Don't let the Scout become a status symbol; why $60k misses the point of the Revival

[Mousehunter]

What was the range on that $60k Lightning? Was that the $40k Lightning they promised us selling at $60k. Or was that the $60k Lightning that the dealers were asking $100k for and nobody gave a second chance to because they did not think Ford removed that disastrous initial market adjustment

But regardless - I did not want the Lightning because it did not replace my Superduty. The Traveler could replace virtually any of my SUV's or cars.

 

[Horn of Gabriel]

My career spans 25+ years in product research, marketing, product management and strategy, and pricing. I consult with Fortune 50 companies (including some in automotive) on pricing. This isn't a brag, it's to illustrate that when it comes to pricing products, I know what I'm talking about, and companies trust me to help them get it right.

The AI-bot (likely Chinese in origin spreading agitprop) makes claims about how Scout should price at X because he values the product at Y and the Chinese companies price their cars at Z. This illustrates a few fundamental misunderstandings of good pricing practices:

• Price is not based on cost.

You should never - EVER - price a product based on cost, unless forced to by the government or regulatory regime. The market doesn't know your true cost, and never should. The cost you incur to ship a product is not the value you deliver to the buyer when they receive it: they are two separate things. Examples in hardware, software, and services are easy to find: the cost of the diamond for your wife's engagement ring has zero to do with DeBeers cost to get it out of the ground and onto a ring in the store. The price you or your business pays for one incremental copy of Office365 delivered to your laptop has zero to do with Microsoft's incremental cost to deliver it (which is close to zero). McKinsey's or Bain's report they develop for your CEO and sell for $10MM has nothing to do with their cost to develop it, in fact it was 75% developed before they walk through the door. And in tech, Nvidia's cost to build the next version of their latest AI-chip to power our fun AI-bots like in this thread have nothing to do with what they will charge.

Pricing based on cost does not optimize profit. Because we are in a capitalistic society, and Scout isn't a non-profit, they and VW both have a fiduciary duty to their shareholders and investors to optimize their return on their investments. You may not like that, you may prefer that it was another way, or pine for yesteryear when things were "better," but that is how it is today.

Finally on the cost point, even if they did price on cost, comparing vs. a Chinese company is false equivalency. Chinese companies are often quasi-governmental bodies, with investment from and and a controlling interest by the Chinese Communist Party. Their financials are not transparent, and the Communist Party often will choose to massively subsidize certain industries as a way to flood and then corner the market with predatory pricing.

Also, many companies in China use slave-labor from ethnic minorities like the Uighur population, which they don't pay and force to live in squalor and sterilize while sending to re-education camps. Something to consider whenever doing a side by side comparison of a Chinese product vs. a product manufactured in the U.S. or Europe.

• Price is based on what people are willing-to-pay for the product.

Good pricing is based on what the buyer of the product is willing to pay. If a company attempts to price the product beyond the value that the buyer feels they are receiving, they either won't purchase, or they will negotiate if that is an available option.

The beauty is that value is in the eye of the beholder. The AI-bot says that $60K price is too high for the value received, which may be perfectly true for him and maybe he would max out at $40K to match price:value. But for the next buyer down the road, $75K might be perfectly acceptable.

• When a company prices below the value the buyer feels they are receiving, it's called "deal value."

The easiest way to think about it is when you see a product and the price is lower than expected and you say "wow, that is a really good deal!" There are many reasons that a company might want to create the perception of deal value, but the foremost is capturing market share.

• In a supply-constrained environment, use price segmentation to serve those with the highest willingness to pay.

You get out of a concert and 10,000 people all want an Uber. What happens? Surge pricing kicks in. Those with a higher willingness to pay get a car first (aka "the rich" lol), and others can either wait 30 minutes and get a beer at the bar, or walk 5 blocks out of the surge pricing zone.

Scout is in a supply-constrained environment and will be for years. They have tens of thousands of reservation holders. They aren't trying to capture share: they are going to sell out their first several years of vehicles already. Again, Scout is a for-profit business with a fiduciary obligation to its investors. It would be grounds for removal by the board of directors if the CEO approved a pricing strategy that did not optimize for those with a higher willingness to pay.

