Biden extends $6 billion lifeline to struggling EV startup Rivian amid growing unsold inventory on dealer lots

Just two months before President-elect Trump takes office, the Biden administration is rushing to allocate billions in taxpayer funds to support Rivian Automotive, a struggling electric vehicle startup grappling with unsold inventory and faltering demand. This decision follows a recent $8 billion boost to Intel.

The Department of Energy (DOE) announced on Tuesday a $6.57 billion direct loan to fund Rivian’s EV factory in Georgia’s Stanton Springs North, near Social Circle. The project, previously shelved in March to cut costs, is back on the table.

“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 DoE stated.

The announcement comes on the heels of a significant investment from Volkswagen, which contributed millions as part of a joint venture with Rivian. This news buoyed Rivian’s stock by over 15%, but questions remain about whether the financial aid will be enough to stabilize the Amazon-backed EV maker, which is still struggling to sell its vehicles.

Will Billions Save Rivian from the Brink of Collapse?

Earlier this year, Volkswagen injected $5 billion into Rivian, bringing its total investment to $5.8 billion. This lifeline came as Rivian posted a staggering $1.45 billion loss in the first quarter of 2024, compared to $1.35 billion during the same period the previous year. With its cash burn rate still alarmingly high, Rivian faces an uphill battle to sustain operations.

The DoE loan arrives at a pivotal time. Rivian has burned through $19 billion since its 2021 IPO and missed production and sales targets. Earlier this year, it paused construction of the Georgia plant due to financial pressures. The new facility is expected to help Rivian produce more affordable models, addressing its current lineup’s high price point—starting at $70,000, which remains out of reach for many consumers.

Rivian CEO RJ Scaringe said in a statement, “This loan would enable Rivian to more aggressively scale our US manufacturing footprint for our competitively priced R2 and R3 vehicles that emphasize both capability and affordability. A robust ecosystem of US companies developing and manufacturing EVs is critical for the US to maintain its long-term leadership in transportation.”

Scaling Production and Jobs in Georgia

Rivian plans to build the Georgia facility in two phases, each targeting an annual capacity of 200,000 units, for a total of 400,000. Production is set to begin in 2028, with the project expected to generate 7,500 operational jobs by 2030, alongside 2,000 full-time construction jobs. These roles will complement the workforce at Rivian’s existing plant in Normal, Illinois.

Challenges Loom as EV Tax Credits Face Elimination

With the Trump administration expected to eliminate EV tax credits, valued at $7,500 for new EVs and $4,000 for used ones, Rivian’s road ahead could become even steeper. Tesla CEO Elon Musk has voiced support for ending these credits, arguing it could destabilize competitors.

The timing of Rivian’s cost-cutting efforts and the development of its more budget-friendly R2 SUV is critical. The new model aims to attract cost-conscious buyers, a key market for growth as Rivian and Volkswagen continue their collaboration under the Rivian and VW Group Technology LLC joint venture.

From Market Darling to Money Pit

In 2022, Amazon reported a $7.6 billion loss on its investment in Rivian, as the EV maker’s valuation plummeted from its peak of $146.7 billion to $29.41 billion. Rivian’s stock saw initial success at its IPO, reaching $172 per share, surpassing GM’s $101 billion valuation despite fewer than 100 trucks delivered at the time. Rivian’s stock, once trading at $172 after its IPO, has since dropped over 90%, now hovering around $11.60 as of the time of writing.