Rivian Pauses Construction at Factory That Costs Georgia Taxpayers $1.5 Billion

The company will now build everything in its existing Illinois factory, pausing construction on the Georgia plant until "later."

Luxury electric automaker Rivian made several big announcements this week related to its expanding product line. At the same time, though, the company announced that it would pause construction on a factory in Georgia that received some of the most generous taxpayer-funded incentives in state history.

On Thursday, Rivian unveiled three new vehicles that will be available in the coming years. The company already offers the R1T and R1S, a luxury truck and SUV, respectively, which start at $70,000–$75,000 and can cost $100,000 or more. CEO R.J. Scaringe announced the R2, a smaller and more modest SUV that would be available in 2026 with prices starting at $45,000, as well as the R3 and R3X crossovers, also expected to be less expensive than the R1 series.

As Reason has documented, Rivian went public in November 2021, promising luxury electric vehicles that would be both stylish and rugged. The following month, the company—which only had a single factory in Illinois—struck a deal to build its second factory in Georgia: Rivian would spend $5 billion on the factory, and in exchange, Georgia state and local governments authorized up to $1.5 billion in tax credits and incentives.

In the years since, however, the company has struggled. In May 2023, Bloomberg reported that the company had lost 93 percent of its share value, and its market cap reflected "almost no value beyond the company's cash hoard." In the fourth quarter of 2023, the company lost $43,372 on each vehicle sold, up from a $30,648 per-vehicle loss in the third quarter.

Branching out into the more affordable R2 and R3 models is key to Rivian's long-term survival, opening up its product line to appeal to more than just those who can pay over $75,000 for a luxury vehicle. And to do this, it had to make some adjustments.

"To enable R2 to be launched earlier and with a considerable reduction in the capital required for its launch, Rivian plans to start production of R2 in its existing Normal, Illinois manufacturing facility," the company announced. It is also pausing construction in Georgia: "Rivian's Georgia plant remains an extremely important part of its strategy to scale production of R2 and R3. The timing for resuming construction is expected to be later to focus its teams on the capital-efficient launch of R2 in Normal, Illinois."

The move is expected to save the company $2.25 billion "as compared to the original forecast of launching the first line of R2 production at Rivian's Georgia site."

In October, the company announced that the Georgia site was "95 percent graded" and "nearly ready for construction to begin." Notably, under the incentive agreement, Georgia officials paid over $32 million for "clearing and grading" the site.

One year ago, almost to the day, Scaringe reaffirmed the company's dedication to the Georgia project, telling The Atlanta Journal-Constitution, "We're committed to this state and this project," adding that "the future of our company in terms of scaling and growing really relies on the future of this project. There's not another option. We're not planning an alternative. This must work."

The electric vehicle market, while growing, is in flux, due to softening consumer demand and persistently high interest rates. Just last month, Apple—the first company in history to ever record a $3 trillion valuation—canceled its decade-long quest to develop an electric car. General Motors and Ford have also rolled back pledged investments in electric vehicles.

In that sense, Rivian's pivot would be perfectly reasonable—companies must be free to adapt to changing circumstances in a way that benefits both their customers and their shareholders. But as with any central planning scheme, state economic incentives don't tend to allow for those sorts of dynamic pivots. In this case, Georgia officials mortgaged a large amount of taxpayer money on a plan that foresaw the company continuing on a path that no longer seems financially feasible.

Comments

[Don't look at me!]

Unused tax credits don’t “cost” anything.

[Nazi-Chipping Warlock]

This is what I was wondering. I can clearly see that Georgia has spent $32 million on the site prep, and perhaps that was overpriced given the government doing it, but what else have they actually spent? Tax credits are "money they don't collect" which isn't the same as spending money, and if the company ends up not owing those taxes because they aren't doing fabrication there, then they aren't giving up anything they wouldn't have already not been collecting. (And I do apologize for the number of negatives in that sentence.) Hell, as it stands now, they could likely even recoup the costs, if the land were to be sold to another buyer and the "pre-graded" state factored in. Or they could even just insist that Rivian pay back the grading costs if they aren't going to actually build anything there. One hopes the contract for the incentives specifies that both sides have to perform.

[TrickyVic (old school)]

I don't think Greorgia spent $32 million on site prep. I'm not saying they didn't spend $32 million. I would love to see an audit of that.

[VULGAR MADMAN]

I bet Georgia lawmakers wouldn’t want to see an audit.

[Nazi-Chipping Warlock]

That could certainly be true, I was going by the story. By the story, Georgia has only spent $32M, not $1.5B. Whether Georgia actually spent even the $32M is another question entirely.

[Rossami]

Wrong on two counts. The first is specific to these tax credits which (based on other articles) are transferrable. In other words, the company is allowed to sell them to other companies for cash. That means the tax credits will be used, just not by Rivian. (If my sources are wrong and these taxes are not in fact transferrable, I will apologize and withdraw that part of the comment.)

Second, though, is the opportunity cost. By luring a company in with the promise of tax credits, the state inherently disincented other companies from considering the area. This wasted opportunity is an intangible but no less real cost to the community.

Third, not directly relevant to your comment but definitely relevant to the case above, the state paid out hard cash (the site prep) in addition to the tax credits. This was a bad deal all around and the Georgia taxpayers are going to get stiffed for a bunch of crony giveaways.

[Overt]

Tax credits are only transferrable if they are earned. Do you have evidence indicating that Rivian was granted these credits prior to building the plant? For example, my previous employer had tax credits in Buffalo for a data center that basically made power free for us. But we would not get those credits each year unless we were employing a certain number of high-paid employees.

