Rivian, the manufacturer of electric pickups, SUV’s, and cargo vans unveiled its newest vehicle last week, a smaller and lower priced SUV aimed at the mass market of car shoppers.  It was the product that was planned to be built at Rivian’s factory east of Atlanta.  The company has instead decided to put those plans on hold, and get the R2 into production faster by utilizing its existing factory in Illinois.  

Opponents of the plant and those skeptical of electric cars in general took the announcement as a victory. The company and the state have both released statements saying they remain committed to the project.  In the balance lies a few thousand acres of graded land and the potential for thousands of high paying manufacturing jobs. 

It’s important to note that the state is not on the hook for most of the incentives offered to Rivian in a package worth up to $1.5 billion if the plant is completed and up to 7,500 jobs created by 2030 and maintained for 20 years. The company still has time to reach this goal, and also revealed a future even smaller vehicle – the R3 – demonstrating continued growth of their product portfolio and eventual need for additional manufacturing capacity. 

The majority of incentives Georgia offers to lure new employers generally fall into three categories.  Property taxes are reduced on the buildings and equipment in lieu of a guaranteed annual payment to local governments that exceed the taxes that would have been paid had the land remained vacant.   Infrastructure improvements are made to allow ingress/egress of the site for trucks and/or rail access, along with utility improvements as necessary.  For the largest of projects, the state usually offers a dedicated job training center, similar to what a technical college would offer, in order to train workers with the special skills needed to work in the proposed facility.

Thus, should Rivian not decide to proceed under the current agreement, the state is out only short term potential for new jobs.  The state currently owns the site which is now improved and ready for any large employer or group of employers. 

According to the Atlanta Business Chronicle, Rivian is currently leasing the land from the state and must continue to lease the land for a minimum of four years.  Rivian has also paid local governments $3 million under its payment in lieu of taxes agreement so far. 

What must happen next is some stability in the public adoption of EVs, as well as some stability and certainty of federal policy on the transition to and the subsidization of electric vehicles.  The Inflation Reduction Act changed the rules on consumer tax credits, which have since been changed multiple times again via administrative rule changes.  Manufacturers trying to make multi-year billion-dollar capital commitments need some clarity to know if the rules for them and for their competition today will still be the same by the time they can get a product to market. 

The Bipartisan Infrastructure Act also subsidized additional electric charging stations, which was supposed to speed the development of fast chargers in rural areas to make longer road trips seamless.  Instead, unclear rules that again have been slow to find clarity combined with charging companies more interested in securing locations and federal handouts left early adopting consumers with too many experiences of broken chargers and “range anxiety”.

Prices and the ability to source materials needed for batteries in EVs have also made forecasting profit models difficult.  Lithium prices soared a couple of years ago as virtually every auto manufacturer tried to scale up production of EVs quickly.  Those prices have since crashed as many of those same manufacturers have scaled back their plans.

Not every manufacturer will make it through this transition.  That may not just include startups.  As the price of battery components fall, it will become harder and harder for manufactures of cars with internal combustion engines to compete on price. 

Rivian’s decision was ultimately about preserving capital as they try to expand their product portfolio.  They want to achieve the production volume necessary to generate positive cash flow before committing to more than doubling their factory capacity. 

An advantage they have is that they aren’t just relying on mass consumer adoption of EVs.  They also count Amazon as both a customer for commercial vans, as well as an investor.  AT&T has recently been added as a purchaser of their vans for fleet use. 

Georgia has made a big bet on an electric future.  Rivian’s payoff on that bet has been delayed.  In the interim, Georgia remains the battery and EV capital of the south.   Should Rivian prosper enough to continue, there’s a site ready for them.   Should their plans ultimately change, there is a large and attractive site now ready for another employer in the state always prepared to prove it is the number one place to do business.