Rivian has agreed to pay 250 million dollars to settle a class-action shareholder lawsuit. The lawsuit was filed after the company suddenly increased prices on its R1 pickup truck and SUV in 2022.
The legal action alleged that Rivian included misleading statements and figures in its regulatory filings before its 2021 initial public offering. These filings reportedly misrepresented the costs required to build the R1 electric vehicles. Despite agreeing to the payment, Rivian denies the allegations in the suit. The company maintains that the settlement agreement is not an admission of fault or wrongdoing.
The settlement payment still requires approval by a judge in the United States District Court for the Central District of California. If approved, Rivian plans to pay 67 million dollars of the total through its directors’ and officers’ liability insurance. The remaining 183 million dollars will come from the company’s cash reserves. The company reported having 4.8 billion dollars in cash and equivalents as of June 30.
This settlement arrives at a pivotal time for Rivian. The company is deeply engaged in preparations to launch its second-generation electric vehicle, the R2 SUV, in 2026. This new vehicle is significantly cheaper than the R1 lineup, and Rivian plans to manufacture far more units. The company states it can build as many as 150,000 R2 vehicles per year at its factory in Illinois. It is also constructing a new factory in Georgia that will produce the R2 and future vehicles.
At the same time, sales of the R1 models have been lagging. The company expects to finish 2025 having shipped far fewer electric vehicles than it did in 2024 or 2023. A combination of President Trump’s tariffs and the loss of the federal electric vehicle tax credit has further complicated the market for Rivian’s vehicles.
In response to these challenges, the company laid off more than 600 employees this week in a restructuring. This restructuring also involved CEO RJ Scaringe taking over as the interim chief marketing officer.
Rivian delivered the first R1 pickup trucks in late 2021. In March 2022, the company decided to raise the price of the truck and the SUV by nearly 20 percent. The company cited supply chain shortages, inflation, and plans to introduce cheaper models as reasons for the increase. Rivian began R1S SUV deliveries in August 2022. The price hike was applied to both new orders and to customers who had placed pre-orders and were on a waitlist.
Customers and fans of the company were irate. Rivian quickly reversed the decision for customers who had pre-orders. Crucially, the price hike announcement also caused Rivian’s stock price to fall, resulting in losses for shareholders.
CEO RJ Scaringe acknowledged the error at the time, stating it was wrong and that the company broke the trust of its customers. He called it the most painful mistake he had made since starting Rivian more than twelve years ago.
A Rivian shareholder, Charles Larry Crews, sued the company just a few days after the price hike reversal. He claimed the company had misrepresented the true cost of building the R1 vehicles in its initial public offering documentation. He argued these misrepresentations led to the price hike announcement, which then negatively impacted the stock price. This lawsuit was granted class action status in July 2024.