollars to purchase the plant.
Lordstown, said there were thousands of orders for the pickup truck called the Endurance.
In March 2021, the investment research firm Hindenburg Research that specializes in short selling published a lengthy report about Lordstown supporting its short position in the stock. In the report, Hindenburg presented evidence that it said demonstrated a history of fraud at Lordstown, with the company misleading investors by exaggerating demand and orders for its trucks, as well as Lordstown’s ability to build these trucks. Hindenburg’s report showed that thousands of Lordstown’s claimed orders were non-binding, no-deposit indications of interest by companies without the apparent financial strength to support the size of the orders. The report also claimed significant production delays beyond Lordstown’s claimed timeline with trucks three to four years away from production, stock sales by insiders, amidst vehicle testing problems, and irregularities in the background of Lordstown’s founder, Steve Burns.
In December of last years, General Motor sold off all its shares of Lordstown. Lordstown Motors is history, it hopes to sell the plant to Taiwanese Electronic maker Foxconn.