Elon Musk’s DOGE partner Vivek Ramaswamy lends $6.6 billion to Tesla rival Rivian from Biden

Ramaswamy, founder of several biotechnology companies collectively known as “Vant,” is in charge semi-officially Department of Government Effectivenessor DOGE, after Trump was sworn into office. Together with DOGE co-leader 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. by a targeted strategy of 2 trillion USD loss from the budget.

They pointed to spending earmarked for the Corporation for Public Broadcasting and Planned Parenthood, two organizations long targeted by Republicans, as a starting point to cut back. This can now also extend to Rivian.

“Biden is funneling more than $6.6 billion to electric vehicle maker Rivian to build a factory in Georgia that they have paused,” he said. posted on Thursday. “One ‘justification’ is that it creates 7,500 jobs, but that implies a cost of $880k/job, which is crazy. This seems more like a political shot at Elon Musk and Tesla.”

the loan will fund the construction of Rivian’s second factory, which is expected to eventually build the so-called R2 line of mid-size Rivians slotted below R1T electric pickup trucks and SUVs. multi-purpose sport R1S. In March, Rivian founder and CEO RJ Scaringe construction delay to save cash.

There are many reasons why this loan could be considered political in nature. Helping turn financially weak rival Tesla into an electric vehicle heavyweight would weaken Musk, who plays a important role in expelling Democrats from all branches of government this month. Indeed, the Democratic governor of California clearly snubbed Tesla from the state’s new plan to expand electric vehicle subsidies for car buyers.

Luck has reached out to Rivian, the Department of Energy and Trump’s transition team for comment.

The coveted auto factory

However, Ramaswamy’s calculation may be too simple. Auto factories are often the most highly regarded of all industrial production facilities, not least because they directly support thousands of families with high-paying labor.

Equally important is that they sit at the top of a supply chain powered by a whole range of economic sectors including steel, aluminium, electronics, chemicals, paints, plastics, rubber, leather and upholstery and many more. the other is responsible for the thousands of parts built into every modern passenger car. .

Many of these suppliers often have stores nearby, due to the need to deliver certain parts often on time and exactly in the required sequence on the assembly line. That continues to contribute to job growth and building the community’s tax base. As these clusters settle around centers such as Detroit in the US and Stuttgart in Germany, they also tend to attract other businesses.

Desperate to diversify its oil-dependent economy, Saudi Arabia has is supported Tesla competitor Lucid because of this very reason. After regulation electric vehicle manufacturers must automobile production domestic, Kingdom Later win investment by Hyundai And Pirelli also.

Rivian’s financial troubles

The Biden administration may have good reason to support Rivian. It’s a premium electric vehicle brand with an image that speaks to America’s rugged outdoors spirit, an ever-growing range of vehicles award-winning car All are domestically built and aspirational call for a young company with a respectable 720,000 followers on Instagram.

Instead, Ramaswamy may point to Rivian’s main problem: it’s still losing money, even on a gross profit basis. As long as this remains negative, the more cars sold, the greater the loss. This is the opposite of what one would hope, since typically the key to profitability for an automaker is scale business.

To fix this, Rivian changed suppliers and streamlined its manufacturing process, even at the cost of shut down its assembly line earlier this year. Its key goal for 2024 is to prove the doubters wrong and demonstrate the viability of its business ultimately by generating gross profit in the present fourth quarter.

Volkswagen faces private capital risks

However, support for the clean energy sector is viewed with suspicion by Republicans, many of whom see it as government meddling in the free market to pick winners and losers — especially when the The losers are the fossil fuel companies that donate heavily to the GOP.

Furthermore, federal loans in which risk is socialized and profits privatized are often seen as a last resort, something to be used surgically in the case of promising new technologies. The promise that traditional market forces would crush an industry in its infancy.

It is debatable whether aid to Rivian fits these criteria. While electric vehicles may not be mainstream, Tesla has shown that you can make a profit if you choose the right product.

Furthermore, investors have demonstrated that they are willing to risk private capital if given the right incentives. German car company Volkswagen providing increased critical funding to Rivian in exchange for access to its software.

Biden lends a case to ‘corporate welfare’ critics say

It is not surprising that the conservative editorial board of Wall Street Journal also gave a critical look at the $6.6 billion loan.

“The Biden team is financing a troubled company with known credit risk that is competing in a well-developed auto industry,” it said. wrote in a column on Thursday.

According to the newspaper, the explanation is easy – Trump would never approve such a loan, so it must have been granted shortly before the new administration took office in January.

The solution they believe in is equally obvious: Energy Secretary-designate Chris Wright must act once fracking executives and climate change denier are in charge.

“That includes cleaning up Biden’s portfolio of corporate welfare loans that were made for political reasons,” the WSJ argues, “not based on principles or market outlook” .