Fortune reports that Vivek Ramaswamy, soon to be at the helm of the Department of Government Efficiency (DOGE) in the incoming Trump administration, has expressed skepticism about a significant $6.6 billion loan granted by the Biden administration to Rivian (RIVN), an electric vehicle (EV) manufacturer and Tesla (TSLA) competitor. Ramaswamy, alongside Elon Musk, aims to drastically cut government size, focusing on reducing regulations and eliminating what they view as wasteful spending, with a goal to reduce the federal budget by $2 trillion.
Ramaswamy has criticized the loan, which is earmarked for the construction of a new manufacturing facility in Stanton Springs North, Georgia, questioning the justification of creating 7,500 jobs at what he calculates as an “insane” cost of $880,000 per job. He suggested that this financial support might be more of a political move against Musk than a sound economic decision, especially given Rivian’s current financial struggles and the halt in construction of the Georgia plant.
Biden is forking over $6.6B to EV-maker Rivian to build a Georgia plant they’ve already halted. One “justification” is the 7,500 jobs it creates, but that implies a cost of $880k/job which is insane. This smells more like a political shot across the bow at @elonmusk & @Tesla. https://t.co/YYLW3fk1jX
— Vivek Ramaswamy (@VivekGRamaswamy) November 26, 2024
Rivian, known for its premium, rugged-branded EVs like the R1T and R1S, has been facing profitability challenges. Despite its appeal and domestic manufacturing, the company has not turned a gross profit, a critical indicator of financial health in the automotive industry. Rivian’s efforts to streamline production and change suppliers reflect its attempts to address these issues, aiming for a ‘modest‘ positive gross profit in the fourth quarter of 2024.
The loan’s implications extend beyond Rivian. Vehicle manufacturing plants are central to extensive supply chains, influencing job creation and economic development in regions where they are established. However, the loan’s political undertones are evident, especially considering the timing – just before a change in administration, where the incoming Trump team, known for its skepticism towards such governmental financial interventions, could reverse or scrutinize such decisions.
Fortunee notes that critics, including the editorial board of The Wall Street Journal, have labeled this loan as a form of “corporate welfare,” arguing it’s based more on political motives than on market principles or the company’s financial prospects. They anticipate that under the new Energy Secretary-designate Chris Wright, known for his views on fracking and climate change, there will be a push to reassess and possibly retract such loans, focusing instead on market-driven initiatives.
This scenario underscores the tension between fostering new industries like electric vehicles, supporting job creation, and the ideological push towards less government intervention in business. Ramaswamy’s critique and the broader political context suggest that the incoming administration’s approach might significantly alter the landscape for EV manufacturers like Rivian, potentially impacting the future of green technology investments in the U.S.
Price Action: Rivian closed Friday’s trading session at $12.23, marking a modest 0.08% increase. However, the electric vehicle manufacturer’s stock has experienced a challenging year, with a 48% decline year-to-date and a 27% drop year-over-year.
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