The trouble with launching a brand-new car company is that it’s really, really expensive. It takes enormous, long-term investments in new manufacturing facilities, supply chains, workers and so on to succeed in the car business. It’s a lot more capital-intensive and a lot less profitable than, say, starting a software company from your dorm room. That’s why so few new carmakers make a go of it—and why many fail to get off the ground.
There’s good news on the funding front out of the California-based electric vehicle startup Rivian on Thursday. The company announced that it received $827 million in state incentives to expand its factory in Normal, Illinois. That should help it along its road to profitability.
Rivian navigates the valley of death
Electric vehicle startup Rivian has managed to sell thousands of vehicles and has dazzled with its luxurious, off-road focused models. But it’s still losing money. Now it’s preparing the mass-market SUV that it hopes will be its ticket to long-term profitability.
The Rivian R1S SUV (left) and Rivian R1T pickup truck.
Normal is where Rivian makes its current crop of vehicles: the high-end R1T pickup and R1S SUV, along with a commercial delivery van. Most importantly, the plant will soon produce Rivian’s upcoming, mass-market SUV, the R2. The state funds will help get that project off of the ground through “expansion of the plant, improvements in public infrastructure and job training programs for Rivian’s workforce,” Rivian said.
Rivian had initially planned to make the R2 at a new facility it’s building in Georgia. But earlier this year it said it would postpone the plant’s opening to save around $2.25 billion. As a result, Rivian will initially build the R2 at its Normal facility.
Rivian shares closed up 6.73% on Thursday. Since the start of the year, the company’s stock has lost just over half of its value amid a broader slowdown in the growth of EV sales. Tesla and fellow upstart Lucid Motors have taken a beatdown as well.
The R2 is Rivian’s ticket to financial sustainability if it can successfully ramp up production and get consumers on board. Slated to start at $45,000, it will be Rivian’s most accessible and high-volume vehicle yet. It will sit in the same segment as the Tesla Model Y, the world’s most popular car.
The upcoming Rivian R2.
Rivian has been selling vehicles since late 2021 but has yet to turn a profit. It needs to make its war chest of $7.86 billion (as of the end of 2023) last until it can sustain itself on vehicle sales. The R2 and successive vehicles will be key to making that happen.
Updates to the Normal facility will begin in the coming months, Rivian said. To date, Rivian has churned out more than 100,000 vehicles at the plant. That makes it by far the most productive post-Tesla EV startup in the U.S.
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