Inside a packed theater in Laguna Beach, California, in early March, Rivian CEO RJ Scaringe revealed a trio of new, more affordable electric vehicles considered key to the startup’s quest to appeal to the masses and achieve profitability.
But the splashy announcement also included news that landed with a thud thousands of miles away: The EV models, at least for now, would not be built in Georgia as planned. Instead, in a move to save money, Rivian said it would start producing the vehicles at its existing facility in Illinois.
The company insisted it still was committed to Georgia, but its decision to press pause on the plant it had agreed to build an hour east of Atlanta angered state lawmakers and raised questions about whether the factory and the 7,500 jobs it promised to deliver would materialize.
Fast forward nearly nine months: In a matter of weeks, Rivian’s factory — billed as Georgia’s second-largest economic development project ever — suddenly appears primed to restart.
Credit: HYOSUB SHIN / AJC
Credit: HYOSUB SHIN / AJC
Tuesday, in the waning weeks of President Joe Biden’s administration, the U.S. Department of Energy gave Rivian’s Georgia plant a massive shot in the arm by announcing plans to award the California-based automaker a nearly $6 billion loan to build its factory. The financing consists of $5.98 billion in principal Rivian can use to construct the factory on 1,800 acres in southern Morgan and Walton counties, plus $592 million of capitalized interest.
Rivian still must meet undisclosed environmental, financial and legal conditions to secure the funding, but if finalized, the loan would be the second-largest ever doled out by the DOE’s Advanced Technology Vehicles Manufacturing program. With the loan, Rivian said it plans to begin EV production in 2028, but did not share a timeline for resuming construction at the site.
EV pioneer Tesla was among the first to receive a loan through this program, helping to catapult the then-struggling company into the world’s most valuable automaker. If Rivian’s loan pays similar dividends, Columbia Business School climate economist Gernot Wagner said, “We will see many, many more Rivians on the roads very soon with an effect that goes well beyond this one plant.”
Rivian’s current models, the R1S SUV and R1T pickup, carry price tags in the neighborhood of $70,000. Scaringe said the loan would allow the company to scale up production of its more affordable models. “A robust ecosystem of U.S. companies developing and manufacturing EVs is critical for the U.S. to maintain its long-term leadership in transportation,” he said.
Credit: Natrice Miller / Natrice.Miller@ajc.com
Credit: Natrice Miller / Natrice.Miller@ajc.com
Like other EV startups, Rivian has battled supply chain issues and burned through cash. On top of that, weaker-than-expected demand for all-electric vehicles has led to softer sales than many analysts had expected. That mix already has doomed some of its once-hyped competitors.
Rivian’s success is not assured, but experts said the loan should provide the company with a financial cushion at a critical time — and thrust Georgia back into the center of the EV universe.
“I think Rivian is a big winner for getting this lease on life,” said Alok Saboo, a professor of marketing at Georgia State University. “But the other positive is for the state of Georgia.”
Survival of the fittest
When Biden came into office in 2021, he did so with ambitious goals for the United States to achieve net-zero greenhouse gas emissions by 2050. Getting there would require slashing emissions from several key parts of the economy. Chief among them is the transportation sector, which produces more heat-trapping pollution than any other part of the economy.
With new regulations that push automakers to electrify their lineups and tax incentives that sweeten the deal for companies to build EVs in the U.S. — and for consumers to buy them — the Biden administration has sought to supercharge the country’s transition away from gas-powered vehicles.
New EV sales have continued to increase in the U.S., comprising nearly 9% of all new auto sales by the end of September, data from Cox Automotive shows. But the embrace of EVs has not been as swift as many analysts or automakers predicted, and consumers consistently cite range anxiety, high sticker prices and scattered charging infrastructure for their hesitance to make the switch.
The sluggish sales have led auto giants like Ford, Toyota and General Motors to pump the brakes on planned EV models, spending and growth projections. Companies without hybrid or gas vehicles to fall back on have had an even harder time. This summer, Fisker became the latest EV startup to file for bankruptcy. It was actually its second bankruptcy filing.
