Donald Trump’s designated government efficiency co-czar, Vivek Ramaswamy, has signaled his intention to investigate the Biden administration’s loan to EV maker Rivian, a rival. Tesla.
Ramaswamy, founder of several biotech firms collectively known as “the vents,” is due to take charge of the semi-official Department of Government EfficiencyOr DOGE, once Trump is sworn in. Along with DOGE co-leader Elon Musk, CEO of Tesla, their task is to radically reduce the size of the US government by reducing regulations, laying off federal employees and eliminating waste in the system. The goal of 2 trillion dollars shortfall from the budget.
He has already pointed to spending earmarked for the corporation for public broadcasting and Planned Parenthood, two organizations long targeted by Republicans, a starting point to cut It can now extend to Rivian.
“Biden is asking EV-maker Rivian for more than the $6.6 billion they’ve already withheld to build a Georgia plant,” he said. posted on Thursday. “A ‘legitimate’ 7,500 jobs it creates, but that means a cost of $880k/job, which is insane. This smells like a political shot across the bow at Elon Musk and Tesla.
The loan The financing will be used to build Rivian’s second factory, where it is expected to eventually build the R2 family of mid-size Rivians, which sits below the electric R1T pickup truck and R1S sport utility vehicle. In March, Rivian founder and CEO R.J Delayed construction To save cash.
There are reasons why this debt can be seen as political. Helping financially ailing Tesla rival become a serious EV competitor would undermine Musk, who has a The main role In ousting Democrats from all branches of government this month. Indeed, the Democratic governor of California Clearly scolded From a new state plan to increase EV subsidies to Tesla car buyers.
destiny Rivian, the Department of Energy and Trump’s transition team have been reached for comment.
Coveted car plants
However, Ramaswamy’s calculations may be oversimplified. Auto plants are often the most valuable of all industrial manufacturing sites, not just because they directly support thousands of families with well-paying blue-collar jobs.
Just as importantly, they sit at the top of a supply chain fed by entire economic sectors, including steel, aluminum, electronics, chemicals, paint, plastics, rubber, leather and upholstery and responsible for the thousands of components that go into every modern passenger car. are .
Suppliers often set up shop nearby, seeing what is needed just in time and in the exact order they need on the assembly line. This further contributes to job growth and builds a community’s tax base. Once these clusters settle around hubs like Detroit in the US and Stuttgart in Germany, they also attract more businesses.
Desperate to diversify its oil-dependent economy, is Saudi Arabia Supported For that Tesla competitor Lucid A lot of reasons. After determining the EV maker must Manufacture of cars In the country, in the state Later on Investment won by Hyundai And Pirelli next to.
Rivian’s financial problems
The Biden administration may have good reasons for backing Rivian. It is a premium EV brand with an image that reflects America’s tough outdoor spirit, a growing range Award winning vehicle All are home made and Ambitious appeal For a young company that has 720,000 followers Instagram.
Ramaswamy could instead have pointed to Rivian’s primary problem: It remains loss-making, even on a gross profit basis. As long as it is negative, the loss increases the more cars are sold. This is the opposite of what one would expect, as that is usually the goal of automakers scale their business beneficial.
To correct this, Rivian has changed suppliers and streamlined its production process, even Shutting down its assembly line Earlier this year. Its milestone goal for 2024 is to prove and demonstrate the skeptics wrong Its business viability Finally by turning a net profit into the present Fourth quarter.
Volkswagen puts private capital at risk
However, aid to the clean energy sector is viewed with suspicion by Republicans. Many of them see the government as meddling in the free market to pick winners and losers—especially when the latter are fossil-fuel companies that donate heavily to the GOP.
Furthermore, federal loans in which the risks are socialized and the benefits of privatization are generally considered a last resort should be used surgically in the case of promising new technologies where traditional market forces It will crush the growing industry in its infancy.
It is debatable whether aid to Rivian meets these criteria. While EVs may not be mainstream, Tesla has shown that you can be profitable with the right product.
Furthermore, investors have demonstrated that they are willing to risk private capital given appropriate incentives. German car manufacturer Volkswagen Rivian proceeded to provide significant funding In exchange for access to its software.
Biden Loan ‘Corporate Welfare’ Critics Matter
It is surprising, then, of the conservative editorial board The Wall Street Journal has also taken a critical look at the $6.6 billion debt.
“The Biden team is financing a struggling company with a known credit risk that is competing in a well-developed auto industry,” it said. wrote In a column on Thursday.
According to the paper, the explanation is easy—Trump would never have approved such a loan, so it should have been granted now before the incoming administration takes office in January.
It believes the solution is pretty clear: Energy Secretary-designate Chris Wright as the one-time fracking executive and Climate change denial is in charge “This includes purging the Biden portfolio of corporate-welfare loans made for political reasons,” the WSJ argued, “not based on market principles or probabilities.”