If you don't like that choice, you can either 1) not purchase because the price charged does not align to the value you feel you receive, 2) wait and hope that the price will decrease based on saturation and market-forces. It suppose the AI-bot shows us a third option: get on the company's community site and complain about the price. Maybe the 4th option is to start an anti-capitalist revolution and get the government to impose price controls based on your ideals about what the correct price:value ratio should be? I wouldn't recommend it.

 

[Mousehunter]

I can agree with a lot of what the prior poster has expressed. There are a couple other things that come to mind.

How will Scout deal with initial market adjustments? They will only be able to fulfill reservations at certain rates. In a free market, the market will find ways to allow people who give the product higher value the ability to get the product faster. In a dealer model, we see market adjustment surcharges. Even in direct marketing, we generally see companies releasing products with a higher margin first. Absent of the dealer or manufacturer addressing the issue, aftermarket will. Some early buyers will treat their early delivery like winning the lotto - and cash in, reselling for profit. Many who see adjustment surcharges might decide to drop reservations and just look elsewhere rather than waiting more years with fingers crossed.

The second issue is that early adopters will have somewhat limited information to base their value judgements on. Some will add value due to the hope they will be one of the above lotto winners. Others will add value because they don't want to wait. But as more information becomes available (like the actual transfer rate of reservations to orders, like the actual user experience) - the market will change it's perceived value. Too often with EV's, that is a not a possessive thing - real world ranges not coming close to expectations, real world performance and durability not meeting expectations, quality control not meeting expectations. Hopefully Scout will not have those types of issues. Under promise, over deliver - and then reservations might actually increase rather than having a 1 out of 10 conversion rate.

 

[R1TVT]

It would be grounds for removal by the board of directors if the CEO approved a pricing strategy that did not optimize for those with a higher willingness to pay.

Agreed on all of this, and in terms of the above, the DTC model sets a price that we (the collective buyers) are willing to pay.

That pricing may be adjusted over time. Think of it as group pricing, with no need for any individual "market adjustments". The company realizes a significant benefit and efficiency gain with this model, offsetting any minor losses for customers who might want to bypass the line.

There is significantly less overhead and greater operational simplicity with a DTC model than with a dealer model. It's basically staggered grouped pricing and might be adjusted with upgrades to the current model, or new models.

We are the first group willing to pay ~$60K'ish for the first drop (based on the perceived value that Scout will deliver).

 

[tomgillotti]

My career spans 25+ years in product research, marketing, product management and strategy, and pricing. I consult with Fortune 50 companies (including some in automotive) on pricing. This isn't a brag, it's to illustrate that when it comes to pricing products, I know what I'm talking about, and companies trust me to help them get it right.

The AI-bot (likely Chinese in origin spreading agitprop) makes claims about how Scout should price at X because he values the product at Y and the Chinese companies price their cars at Z. This illustrates a few fundamental misunderstandings of good pricing practices:

• Price is not based on cost.

You should never - EVER - price a product based on cost, unless forced to by the government or regulatory regime. The market doesn't know your true cost, and never should. The cost you incur to ship a product is not the value you deliver to the buyer when they receive it: they are two separate things. Examples in hardware, software, and services are easy to find: the cost of the diamond for your wife's engagement ring has zero to do with DeBeers cost to get it out of the ground and onto a ring in the store. The price you or your business pays for one incremental copy of Office365 delivered to your laptop has zero to do with Microsoft's incremental cost to deliver it (which is close to zero). McKinsey's or Bain's report they develop for your CEO and sell for $10MM has nothing to do with their cost to develop it, in fact it was 75% developed before they walk through the door. And in tech, Nvidia's cost to build the next version of their latest AI-chip to power our fun AI-bots like in this thread have nothing to do with what they will charge.

Pricing based on cost does not optimize profit. Because we are in a capitalistic society, and Scout isn't a non-profit, they and VW both have a fiduciary duty to their shareholders and investors to optimize their return on their investments. You may not like that, you may prefer that it was another way, or pine for yesteryear when things were "better," but that is how it is today.

