Rivian to Pay $250M Settlement Over R1 Price Increase

Rivian Reaches Settlement in Shareholder Lawsuit

A $250 million settlement has been agreed upon by Rivian to resolve a class action lawsuit brought forth by shareholders. The suit stemmed from a sudden and substantial price increase implemented on the R1 pickup truck and SUV models in 2022.

Allegations of Misleading Information

The core of the lawsuit centered on claims that Rivian had presented inaccurate statements and figures within its regulatory filings leading up to its 2021 Initial Public Offering (IPO). Specifically, the allegations concerned the actual costs associated with manufacturing the R1 electric vehicles. Despite the settlement agreement, Rivian has officially stated that it disputes the claims made in the lawsuit and emphasizes that the settlement does not constitute an acknowledgement of guilt or wrongdoing.

Settlement Details and Financial Impact

The proposed settlement is currently awaiting approval from a judge within the U.S. District Court for the Central District of California. Upon approval, Rivian intends to cover $67 million of the total settlement amount through its directors’ and officers’ liability insurance policy. The remaining $183 million will be funded from the company’s existing cash reserves, which totaled $4.8 billion as of June 30th.

Timing and Future Vehicle Plans

This settlement arrives at a critical juncture for Rivian as the company prepares for the launch of its next-generation EV, the R2 SUV, scheduled for 2026. This upcoming vehicle is designed to be significantly more affordable than the current R1 lineup, and Rivian anticipates a substantial increase in production volume.

• The Illinois factory is projected to produce up to 150,000 R2 vehicles annually.
• A new manufacturing facility is under construction in Georgia to support R2 production and future vehicle models.

Current Sales Challenges

Concurrently, sales of the R1 models have experienced a slowdown. Rivian forecasts that its total EV shipments for 2025 will be lower than those achieved in both 2024 and 2023. External factors, including tariffs imposed by President Trump and the elimination of the federal EV tax credit, have further impacted the market conditions for Rivian’s vehicles.

Recent Restructuring and Leadership Changes

In response to these challenges, Rivian recently underwent a restructuring process that involved the layoff of over 600 employees. Furthermore, CEO RJ Scaringe has assumed the additional role of interim chief marketing officer.

The 2022 Price Increase Controversy

Initial deliveries of the R1 pickup trucks commenced in late 2021. In March 2022, Rivian announced a nearly 20% price increase for both the truck and SUV models. This decision was attributed to supply chain disruptions, inflationary pressures, and the planned introduction of more budget-friendly models. Deliveries of the R1S SUV began in August 2022.

The price hike was applied to both new orders and existing preorders, sparking significant backlash from customers and enthusiasts.

Reversal and Stock Impact

Facing considerable criticism, Rivian swiftly reversed the price increase for customers who had already placed preorders. However, the initial announcement of the price increase led to a decline in Rivian’s stock price, resulting in financial losses for shareholders.

CEO’s Apology and Subsequent Lawsuit

RJ Scaringe issued a public apology, acknowledging the error in judgment and the breach of trust. He stated that the decision was his most regrettable mistake in the company’s twelve-year history.

Shortly after, shareholder Charles Larry Crews initiated a lawsuit against the company, alleging that Rivian had misrepresented the actual production costs of the R1 vehicles in its IPO documentation. The claim was that these misrepresentations directly contributed to the negative impact on the stock price following the price hike announcement. The lawsuit was granted class action status in July 2024.