Rivian will pay $250M to settle lawsuit over R1 price hike

Rivian has reached a significant settlement of $250 million to resolve a class-action lawsuit filed by shareholders following an unexpected price increase for its R1 pickup truck and SUV in 2022. The lawsuit accused Rivian of including deceptive statements in its regulatory documents prior to its 2021 IPO, particularly regarding the production costs of its R1 electric vehicles. While Rivian agreed to this settlement, the company maintains its innocence, stating through a press release that this resolution does not imply any admission of wrongdoing. The settlement still awaits approval from a judge in the U.S. District Court for the Central District of California. In terms of financial impact, Rivian plans to cover $67 million of the settlement through its directors’ and officers’ liability insurance, with the remaining $183 million sourced from its cash reserves. As of June 30, Rivian reported having $4.8 billion in cash and equivalents, which places the company in a robust position to manage this financial obligation. This settlement comes at a crucial juncture for Rivian, which is gearing up for the launch of its next-generation electric vehicle, the R2 SUV, set for 2026. The R2 is designed to be more affordable than the current R1 models, with production targets of up to 150,000 units annually at its Illinois factory. Additionally, Rivian is constructing a new facility in Georgia dedicated to the R2 and upcoming models. However, Rivian's R1 sales have shown signs of decline, with projections indicating that the company will deliver significantly fewer vehicles in 2025 compared to previous years. Factors such as tariffs imposed during President Trump's administration and the loss of the federal EV tax credit have added further challenges. In response to these market difficulties, Rivian recently laid off over 600 employees as part of a restructuring initiative. CEO RJ Scaringe has also stepped in as interim chief marketing officer to navigate these tumultuous times. The controversy began when Rivian raised prices nearly 20% on the R1 models in March 2022, citing supply chain issues and inflation, which sparked outrage among customers—especially those with pre-orders. In a letter to customers, Scaringe acknowledged the breach of trust and expressed regret over the decision, which subsequently led to a significant drop in Rivian's stock price. Shareholder Charles Larry Crews promptly filed a lawsuit, alleging that the company's misleading statements contributed to the adverse market reaction. The lawsuit received class action status in July 2024.