Finally on the cost point, even if they did price on cost, comparing vs. a Chinese company is false equivalency. Chinese companies are often quasi-governmental bodies, with investment from and and a controlling interest by the Chinese Communist Party. Their financials are not transparent, and the Communist Party often will choose to massively subsidize certain industries as a way to flood and then corner the market with predatory pricing.

Also, many companies in China use slave-labor from ethnic minorities like the Uighur population, which they don't pay and force to live in squalor and sterilize while sending to re-education camps. Something to consider whenever doing a side by side comparison of a Chinese product vs. a product manufactured in the U.S. or Europe.

• Price is based on what people are willing-to-pay for the product.

Good pricing is based on what the buyer of the product is willing to pay. If a company attempts to price the product beyond the value that the buyer feels they are receiving, they either won't purchase, or they will negotiate if that is an available option.

The beauty is that value is in the eye of the beholder. The AI-bot says that $60K price is too high for the value received, which may be perfectly true for him and maybe he would max out at $40K to match price:value. But for the next buyer down the road, $75K might be perfectly acceptable.

• When a company prices below the value the buyer feels they are receiving, it's called "deal value."

The easiest way to think about it is when you see a product and the price is lower than expected and you say "wow, that is a really good deal!" There are many reasons that a company might want to create the perception of deal value, but the foremost is capturing market share.

• In a supply-constrained environment, use price segmentation to serve those with the highest willingness to pay.

You get out of a concert and 10,000 people all want an Uber. What happens? Surge pricing kicks in. Those with a higher willingness to pay get a car first (aka "the rich" lol), and others can either wait 30 minutes and get a beer at the bar, or walk 5 blocks out of the surge pricing zone.

Scout is in a supply-constrained environment and will be for years. They have tens of thousands of reservation holders. They aren't trying to capture share: they are going to sell out their first several years of vehicles already. Again, Scout is a for-profit business with a fiduciary obligation to its investors. It would be grounds for removal by the board of directors if the CEO approved a pricing strategy that did not optimize for those with a higher willingness to pay.

If you don't like that choice, you can either 1) not purchase because the price charged does not align to the value you feel you receive, 2) wait and hope that the price will decrease based on saturation and market-forces. It suppose the AI-bot shows us a third option: get on the company's community site and complain about the price. Maybe the 4th option is to start an anti-capitalist revolution and get the government to impose price controls based on your ideals about what the correct price:value ratio should be? I wouldn't recommend it.

I usually ignore the personal attacks, but I’m going to stop you right there.

I am a US Air Force Veteran and a single father living in Texas.

Calling a fellow reservation holder "Chinese Agitprop" because you disagree with their economic outlook is not "product expertise"—it is delusional and disrespectful. You might want to recalibrate your sensors; they are way off target.

Now, let’s address your lecture on pricing. You wrote a lot of words to say: "Price is determined by Willingness to Pay, not Cost."

I agree. That is Econ 101.

But then you based your entire conclusion on this premise:

"Scout is in a supply-constrained environment... they have tens of thousands of reservation holders."

This is where your 25 years of experience is failing you.

You are applying 2021 logic to the 2027 market.

• 2021 (Rivian/Ford Launch): Supply Constrained. Willingness to Pay was infinite. MSRP didn't matter.

• Today: The EV truck market is Oversupplied. Ford has a 100+ day supply of Lightnings. Rivian is burning cash to move metal.

• The Reality: The "Willingness to Pay" for an electric truck has dropped like a rock. That is why Rivian is terrified and pivoting to the $45k R2.

If Scout prices based on "Willingness to Pay" in a saturated market, they cannot price at $65k—because the buyers aren't there anymore. They are all driving Mavericks or waiting for the R2.

You are arguing for a "Skimming Strategy" (high price/low volume) in a market that has already moved to "Market Penetration" (low price/high volume). That isn't "Fortune 50 strategy"; that is how you become Fisker.

 

[Horn of Gabriel]

I usually ignore the personal attacks, but I’m going to stop you right there.

I am a US Air Force Veteran and a single father living in Texas.

