Donald Trump’s designated government efficiency czar, Vivek Ramaswamy, has signaled his intention to review the Biden administration’s loan to EV maker Rivian, Rivian’s rival. Tesla.
Ramaswamy, founder of biotech group companies”Vants,” almost has to take on the official responsibility Government Efficiency Departmentor DOGE, after Trump is sworn in. DOGE co-leader along with Tesla CEO Elon Musk is to radically reduce the size of the US government by reducing regulations, laying off federal workers and eliminating waste in the system. the purpose of removing $2 trillion from the budget.
Republicans have already announced long-overdue spending for Public Outreach and Planned Parenthood. starting point to make cuts This could now be extended to Rivian as well.
“Biden is putting more than $6.6 billion into EV maker Rivian to build the Georgia plant they’ve already stopped,” he said. published on Thursday “A ‘justification’ is the 7,500 jobs it creates, but that comes at a cost of $880,000, which is crazy. This smells more like a political shot across the bow from Elon Musk and Tesla.”
The loan It would go towards funding the construction of Rivian’s second factory, where it is expected to eventually build the mid-size R2 family of Rivians, positioned below the R1T electric 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 can be considered political in nature. Helping build a financially weak Tesla rival into a serious EV contender would undermine Musk, which he played on. key role in firing Democrats from all branches of government this month. In fact, the Democratic governor of California significantly split Tesla from a new state plan to extend EV subsidies to car buyers.
luck Rivian, the Department of Energy and the Trump transition team have been contacted for comment.
Coveted car plants
However, Ramaswamy’s calculation may be too simplistic. Vehicle factories tend to be the most prized of all industrial manufacturing sites, not just because they directly support thousands of families with well-paying blue-collar jobs.
Most importantly, they are at the top of supply chains that feed entire economic sectors, including steel, aluminum, electronics, chemicals, paints, plastics, rubber, leather and upholstery, and many more, responsible for the thousands of parts built into every modern passenger car. .
Suppliers will often set up shop nearby due to the need to deliver parts on time and in the sequence they are needed on the assembly line. This contributes to job growth and builds the community’s tax base. When these clusters settle around areas such as Detroit in the US and Stuttgart in Germany, they also attract other businesses.
Saudi Arabia is desperate to diversify its oil-dependent economy back to back Competitors Lucid Tesla for that very right. Once specified by the EV manufacturer car manufacturing in the country, the Kingdom later on he earned his investments Hyundai and Pirelli as well
Rivian’s financial troubles
The Biden administration may have good reason to support Rivia. EV is a premium brand with an image that speaks to America’s rugged outdoor spirit, and the range is growing. award-winning vehicles all built at home and aspiration appeal For a young company with a respectable 720,000 followers Instagram.
Ramaswamy could point to Rivian’s main problem: it remains loss-making, even on a gross profit basis. While that’s a negative, losses grow the more cars you sell. This is the opposite of what is expected, as automakers usually aim for the scale their business profitable.
To solve this, Rivian has switched suppliers and streamlined its production process, albeit at a cost closing its assembly line at the beginning of the year His milestone goal for 2024 has been to prove and prove the doubters wrong the viability of his business eventually turning into a gross profit in the stream fourth quarter.
Volkswagen puts private capital at risk
However, Republicans are suspicious of supporting the clean energy sector. Many of them see government meddling in the free market to pick winners and losers, especially when the latter are fossil fuel companies that donate heavily to the GOP.
Moreover, federal loans, with risks socialized and profits privatized, are generally considered a last resort, to be used surgically in the case of promising new technologies where market forces would crush a growing industry in its infancy.
It is debatable whether the aid provided to Rivian fits these criteria. While EVs aren’t mainstream, Tesla has shown they can be profitable with the right product.
Furthermore, investors have proven willing to risk private capital given the right incentives. German car maker Volkswagen stepped up to provide vital funding to Rivian in exchange for access to its software.
Biden has made the case for “corporate welfare” critics
Not surprisingly, then, conservative editorial boards The Wall Street Journal He has also cast a critical eye on the 6.6 billion dollar loan.
“Biden’s group is financing a company with a known credit risk that is competing in a well-developed auto industry,” he said. he wrote in a Thursday column.
The explanation, according to the paper, was simple—Trump would never approve such a loan, so it had to be made now before the incoming administration took office in January.
The solution is as obvious as he thinks: Energy Secretary Chris Wright-appointed fracking executives and climate change denier is responsible “This includes purging the Biden portfolio of corporate welfare loans made for political reasons,” the WSJ argued, “not based on market principles or forecasts.”
