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Rivian Has News That May Ease Concern Among Investors

Rivian, the producer of electric pickups, SUVS and vans, is increasing production rates.
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Rivian  (RIVN) - Get Rivian Automotive Inc. Report is trying to break a bad streak. 

As athletes well know, a few subpar performances can undermine morale. They train, repeat that they're in top form and this time it's going to be fine, and on the day of the competition they give everything they have -- and come up short. 

Sometimes, they get a bit discouraged. But when they're about to give in, a little voice or spark pushes them to train yet harder to reverse the trend and taste victory again.

Rivian is currently in this position. In its case, victory would be overcoming the challenges of increased production rates and managing through the supply-chain disruptions caused by the covid-19 pandemic and its lockdowns. 

Rivian Signed a Major Agreement

Rivian must also navigate the headache that is the short supply and soaring prices of raw materials that are essential to car manufacturing, such as cobalt, nickel, graphite, aluminum. These problems slow production and increase costs. 

While they affect all vehicle manufacturers, legacy carmakers as well as disruptors, the impact is even greater among young manufacturers like Rivian.

Rivian shares have lost more than 69% of their value since January. The fall is 81.5% since the high of $172.91 reached on Nov. 16. The shares at last check traded around $33.

The fall has also affected its main shareholders, Amazon  (AMZN) - Get Inc. Report and Ford  (F) - Get Ford Motor Company Report. The e-commerce giant said last month that it recorded a pretax valuation loss of $7.6 billion from its common-stock investment in Rivian Automotive. As for Ford, its stake in Rivian was valued at $5.1 billion on March 31, down more than half from $10.6 billion at the end of 2021, the company said. 

Amazon owned 17.74% of Rivian as of Dec. 31 and Ford owned 11.42%, according to documents filed with the Securities and Exchange Commission.

But Rivian has just announced an important agreement with authorities in the U.S. state of Georgia. This agreement will enable the carmaker to accelerate the construction of a factory east of Atlanta. That'll be the second vehicle-production site for the company after Normal, Ill.

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The agreement was signed with the Georgia Department of Economic Development in partnership with the Joint Development Authority of Jasper County, Morgan County, Newton County, and Walton County.

The $5 billion Georgia project will create 7,500 jobs with an average wage of $56,000 at Stanton Springs, half an hour east of Atlanta, Rivian said. 

"Today marks a milestone in our progress towards the development of our second U.S. manufacturing plant," the company added.

Construction is scheduled to begin this summer, with the first vehicles expected to roll off the line in 2024. The new assembly plant and battery factory will focus on Rivian's next generation of electric vehicles. Once manufacturing operations are fully ramped up, the facility will be able to produce as many as 400,000 vehicles a year.

Incentives Total $1.5 Billion

Rivian was founded in 2009 and went public in 2021. The company produces three electric vehicles: the R1T pickup truck, the R1S SUV, and the RCV commercial van.

The agreement will also give Rivian $1.5 billion in public subsidies from Georgia. This aid will be in the form of tax credits and other incentives tied to creating new jobs, buying machinery, construction, research and development, sales tax and raw materials.

The local authorities have safeguards in case Rivian does not honor its commitments.

“We have also taken care to protect our interests through the use of clawbacks in the extremely unlikely event of company goals not being met in the timeline offered," Commissioner Pat Wilson of the economic-development agency said in a statement.

The company has until the end of 2028 to meet the benchmarks of 7,500 jobs and $5 billion of capital investment.

Overall, the agreement is a relief for Rivian because the project had encountered local opposition as we wrote in February.

A movement had organized protests in the region to oppose transforming the 2,000-acre site into a vehicle-manufacturing plant. Opponents had pressured local authorities to sharply restrict Rivian regarding its rezoning requests.