FX168 financial news agency (Asia Pacific) reported that on Monday (December 2), the US stock market closed with Tesla's stock price rising by 5.96%, closing at $352.76. The newly established Department of Government Efficiency (DOGE) by US President-elect Donald Trump announced that they will carefully review the $6.6 billion loan provided by Biden to Tesla's competitor, Rivian.

(Source: FX168)

The US Department of Government Efficiency, led by Tesla's CEO Elon Musk and Vivek Ramaswamy, stated that they plan to thoroughly review the loan provided by the Biden administration to Rivian. The department has already indicated that cutting expenses will start with reducing funding for public broadcasting corporations and Planned Parenthood, both long-time targets of the Republican Party. Now, these budget cuts may also extend to Rivian.

(Source: Fortune)

"Biden will pay $6.6 billion to electric vehicle manufacturer Rivian to build their already defunct factory in Georgia," Ramaswamy posted. "One of the 'reasons' is that it creates 7,500 jobs, but this means the cost per job is $0.88 million, which is insane and seems more like a political warning to Musk and Tesla."

This loan will be used to construct Rivian's second factory, expected to eventually produce the medium-sized R2 series at the plant, positioned below the electric R1T pickup and R1S crossover SUV. In March, Rivian's founder and CEO RJ Scaringe postponed construction to save cash.

Fortune magazine reports that there are reasons to believe that this loan has political implications. Helping Tesla's competitors with poor financial conditions become strong competitors in the field of electric vehicles will weaken Musk's influence, as Musk played a key role in removing Democrats from various government departments this month. In fact, the Democratic governor of California clearly rejected Tesla's participation in a new state program aimed at expanding subsidies for electric vehicle buyers.

When asked about the criticism of this loan, the US Department of Energy issued the following statement: 'The Department of Energy's Advanced Technology Vehicle Manufacturing program has solidified the United States' position as a global automotive powerhouse. One of the program's biggest successes was providing a loan to Tesla in 2010, driving the development of the electric vehicle industry. We will continue to ensure that American workers have the tools needed to lead the world in future technologies.'

Tesla fully repaid the approximately $0.5 billion ATVM government loan nine years early, including interest. The program was signed into law in 2008 by then-US President George W. Bush, but became synonymous with failed industrial policy after the high-profile recipient Solyndra went bankrupt. Trump has proposed to cut funding for the ATVM program in his final budget for fiscal year 2021.

However, Ramesh Swaminathan's calculations may be too simplistic. Automobile factories are often the most valued among all industrial manufacturing bases, not only because they provide high-paying blue-collar jobs for thousands of families.

Equally important is that they are at the top of the supply chain, and the entire economic sector provides supply chains for these sectors, including steel, aluminum, electronics, chemicals, paints, plastics, rubbers, leather, interior decoration, and many other sectors, responsible for manufacturing thousands of components for each modern passenger vehicle.

Suppliers often establish shops nearby to deliver parts on time and in the required order on the assembly line. This further promotes job growth and increases the community's tax base. Once these clusters settle near hubs like Detroit in the United States and Stuttgart in Germany, they often attract other businesses.

Saudi Arabia is eager to achieve economic diversification, hence supporting Tesla's competitor Lucid. After stipulating that this electric vehicle manufacturer must produce cars in the country, Saudi Arabia subsequently received investments from Hyundai and Pirelli.

The US media pointed out that the Biden administration's support for Rivian may have sufficient reasons. It is a high-end electric vehicle brand that embodies the rugged outdoor spirit of America; its growing award-winning models are all made in the United States; for a young company with 0.72 million followers on Instagram, it has an appealing allure.

Ramaswamy pointed out the main issue with Rivian: even in terms of gross profit, the company is still in a loss. As long as the gross profit is negative, the higher the car sales, the greater the loss. This goes against people's expectations, as auto manufacturers usually aim to expand their business scale and achieve profitability.

To address this issue, Rivian has changed suppliers and streamlined production processes, even going as far as shutting down assembly lines earlier this year. The company's milestone goal for 2024 is to prove skeptics wrong and demonstrate the feasibility of its business by achieving gross profit by the end of the current fourth quarter.

The Wall Street Journal (WSJ) had previously criticized this $6.6 billion loan, stating in a column, "The Biden team is providing financing for a financially distressed and known credit-risky industry competitor in the flourishing auto sector."

(Source: WSJ)

According to the report, the explanation is simple - Trump would never approve such a loan, so it must be approved before the new government takes office in January 2025.