Rivian (RIVN.US) Receives $6.6 Billion Loan Approval to Accelerate Georgia Plant Construction

The Zhitong Finance App learned that US electric vehicle manufacturer Rivian Automotive (RIVN.US) announced on Monday that it has obtained a loan of 6.6 billion US dollars conditionally approved by the US Department of Energy. This capital will be used to build its electric vehicle production facility in Georgia. The news came before President-elect Donald Trump took office, and the market generally expected Trump to remove many of the Biden administration's e-car-friendly policies and incentives. However, Rivian said the Georgia plant is scheduled to be put into operation in 2028, mainly producing smaller and cheaper R2 SUVs and R3 crossovers to expand its production scale and product line in the US.

As a startup headquartered in California, Rivian has been struggling to produce electric SUVs and pickups in recent years while facing the double pressure of parts shortages and cost cuts. Its stock price has dropped by about 50% this year.

To save cash and speed up production of the key model R2, Rivian suspended construction of the Georgia plant earlier this year and instead concentrated resources on manufacturing its flagship R1S SUV and R1T pickup at the Normal, Illinois plant. However, the loan received this time will allow Rivian to restart construction of the Georgia plant and expand its production footprint more aggressively.

Rivian CEO RJ Scaringe said the loan was critical to producing competitively priced R2 and R3 models, which would combine performance and affordability. However, the loan was not provided unconditionally, and Rivian had to meet a range of technical, legal, environmental, and financial conditions before ultimately receiving funding.

Notably, as part of the loan terms, Rivian will not actively oppose the Georgia plant's unionization work, but the loan approval does not guarantee the plant's unionization. According to people familiar with the matter, Rivian will work with the Department of Energy to settle the loan before the Trump administration takes over.

According to information, this loan comes from the government's Advanced Technology Automobile Manufacturing Loan Program, which previously provided low-cost loans to other automakers such as Tesla (TSLA.US), Ford (F.US), and General Motors (GM.US).

Rivian previously predicted the cost of the Georgia plant would be $5 billion and expected the plant would employ approximately 7,500 operating employees by 2030. While evaluating the loan, the US Department of Energy said that providing financial support would help Rivian bring 400,000 electric vehicles to market and be used more widely.

Prior to announcing the loan, Rivian had just received an investment of $5.8 billion from German automaker VW as part of a technology joint venture between the two parties.

Analysts at Canaccord Genuity pointed out in a report that the establishment of the joint venture will help ease major capital concerns and may shape Rivian's partnership with Volkswagen as the preferred electric vehicle platform other than Tesla in the Western market.

However, Rivian still faces many challenges, including insufficient scale, increased competition, high capital costs, and Trump's plan to remove tax credits for electric vehicle buyers.

In 2022, Rivian received $1.5 billion in state and local incentives for its Georgia plant. In May of this year, the company announced that it had received $827 million in incentives from the state of Illinois to expand operations at its factory in Normal.

Despite this, Rivian reported its first quarterly revenue drop since going public three years ago earlier this month due to a severe shortage of a component used in its vehicle's drive unit.

However, even in the face of declining revenue, the company maintained its forecast of achieving initial gross profit for the current quarter. This forecast reflects cost reductions achieved by the company through renegotiation of supplier contracts and improved manufacturing processes, as well as a significant increase in green car credits.

In summary, by receiving $6.6 billion loan approval from the US Department of Energy, Rivian Automotive will accelerate construction of its Georgia plant to scale up electric vehicle production and launch new products. Despite many challenges, Rivian is still working to reduce costs, improve production efficiency, and seek common development with partners.