Rivian has agreed to pay $250 million to settle a shareholder class action lawsuit brought after the company abruptly increased the prices of its 2022 R1 pickup truck and SUV.
The lawsuit alleges that Rivian included misleading statements and numbers about the costs involved in manufacturing the R1 EV in regulatory filings for its 2021 IPO. Although Rivian agreed to the payment, it said in a press release that it “denies the allegations in the lawsuit and maintains that this settlement agreement does not constitute an admission of negligence or wrongdoing.”
The payment must be approved by a judge in the U.S. District Court for the Central District of California. If that happens, Rivian will pay $67 million of the total settlement amount through directors’ and officers’ liability insurance, and the remaining $183 million from cash on hand. The company had $4.8 billion in cash (and equivalents) as of June 30.
The settlement comes at a critical time for Rivian. The company is preparing to launch its second generation EV, the R2 SUV, in 2026. This vehicle is much cheaper than the R1 lineup, and Rivian plans to produce far more of them. The company says it can produce up to 150,000 vehicles a year at its Illinois plant, and is building a new plant in Georgia to make the R2 and future vehicles.
At the same time, R1 sales are slow. The company expects to end 2025 with far fewer EV shipments than in 2024 or 2023. The combination of President Trump’s tariffs and the loss of the federal EV tax credit further complicates Rivian’s auto market.
To that end, the company laid off more than 600 employees this week in a restructuring, and CEO RJ Scaringe became interim chief marketing officer.
Rivian delivered its first R1 pickup truck in late 2021. In March 2022, the company decided to raise the prices of its trucks and SUVs by nearly 20%, citing supply chain shortages, inflation, and plans to introduce lower-priced models. (Rivian began deliveries of the R1S SUV in August 2022.) The company applied the price increase to both new orders and those who pre-ordered and were on the waiting list.
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The company’s customers and fans were furious, but Rivian quickly reversed its decision for customers who had pre-ordered it. Importantly, the price increase announcement also caused Rivian’s stock price to fall, resulting in losses for shareholders.
“It is wrong and we have shattered your trust in Rivian,” Mr. Scaringe wrote in a letter at the time. “Since I started Rivian over 12 years ago, I’ve made a lot of mistakes, but this one hurt the most.”
Rivian shareholder Charles Larry Crews sued the company days later, alleging, among other things, that the company misrepresented the actual manufacturing cost of the R1 vehicle in IPO documents. He claimed that these misrepresentations led to the negative impact on the stock price due to the price increase announcement. This lawsuit was classified as a class action lawsuit in July 2024.
