By: Mark Glennon*
At $1.5 million per job, this new incentive package from the state is at least 15 times the norm. For this much money, the state could have just handed out a million bucks to 827 people, instead of creating 550 jobs.
Gov. JB Pritzker announced Thursday that the State of Illinois will provide an $827 million incentive package for Rivian to invest $1.5 billion to expand its electric vehicle factory in Normal, Illinois. The expansion is expected to create at least 550 full-time jobs within the next five years, and will build Rivian’s next model EV, the R2. Rivian initially got $49.5 million under Gov. Bruce Rauner in 2017 to create 1,000 jobs at the same location.
The new deal gives $1.5 million per job created, which is astronomical in the world of location incentives. Estimated average location incentives paid by state and local governments around the nation range from $13,000 to $84,000 per job, though sometimes go as high as $100,000 per job for capital intensive projects. Even using that high end, Rivian’s package will be 15 times what’s typical.
Moreover, Rivian is on shaky wheels, along with the rest of the U.S. EV industry. Rivian loses over $43,000 for every vehicle it sells and has had two rounds of layoffs this year. The decision to move its R2 production to Illinois is a further reflection of the company’s need to preserve cash. R2 production was initially planned for a new $5 billion plant in Georgia, heavily subsidized by the state. But Rivian concluded that moving production to the existing Illinois facility would save cash.
Its stock price has consequently been hammered. It reached a high of $172 per share in 2021 but now trades at less than $10 per share.
Rivian is not alone. As a CNBC headline recently declared, “EV euphoria is dead. Automakers are scaling back or delaying their electric vehicle plans.” Since then, the news is no better. Ford announced last week that it is losing a stunning $132,000 per vehicle. Hertz announced last week a second round of sales of its EV fleet due to heavy maintenance and depreciation costs. For the first quarter of this year, EV sales continued to slow and the share of EV sales for all autos actually decreased. While total EV sales are still up a bit from last year, the growth rate is not nearly enough to put EV makers on a path to profitability.
EV makers pin their hopes on less expensive models that they promise soon, and on more public charging stations, into which Illinois last month announced it would invest an additional $50 million. Rivian hopes its new R2 will be among the new, lower priced models. However, its starting price is expected to be about $45,000 and it won’t come out until the first half of 2026.
Regarding the astronomical incentive package to be paid by Illinois, in fairness, it should be noted that most of it is in the form of tax credits to be granted over the next 30 years. They are available on condition that the company retain 6,000 already existing jobs. However, the fact remains that just 550 new jobs are to be created, and incentive packages like this are not supposed to be payoffs for merely standing still. And a less charitable way to look at it would be that future taxpayers will be on the hook for the high cost of the incentive package — if it works.
Aside from thinking that the new job payoff is too low, my first instinct was to ask, “Where’s the warrant coverage.” That is, I know from working as a lawyer and then as an investor, often with troubled companies, that it’s not unusual to make risky bets. However, it’s routine for the investor to get part of the upside if the venture succeeds, usually in the form of stock or warrants (basically, options) on stock that pay off nicely if things turn around. The federal government, for example, got stock and warrants as part of the deal for its 2010 bailout of the auto industry.
This new Rivian deal has nothing like that. Since the job creation per dollar is minimal, it’s just not worth the price.
*Mark Glennon is founder of Wirepoints.
This column was updated in the third to last paragraph to better explain the conditions for getting the tax credits.
Audio and summary 
If this bill passes, say goodbye to local control over all Illinois parks and expect to see open drug and alcohol use, needles, no sanitation and fire hazards, but no ordinary park users.
I cannot stress enough that many of these ‘deals’ that JB puts together are from the reject bin. He’s chasing fake green energy and other pie-in-the-sky high tech businesses as a virtue signal, an ideological belief. Granted, he’s got an uphill battle and little to work with, as most expanding businesses avoid Chicago entirely, but he’s taking the W’s he can get, even if those W’s are complete losers that go nowhere.