Giving money to one company does not disincentivize another company from considering the area- unless it was for that exact same plot of land.

While I am generally against corporatist policies, some are less bad than others.

[I…….. Fudd]

I can’t speak to the Rivian situation, but a Lougle search indicates that Georgia is one of a number of states that offers transferable tax credits.

[Overt]

No one is arguing whether they are transferrable. The question is whether Rivian ACTUALLY got them.

Again, these deals are rarely just handed to the company, no strings attached. They almost always require the company to do something before they are granted. In the case of my former company, they had to guarantee a certain number of jobs every year- fall below that line and "poof" the tax credit is gone.

A company can only transfer (sell) the credit if they have earned it.

[Jerry B.]

Strange that there’s no “e” or “v” in “cash cow”.

[Sarah Palin's Buttplug 2]

This factory is near where I live. Real estate has been skyrocketing. I blame Sleepy Joe, of course.

[Jerry B.]

Now watch it crash when Rivan goes under.

[Sevo]

turd, the ass-clown of the commentariat, lies; it’s all he ever does. turd is a kiddie diddler, and a pathological liar, entirely too stupid to remember which lies he posted even minutes ago, and also too stupid to understand we all know he’s a liar.
If anything he posts isn’t a lie, it’s totally accidental.
turd lies; it’s what he does. turd is a lying pile of lefty shit.

[CindyF]

Local residents of Walton sued to try to stop the construction of the plant. Unfortunately, they lost in the Courts. I bet they are laughing and celebrating now. However, property values in the area have skyrocketed along with the property taxes. Hopefully, after a few years, the building site can return to hay fields or timber land.

I suspect Rivian will be bankrupt in a couple more years. They are bleeding money and have yet to create a product that people want to buy.

[Overt]

Reason should really talk about the big Libertarian issue here, and it ain't these penny-ante local real estate boondoggles.

The whole reason this deal exists is two decades of criminal monetary policy by the Federal Reserve. Since the Financial Apocalypse of 2008, the Federal Reserve was actively supporting the stock market while keeping the yield on bonds unnaturally low. This one act has drastically changed the calculous by which our entire financial system allocates its cash.

By making "low risk" investments like bonds unprofitable, the Fed moved the needle on all financial investing. If you wanted "low risk" but stable returns, you now had to look to Blue Chip stocks. If you wanted to beat these basic returns, you needed to go for more risky stocks.

This financial realignment has made it so that EXTREMELY risky businesses- like Rivian- had tens of billions of dollars to throw around on stupid shit like giant factories to build cars that aren't even clearly demanded in the market. Unlike Tesla- who spent years crafting and testing their products on Lotus Elises in Silicon Valley- Rivian jumped out the door with a full production line. And they did this because banks who needed a return for investors and large companies sitting on cash they couldn't protect with bonds all gave them a giant warchest.

$1.5 Billion in tax credits? That's a rounding error compared to the damage wrought by the Fed's monetary policies. The microchip shortage was completely caused by this- because Dell couldn't get capital while Rivian was throwing boatloads of cash around so they could have digitally controlled beer coolers in the slideout kitchen on their terrible, useless trucks.

[I…….. Fudd]

EV trucks are indeed useless, expensive toys. Which is fine, until the government creates distortions which damage industry. Such as the example you correctly outlined.

[MWAocdoc]

I bet those Georgia officials feel like fools now! Or maybe not ... maybe someone (Fani Willis?) should investigate the kick-backs that Rivian probably had to agree to get those "incentives."

[AT]

Well, it doesn't help that they're charging huge amounts for a vehicle that becomes a paperweight after a fender bender. And there's some real chutzpah in calling their $45K baseline "modest." Especially when so many drivers are weighing the priority between filling their gas tanks or their refrigerators. I get the strategy of marketing something that is clearly just going to be a status symbol - but that only really works in a healthy economy.

To say nothing of the fact that they are the straight up ugliest vehicles on the road. I mean, hey - cool on trying something new and trying to adapt environmentally friendly technology for mainstream use, but for pete's sake, take your design team out back and beat them with a rubber hose.

[TJJ2000]

"lost $43,372 on each vehicle sold."
Huh. Sounds like a government agenda was involved.

USPS tried to run EV years ago and found that any vehicle bigger than a rice-burner costs more per mile in electricity than gas. That's JUST fuel/energy cost. That doesn't take into consideration cost to make or maintain differences. Just pure energy per mile.

[OneOfOne]

these clown ass baby man CEO's almost always meet the same fate. bankruptcy. but the only fools who are dumber than the media , governments, never see it coming.

[Sevo]

Given the current EV ‘demand’, later is going to be a long time coming. Pretty sure ‘all-EV’ mandates are gonna die.

[TJJ2000]

Not so long as it's an *excuse* to STEAL more of the people's money.

[CE]

As long as they take the extra time to redesign those headlights.

[Tyval Dayall]

Now do Lordstown Motors.

[edbeau99]

Brilliant strategy. If they lose $43,000 on each $75,000 vehicle, they should only lose $25,000 on each $45,000 vehicle. Their hoard of cash should last at least 3 months longer before they go bankrupt.

But no fears, Biden will ride to the rescue with taxpayer funds while bellowing his rage at the clouds.

[Arthur Knaus]

What technical risks does the modern lunar race have in comparison with the first human missions, who died in space first ? Fatal errors were an exception even for unspecial space projects, so we can be full of hope that old mistakes will not bring such a sad experience.