The original Fisker and solar panel maker Solyndra have been cautionary tales for the DOE, receiving loans before defaulting and going bankrupt. (The new Fisker did not have a DOE loan at the time of its latest bankruptcy.)
“It is giving out loans that, in some sense, are a little bit riskier than a commercial bank would be willing to,” Wagner said. “So the taxpayer here does subsidize some of the risk.”
But the cases of Tesla and others prove “the reward is all the greater if it works out,” he said.
Rivian has not been immune to the challenging environment. The company’s cash reserves have shrunk, and last month it scaled back manufacturing goals for the year, citing a “production disruption.” But the recent developments have dramatically changed the outlook for the company and its future in Georgia, experts say.
Earlier this month, Rivian finalized a joint venture to develop EV technology and software with German automaker Volkswagen. The agreement could be worth up to $5.8 billion, and for Rivian it includes an initial $1 billion investment, with the potential for more in the future.
Now, the new federal assistance should give Rivian more stability as it seeks to make the all-important pivot to producing more affordable models, said John Paul MacDuffie, a professor of management at the Wharton School of the University of Pennsylvania.
Saboo, the GSU professor, said it’s the “nature of the game” that some entrants into the EV marketplace would fizzle. But with this federal lifeline, he said Rivian appears well-positioned to be one of the few that survives.
“The DOE funding is important in and of itself, but it’s also a great signal to the market that this company may have something that private lenders look for,” Saboo said. “That’s huge.”
Tariffs and tax breaks
Even with its balance sheet set to receive a boost, Rivian could face other headwinds.
President-elect Donald Trump has promised to roll back clean energy incentives included in the Inflation Reduction Act passed by Democrats in 2022 and signed into law by Biden. Several media outlets have reported the law’s $7,500 tax credit for consumers who buy eligible EVs likely will be one of Trump’s top targets.
The Trump administration also is likely to target the DOE’s Advanced Technology Vehicles Manufacturing program either by gutting its loan programs office or refusing to approve new funding, said Wagner, the Columbia economist. But Rivian’s loan, if approved before Biden leaves office, likely can’t be clawed back, he said.
The Zero Emission Transportation Association — a trade group that represents Rivian and a constellation of other EV and battery companies — said in a recent statement that the tax breaks are needed to help U.S. manufacturing “compete and win against China.” Some legacy automakers also have pressed Trump to keep the incentives in place.
Experts said the end of the tax credits could dampen demand for Rivian’s vehicles, but they did not think it would doom the company or the broader EV transition.
“Wherever you stand politically, EVs have strong fundamentals,” said Tim Lieuwen, the executive director of Georgia Tech’s Strategic Energy Institute. “Electricity as an energy source in the U.S. is a whole lot cheaper than oil.”
Trump’s threat to ratchet up tariffs on Canada, China and Mexico is a bigger unknown for Rivian and other manufacturers, said MacDuffie, the Wharton School professor. MacDuffie said the import taxes “would dramatically raise prices on virtually every automobile sold in the U.S., even those built in U.S. assembly plants,” but said it’s possible the Trump administration could carve out exemptions for the auto sector.
Credit: TNS
Credit: TNS
Rivian also still faces a potential roadblock from a group of residents living near the future site of the company’s plant in Georgia, who have pushed back on the project over environmental concerns, quality of life impacts and more. The local opponents have been dealt a series of defeats in court, but JoEllen Artz, one of the group’s leaders, said Tuesday they plan to continue to fight the project.
Greg LeRoy, executive director of left-leaning incentives watchdog Good Jobs First, is another critic of the government incentives granted to Rivian, but he said the project has proved resilient. “Rivian CEO RJ Scaringe seems to have nine lives,” he said.
Cox Enterprises, the owner of The Atlanta Journal-Constitution and Cox Automotive, also owns a 3% stake in Rivian.
Editor’s note: The story has been updated to correct the timeline of Fisker’s bankruptcies and its default on an earlier Department of Energy loan. The company was not a borrower from the DOE program at the time of its second bankruptcy.
A note of disclosure
This coverage is supported by a partnership with Green South Foundation and Journalism Funding Partners. You can learn more and support our climate reporting by donating at ajc.com/donate/climate.
