Vivek Ramaswamy, President Donald Trump’s nominee to lead the government, has signaled he will scrutinize loans the Biden administration gave to rival EV maker Rivian.
Ramaswami is the founder of several biotechnology companies collectively known as ‘.Wants” is scheduled to become head of the Department of Government Efficiency (DOGE), a quasi-public agency, after President Trump takes office. Their mission, along with DOGE co-leader and Tesla CEO Elon Musk, is to radically reduce the size of the United States. Strengthen the government by cutting regulations, laying off federal employees and eliminating waste in the system, with the goal of cutting $2 trillion from the budget.
They have already pointed to spending on the Corporation for Public Broadcasting and Planned Parenthood, long targeted by Republicans, as a starting point for cuts. This may extend to Rivian as well.
“Biden is spending more than $6.6 billion on EV maker Rivian to build a factory in Georgia that has already been shut down,” he said. Posted on Thursday. “One of the ‘justifications’ is that it will create 7,500 jobs, but that means it will cost $880,000 each, which is insane. smells like a political attack on Elon Musk and Tesla.
The loan will be used to finance the construction of Rivian’s second plant, which will eventually produce Rivian’s R2 family of medium-duty vehicles, which sit below the R1T electric pickup truck and the R1S sport utility vehicle. In March, Rivian founder and CEO RJ Scaringe delayed construction to save money.
There are reasons why this loan could be considered political in nature. Helping build Tesla’s financially troubled rival into a serious EV contender would weaken Mr. Musk, who played a key role in removing Democrats from all branches of government this month. Dew. In fact, California’s Democratic governor conspicuously ignored Tesla from the state’s new plan to expand EV subsidies to car buyers.
luck has reached out to Rivian, the Department of Energy, and the Trump transition team for comment.
A dream car factory
But Ramaswamy’s calculations may be too simple. Automotive factories are often the most highly regarded of all industrial manufacturing sites, and not just because they directly support thousands of families with high-paying, blue-collar jobs.
Just as importantly, these companies are responsible for the steel, aluminum, electronics, chemicals, paints, plastics, rubber, leather, upholstery and thousands of other parts that go into modern passenger cars. This means that they are at the top of the supply chain that is fed by entire sectors of the economy, including industry. .
Suppliers often have stores nearby because parts need to be delivered exactly in the order they are needed on the assembly line, just in time. It further contributes to job growth and builds the tax base of the community. Once these clusters establish themselves around hubs such as Detroit in the US or Stuttgart in Germany, they tend to attract other companies as well.
Saudi Arabia is keen to diversify its oil-dependent economy and is supporting Tesla competitor Lucid for this very reason. Saudi Arabia later secured investments from Hyundai and Pirelli after stipulating that EV makers must manufacture cars domestically.
Rivian’s economic difficulties
The Biden administration may have good reason to support Libyan. It’s a premium EV brand with an image that speaks to America’s rugged outdoor spirit, with an award-winning lineup of vehicles that are all domestically built and growing, with an impressive 720,000 followers on Instagram. It has an aspirational appeal for young companies with a following.
Mr. Ramaswamy could have instead pointed to Rivian’s main problem: its continued loss on a gross profit basis. As long as this is negative, the more cars you sell, the more your losses will increase. This is the opposite of what you might expect, as automakers typically aim to: scale their business advantageously.
To solve this, Rivian replaced suppliers and streamlined its production process, even at the cost of shutting down assembly lines earlier this year. The milestone goal for 2024 is to prove the skeptics wrong and prove the viability of the business by finally achieving current gross margins. 4th quarter.
Volkswagen puts private capital at risk
However, support for the clean energy sector is viewed with suspicion by Republicans. Many of them see the government intervening in the free market to decide winners and losers, especially in the case of fossil fuel companies, the latter of which are big donors to the Republican Party.
Moreover, federal loans that socialize risk and privatize profits are generally seen as a last resort, especially in the case of new technologies where traditional market forces can crowd out early-stage, fast-growing industries. It is used surgically.
Whether aid to Rivian meets these criteria is debatable. EVs may not be mainstream, but Tesla has shown that with the right product, you can reap the benefits.
Additionally, investors have shown that they are willing to risk private capital if given the right incentives. German automaker Volkswagen has stepped up to provide Rivian with significant funding in exchange for access to software.
Critics say Biden will lend out case of ‘corporate welfare’
Therefore, a conservative editorial board wall street journal has also cast a critical eye on the $6.6 billion loan.
“The Biden team is funding distressed companies with known credit risks competing in the developed auto industry.” I wrote In Thursday’s column.
The explanation, the paper said, was simple: Mr. Trump would never approve such a loan, so it needed to be approved now before the next administration takes office in January.
The solution the company believes is equally clear. With hydraulic fracturing executives climate change denier is in charge. “It includes cleaning up Mr. Biden’s portfolio of corporate welfare loans that were distributed for political reasons and not based on market forces or projections,” the Journal claimed.
