Vivek Ramaswamy, Donald Trump’s designated co-tsar for government efficiency, signaled his intention to review a loan the Biden administration made to electric vehicle maker Rivian, a rival Tesla.
The founder of several biotech companies collectively known as “Vans” is to take over the management of the quasi-official Ministry of Government Efficiencyor DOGE once Trump is sworn in. Together with DOGE co-head Elon Musk, CEO of Tesla, their mission is to radically reduce the size of the US government by cutting regulations, laying off federal employees and eliminating waste in the system Cut $2 trillion from the budget.
They’ve already pointed out spending for the Corporation for Public Broadcasting and Planned Parenthood, two organizations that have long been targeted by Republicans Starting point for cuts. This could now easily be extended to Rivian.
“Biden is giving electric vehicle maker Rivian over $6.6 billion to build a plant in Georgia that it has already halted,” he said posted on Thursday. “One ‘justification’ is the 7,500 jobs it will create, but that implies a cost of $880,000 per job, which is crazy.” This smacks more of a political shot across the bow against Elon Musk and Tesla.”
The loan would finance the construction of Rivian’s second factory, where it is expected to eventually build the so-called R2 family of midsize Rivians, positioned below the R1T electric pickup and R1S sport utility vehicle. In March, Rivian founder and CEO RJ Scaringe founded delayed construction to save cash.
There are reasons why this loan could be considered a political loan. It would weaken Musk to turn a financially struggling Tesla competitor into a serious electric vehicle competitor Key role in ousting Democrats from all branches of government this month. In fact, the Democratic governor of California conspicuously snubbed Tesla is rejecting a new government plan to extend electric vehicle subsidies to car buyers.
Assets has reached out to Rivian, the Energy Department and the Trump transition team for comment.
Popular car factories
However, Ramaswamy’s calculation may be too simplistic. Vehicle factories are often the most valuable industrial production sites, not only because they directly provide thousands of families with well-paying blue-collar jobs.
Equally important, they are at the forefront of the supply chains that feed entire industries, including steel, aluminum, electronics, chemicals, paints, plastics, rubber, leather and upholstery, among many others, that are responsible for the thousands of parts which are installed in every modern passenger car.
Many of these suppliers are often located nearby because they often need to deliver certain parts just on time and in the exact order in which they are needed on the assembly line. This further contributes to job growth and strengthens a community’s tax base. Once these clusters settle around hubs like Detroit in the US and Stuttgart in Germany, they tend to attract other companies as well.
Saudi Arabia is desperate to diversify its oil-dependent economy supports Tesla competitor Lucid for this very reason. Once determined, the electric vehicle manufacturer must Manufacture cars in the country, in the kingdom afterward investments won by Hyundai And Pirelli as well as.
Rivian’s financial problems
The Biden administration may have good reasons to support Rivian. It’s a premium electric vehicle brand with an image that reflects America’s rugged outdoor spirit, a growing selection of award-winning vehicles all domestically built and ambitious appeal for a young company with an impressive 720,000 followers Instagram.
Ramaswamy could have instead pointed to Rivian’s main problem: the company continues to make losses, even on a gross profit basis. As long as this is negative, the losses increase the more cars are sold. That’s the opposite of what you’d hope for, because it’s typically the key to an automaker’s profitability Scaling the business.
To fix this problem, Rivian swapped suppliers and streamlined its production process, even though it added costs shut down its assembly line Earlier this year. His milestone goal for 2024 was to prove doubters wrong and demonstrate that profitability of its business by finally generating a gross profit fourth quarter.
Volkswagen risks private capital
But the clean energy sector’s support is viewed with suspicion by Republicans, many of whom see it as government interference in the free market to pick winners and losers – especially when the latter are fossil fuel companies , who donate large amounts to Republicans.
In addition, federal loans, in which risks are socialized and profits are privatized, are generally viewed as a last resort that can be surgically deployed on promising new technologies when traditional market forces would crush a nascent industry in its infancy.
It is questionable whether the aid to Rivian meets these criteria. While electric vehicles may not be mainstream, Tesla has shown that with the right product you can be profitable.
In addition, investors have shown that they are willing to risk private capital when given appropriate incentives. The German car manufacturer Volkswagen has agreed to provide Rivian with important funds in exchange for access to its software.
Biden loans are a case of “corporate welfare,” critics say
It is therefore not surprising that the conservative editorial team of The Wall Street Journal also took a critical look at the $6.6 billion loan.
“The Biden team is financing a troubled company with a known credit risk that competes in a well-developed automotive industry,” it said wrote in a column on Thursday.
According to the paper, the explanation is simple: Trump would never have agreed to such a loan, so it must be granted now, before the new administration takes office in January.
The solution she believes is equally obvious: Energy Secretary-designate Chris Wright must take action as soon as the fracking manager and Climate change deniers is responsible.
“This includes cleaning up a Biden portfolio of corporate social loans that were made for political reasons,” the WSJ argued, “rather than based on market principles or prospects.”