What happened
Rivian Automotive (RIVN -3.62%) stock popped Tuesday morning on news related to a planned second manufacturing facility. Rivian shares jumped as much as 6% in early trading, though it ultimately retreated from those gains. As of 11:21 a.m. ET, the stock is up 1.2%.
So what
In December 2021, Rivian announced it planned to build a $5 billion manufacturing facility -- its second -- in Georgia, but that plan has hit obstacles. Local residents pushed back against it. Those obstacles seem to have been overcome, however, as The Atlanta-Journal Constitution reports state and local officials have agreed to give Rivian $1.5 billion of incentives, including tax breaks, to get the project moving.
Image source: Rivian Automotive.
Now what
Georgia governor Brian Kemp said the plant, which is expected to eventually employ more than 7,500 workers, is the largest economic development project ever undertaken in the state. Kemp defended the decision for incentives using an existing example: In 2006, the state offered automaker Kia a package worth about $570 million in today's dollars that has resulted in what Kemp called "great-paying jobs going to rural Georgia."
Rivian is still ramping up production and, due to supply chain challenges, expects to produce only 25,000 vehicles this year. But Georgia built some protections into the offer. Rivian will have to succeed over the long term to realize the benefits of the package.
The report says that Rivian has until 2028 to fulfill 80% of its employment goal and investment plans and that it must maintain them through 2047. Otherwise, it will be subject to state claw-back provisions.
That seems prudent, since Rivian has yet to prove it can manufacture at scale and fully execute its plans. Investors should have that same outlook, knowing an investment in Rivian carries risk, and they should be open to any possible outcome.