Calling a fellow reservation holder "Chinese Agitprop" because you disagree with their economic outlook is not "product expertise"—it is delusional and disrespectful. You might want to recalibrate your sensors; they are way off target.

Now, let’s address your lecture on pricing. You wrote a lot of words to say: "Price is determined by Willingness to Pay, not Cost."

I agree. That is Econ 101.

But then you based your entire conclusion on this premise:

"Scout is in a supply-constrained environment... they have tens of thousands of reservation holders."

This is where your 25 years of experience is failing you.

You are applying 2021 logic to the 2027 market.

• 2021 (Rivian/Ford Launch): Supply Constrained. Willingness to Pay was infinite. MSRP didn't matter.

• Today: The EV truck market is Oversupplied. Ford has a 100+ day supply of Lightnings. Rivian is burning cash to move metal.

• The Reality: The "Willingness to Pay" for an electric truck has dropped like a rock. That is why Rivian is terrified and pivoting to the $45k R2.

If Scout prices based on "Willingness to Pay" in a saturated market, they cannot price at $65k—because the buyers aren't there anymore. They are all driving Mavericks or waiting for the R2.

You are arguing for a "Skimming Strategy" (high price/low volume) in a market that has already moved to "Market Penetration" (low price/high volume). That isn't "Fortune 50 strategy"; that is how you become Fisker.

Sir, if you're going to repeat talking points from the CCP, expect to get called out on it. That's not a personal attack, it's facts. I think upthread you told another user that they conveniently didn't respond to aspects of your argument, which means you inferred they had no response. I note that you also did not respond to the CCPs massive subsidies and control of major companies, or their usage of slave labor. I wholly stand by my assertion that any comparison of a product made in the U.S. or Europe, where we have labor laws and unions and a free market economy, to a product made in China is a false equivalence. It's also rich to see you call a post a "lecture" when you have 50,000+ words on this thread: pot meet kettle.

Regarding your assertion that the WtP for an EV truck has "dropped like a rock," I do not see evidence of this for Scout. Maybe you have presented hard data indicating that reservation holders are cancelling en masse? The Scout market at launch is not the Rivian market, or the Ford Lightning market, or the "Generic EV truck" market. It's an early adopter market, powered not only by EV enthusiasts but also by Scout nostalgics. These are the people who, like me, will happily pay $60K+ for a Scout, appropriately apportioned.

You're only half-right on skimming. Scout is going to sell out at a $60K launch price just as they would at a $40K launch price. I don't have access to their price elasticity data but I'm guessing they'd sell out their initial run at a $70K launch price. The volume for the launch price is not relevant until they hit a price that won't allow them to sell out their run. Scout is a niche product, it's a lot closer to Fisker than Ford. Rivian is terrified because they've burned through their tech-enthusiast early adopters with higher willingness to pay. As a result they have to pivot to a lower-priced vehicle that could appeal to a more mass market with lower WtP. Scout has already teased a lower-priced 3rd vehicle coming to the lineup down the road, which I suspect will meet many of your needs for a lower price and allow Scout to take their learnings from the early adopters who are buying Terra and Traveller to a more mass market. You seem to be advocating that Scout should underprice their halo launch products to appeal to joe everyone when they haven't even hit their early adopters yet. That's bad business.

 

[R1TVT]

Scout is a niche product, it's a lot closer to Fisker than Ford. Rivian is terrified because they've burned through their tech-enthusiast early adopters with higher willingness to pay. As a result they have to pivot to a lower-priced vehicle that could appeal to a more mass market with lower WtP.

Rivian announced their intent to launch R2 in 2022 (in conjunction with their LAUNCH of R1)... This was not a scheme concocted in 2024, it was an intentional and strategic plan to bring a more attractive and appealing "mass market EV" to a broader base of buyers. The intention being to increase profitability and also introduce younger buyers with less disposable income to the brand. It will serve as a critical part of their future viability if they can pull it off and if they develop solid brand affinity with R2 buyers (who could become future premium buyers based on that affinity). It's not different than having an umbrella like VW does with both premium and more value-oriented offerings, and it will not be surprising to see Scout do the same with a future product release. Maybe we should debate if that product should cost ~$40K? No, just kidding, let's not do that.