Biden Administration Approves $6.6 Billion Loan for Loss-Making EV Maker Rivian

In the closing days of President Biden’s administration, it is handing out billions of dollars in a loan to an electric vehicle maker, Rivian Automotive, even though the company has struggled to become profitable. On Tuesday, the Department of Energy said it had approved a “conditional commitment” to approve a $6.57 billion loan for Rivian to help finance the construction of a new manufacturing facility in Georgia. “Today’s announcement reinforces the Biden-Harris Administration’s commitment to strengthen the nation’s manufacturing competitiveness, helping ensure American businesses remain global leaders in the rapidly expanding EV industry,” the Energy Department said. “This project expects to support up to 2,000 full-time jobs through construction and 7,500 operations jobs by 2030.”The factory is expected to produce 400,000 SUVs and crossover vehicles. Rivian is expected to build its smaller, cheaper SUV, the R2, and its crossover, the R3, at the Georgia facility.. The EV maker went public in 2021 and started selling its R1 electric pickup truck, which cost at least $70,000. The R2 SUV starts at $45,000. If the loan is finalized, the Energy Department says it would comply with the “Justice40 Initiative, which requires 40 percent of the overall benefits of certain federal investments in climate, clean energy, and other areas flow to disadvantaged communities that are marginalized by underinvestment and overburdened by pollution.”The Energy Department says the loan will be approved if Rivian meets certain “technical, legal, environmental, and financial conditions.”Earlier this year, Rivian canceled plans to build its factory in Georgia after failing to meet its sales and production targets and was facing a cash crunch. In March, the EV maker said it would build its R2 vehicles in Illinois instead. However, in June, German automaker Volkswagen AG announced a $5 billion investment in Rivian in a joint venture, which provided a financial cushion for the startup EV maker.The chief executive of Rivian, RJ Scaringe, said in a statement that the new $6 billion loan from the Energy Department will “enable Rivian to more aggressively scale our U.S. manufacturing footprint for our competitively priced R2 and R3 vehicles that emphasize both capability and affordability.”Rivian has struggled to become profitable. In the third quarter of this year, it reported a revenue of $874 million, less than the $992 million analysts expected. It also reported a net loss of $1.1 billion during the same time period. The company attributed its lower-than-projected revenue to a “more challenging consumer environment.” And it has faced several difficulties, such as supply chain issues and falling demand for EVs. For every vehicle sold, Rivian loses around $39,130. However, Mr. Scaringe says the company is “on track” for a gross profit per vehicle in the fourth quarter as the EV maker has focused on reducing the costs of materials. The company has also been looking for suppliers that will not be affected by tariffs that President-elect Trump might implement when he takes office. The loan from the Energy Department comes after Trump campaigned to eliminate what he called Mr. Biden’s “EV mandate.” The new administration may decide to terminate the loan for the EV maker if it is not finalized by inauguration day. As part of that plan, Trump aides have signaled that he plans to kill the $7,500 EV tax credit implemented as part of Mr. Biden’s climate agenda. That subsidy, which is meant to incentivize consumers to buy EVs, applies to 15 electric vehicle models and six hybrid models, according to Car and Driver.Representatives for Tesla, the largest EV maker in America, told Reuters the company supports the decision to end the credit. A portfolio manager of Purpose Investments, which invests in Tesla, Nicholas Mersch, explained to Reuters that killing the subsidy would probably help Tesla retain its position as the largest EV maker in America.Other companies such as Ford and GM have not been able to bring down the cost of manufacturing as Telsa has, and they have benefited from the tax credits, which helped to make their EVs more appealing to potential buyers, who might otherwise be turned off by their costs.The tax credit applies to some leases of Rivian models. However, an end to the credit may not hurt the EV maker as much as other companies, as the income requirement for the subsidy means that many of its customers do not qualify for it.

Biden Administration Approves $6.6 Billion Loan for Loss-Making EV Maker Rivian

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