The 2022 Rivian R1T Is Too Underpriced to Be Profitable
Not again, another problem for the Rivian R1T just surfaced. Apparently, the 2022 Rivian R1T is significantly underpriced. It’s thousands of dollars away from being profitable, but the extra costs aren’t all being passed down to consumers.
The 2022 Rivian R1T is underpriced
How is the 2022 Rivian R1T managing to stay afloat? The Rivian R1T only has an MSRP of $67,500, and reportedly, this starting price is too low. According to Reuters, the price is too low for Rivian to profit off of the truck.
Peter Rawlison, CEO of Lucid and former Tesla engineering executive, shared that the R1T should start at about $95,000 to make a profit. That would require a $27,500 price increase, which is astronomical.
Sandy Munro, the head of Munro & Associates, evaluated the R1T for improvements. He explained that the R1T is too underpriced for what it is and what it does.
However, Munro also mentioned that the build quality still isn’t as good as rivals from more established brands. However, this isn’t dissimilar from early Tesla models and other start-ups.
How can the 2022 R1T become profitable?
One easy way to make the 2022 Rivian R1T a profitable model is by increasing the prices. But this would be difficult for Rivian to do, especially after the massive backlash when Rivian tried increasing prices a few months back.
The quad-motor variant priced a price hike of $12,000, raising the starting cost to $79,500. The price increase affected reservation holders who agreed to the original costs, so people got pretty upset.
After an uproar occurred and Rivian decided to honor the original pricing agreement for orders placed before March 1st. If you cancelled your order due to frustration, Rivian will instate the original price upon request.
All new orders are subject to the price increase, but it doesn’t seem to be enough. But on a good note for the Rivian R1T, reservations have increased to over 90,000.
Rivian spends $22,000 on the entry-level battery pack and $22,000 on drive trains from Robert Bosch. Rivian is looking into cost reduction opportunities by considering finding these supplies at cheaper prices. Cutting manufacturing costs is something that start-ups often have to figure out to make a profit.
What other issues does Rivian face?
Like other vehicles, the 2022 Rivian R1T struggles with the ongoing semiconductor chip shortage and other supply chain problems. The plan to increase prices to cover the rising costs of raw materials didn’t go well.
Rivian also faces significant delays due to logistic problems and the failure to properly create an efficient product roadmap or reduce operating expenses. Plus, production dates are based on exterior colors and wheel designs instead of on a first-come, first-serve basis.
Investors are starting to lose a little faith in the Rivian R1T and are pulling out of the game. Ford sold a majority of its shares. However, Rivian urges investors to hold on as it plans to open another factory in the United States by 2025.
Rivian doesn’t seem to be going under yet, but things aren’t exactly looking good. We will keep you updated as the R1T responds to increasing pressure as supply chain shortages and rising inflation strike.