Luxury electric automaker Rivian made several big announcements this week related to its expanding product line. At the same time, however, the company announced it would suspend construction of a factory in Georgia that received some of the most generous taxpayer-funded incentives in the state’s history.
On Thursday, Rivian unveiled three new vehicles that will be available over the next few years. The company already offers the R1T and R1S, a luxury truck and SUV, respectively, that start at $70,000 – $75,000 and can cost $100,000 or more. CEO RJ Scaringe announced the R2, a smaller, more modest SUV that will be available in 2026 with prices starting at $45,000, as well as the R3 and R3X crossovers, which are also less expensive than the R1 series.
AS Reason documented, Rivian went public in November 2021, promising luxury electric vehicles that would be both stylish and rugged. The following month, the company, which had only one plant in Illinois, reached a deal to build its second plant in Georgia: Rivian would spend $5 billion on the factory and, in exchange, the state of Georgia and the governments local authorities would have authorized up to 1.5 billion dollars. in tax credits and incentives.
In the years that followed, however, the company struggled. In May 2023, Bloomberg reported that the company had lost 93% of its stock value and its market capitalization reflected “almost no value beyond the company’s liquidity.” In the fourth quarter of 2023, the company lost $43,372 on each vehicle sold, compared to a loss of $30,648 per vehicle 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 more than $75,000 for a luxury vehicle. And to do this he had to make some adjustments.
“To enable an earlier launch of R2 and with a significant reduction in the capital required for its launch, Rivian plans to begin production of R2 at its current manufacturing facility in Normal, Illinois,” the company announced. It is also suspending construction in Georgia: “Rivian’s plant in Georgia remains an extremely important part of its strategy to scale production of R2 and R3. The timing of 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 “compared to the original forecast to launch the first R2 production line at Rivian’s site in Georgia.”
In October, the company announced that the Georgia site was “95% qualified” and “nearly ready to begin construction.” Notably, under the incentive agreement, Georgia officials paid more than $32 million to “remediate and grade” the site.
A year ago, almost exactly on the same day, Scaringe reaffirmed the company’s dedication to the Georgia project, telling The Atlanta Journal-Constitution“We are committed to this state and to this project,” adding that “the future of our company in terms of scalability and growth really depends on the future of this project. There is not another option. We are not planning for an alternative. This has to work.”
The electric vehicle market, while growing, is continually changing, due to weakening consumer demand and persistently high interest rates. Just last month, Apple, the first company in history to post a $3 trillion valuation, canceled its decade-long attempt to develop an electric car. General Motors and Ford have also withdrawn promised investments in electric vehicles.
In this sense, Rivian’s turnaround would make perfect sense: 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 tend not to allow for these kinds of dynamic pivots. In this case, Georgia officials have mortgaged a large amount of taxpayer money into a plan that would have the company continue on a path that no longer appears financially feasible.