Electric vehicle start-up Rivian has won a US$1.5 billion grant from the Georgia state government to build a new factory with an annual capacity of 400,000 vehicles and an estimated 7,500 new jobs in what appears to be a win-win.
Compared with Tesla, a heel of both the U.S. President and unions, electric car startup Rivian and its founder, R.J. Scaringe, can be said to be very popular in many sectors. Thanks to the help of many, when faced with the pressure of expanding into a new factory, they received the help of the government.
The Georgia state government announced today that it will subsidize Rivian US$1.5 billion to help the company build a new factory in east Atlanta, which is expected to be completed in 2024 and will provide up to 7,500 jobs in the future. Georgia believes this will be the most significant investment in their history and will help them face future challenges.
According to Rivian's estimates, the construction of the factory will cost US$5 billion but with the help of the government, funding pressure has been mitigated. In fact, this is not the first time Rivian has seized the opportunity to earn subsidies. Their first factory received a subsidy of US$49.5 million from the Illinois state government. At that time, they only spent US$16 million to buy the old Mitsubishi Motors factory, solving the problem with the government and allowing them to quickly obtain production lines.
Tesla also used a similar method in its early days to buy old factories in exchange for government subsidies but Rivian is different in that they never seem to be short of funds. One angel investor was the chairman of Abdul Latif Jameel, then it was funded by Sumitomo Mitsui of Japan and Standard Chartered Bank of the United Kingdom, and then Amazon and Ford, until its public listing at the end of 2021. Its financial resources can be said to be endless.
The expansion of this new plant is crucial for Rivian. They have orders for Amazon vans to complete, as well as huge pre-orders for pure electric pickup trucks and SUVs to digest. The new plant will start construction this summer, vehicle production could begin in 2024 at the earliest.
Rivian also promises that they will create more than 7,500 jobs by 2028, with annual salaries above US$56,000 and additional bonuses. Critics, however, argue that such a subsidy policy is simply a waste of taxpayer money by the government, as the subsidy is an investment that will never be paid back.
The current stock price of Rivian is US$31.99, which is incomparable to the US$78 at the time of listing. The other thing that makes people more nervous is that, on May 8, the investment lock-up period will end. Will major shareholders Amazon and Ford dispose of Rivian's stock? Although the possibility is very low, if Ford does withdraw, Rivian's market value will plummet further and, at the same time, Rivian will need to pay for the construction costs of the new plant, which will make its financial situation worse.