Maybe his is why Pritzker is so confident Rivian will thrive: A Trump win would help: https://finbold.com/why-rivian-stock-could-skyrocket-if-trump-is-re-elected
It doesn’t matter who is elected president, Rivian’s success isn’t predicated on protection from Chinese auto makers. Chinese imports are about 1% of the auto market in the U.S. and aren’t a threat to anybody just yet. Rivian has about $8 billion in cash and cash equivalents which should be enough for at least a couple of years. In fact, Rivian is predicting a slight profit in the 4th quarter of this year. That would be a good start to becoming a successful company. The headwind for Rivian is the rate of growth in the EV market. While they are… Read more »
Yes, that’s what I have said repeatedly. The adoption rate for EVs just isn’t there to get them to profitability (except Tesla, and I am pretty worried about them because of the price cuts they are now forced into).
Tesla is now facing competition from established auto companies as well as startups. The big problem for Tesla is they haven’t refreshed their product line since they’ve been in business. Most established auto manufacturers refresh their lineup every few years or so. While Tesla is a global automaker and the biggest player in that space, the competition is coming for them and it’s likely the Chinese will be Tesla’s toughest competition. No one stays on top forever. Sears at one time was the largest retailer in the U.S. Then it was K-Mart, then Walmart. And now Amazon is breathing down… Read more »
If Pritzker had such faith in the Rivian line that he’s putting out tax money, why hasn’t he contracted with to buy a full fleet of vehicles for the state of Illinois?
I guess he doesn’t. I don’t either.
This company will be bankrupt in under 5 years, watch.
So, not the Bears, but, yeah to the boondoggle of EVs. JB, you are simply another hypocrite who has no problem picking YOUR winner (Central planning picking winners and losers), in this case a silly EV plant… What an ass.
“Pritzker doubles down …” Yep, he’s quite the gambler when it comes to using taxpayer money, but he’s no James Holzhauer; more like Chevy Chase in Vegas Vacation.
If this money wasn’t spent on Rivian today it would have been spent on Jack’s magic beans tomorrow, and corn-row subsidies the next day. IL is going down in flames just like CA, RI and so many other states. Sadly, when it does hit the wall D.C. will come to the rescue with all kinds of stabilizers, which will eventually be printed off by the Fed like every other bad debt. We’ll all pay for it, nation wide. The lesson of the story is to buy gold, keep buying gold, and don’t look back. And of course leave these failed… Read more »
Agreed, Americans have no idea of currency and history.
The feds keep extending rules for which EVs models auto makers qualify for full $7,500 tax credit as most US EV manufactures can’t meets standards. Currently a big disadvantage for Rivian is its EV models only qualifies for 1/2 tax credit ($3,750) but all that can change. On the other hand, Tesla for example, is one of few that qualifies for full tax credit, it invested gigantic $ in battery plant in Nevada. All those companies are still buying battery lithium and components from China. Big politics. I don’t understand how that effects a Goiton or is reason why they… Read more »
If you notice how our state leaders are pushing EV’s and Chicago trying to ban natural gas in new construction the City of Berkeley is doing the opposite.
.https://www.yahoo.com/news/city-abruptly-reverses-landmark-decision-180000010.html
Pritzker likes being a tyrant with fiat rule over us plebs, serfs, deplorables, and mouth breathers. I say lets get Pritzker a crown and robe, and a sceptre to wield as he bloviates from his throne.
Within the article is “future taxpayers will be on the hook for the high cost of the incentive package.” This type of funding worked great for the pensions via the pension ramp and now we will have a similar arrangement for automotive plant incentives. The Illinois voter it seems is all for assorted goodies as long as they can pass the bills to someone else including I assume their children and grandchildren. Quite a place Illinois, quite a place.
Not just Illinois voters RB. Why do you think the mantra, “make the rich pay their fare share” is so popular. Everyone wants the benefits and they want the other guy to pay. Not even getting into social security.
Excellent point regarding missing equity participation in exchange for cash or tax credits. Taxpayers should get a piece of the action on these high risk bets. Same for the stadium deals. If the Hallas’s and Reinsdorf’s want taxpayer money then pay up-just like they would have to do if raising private $.
The taxpayers do get a piece of the action on the stadium deal. The stadium is already owned by the taxpayers. Any improvements to the stadium belong to the taxpayers. The Bears are prepared to put up 2 billion of their own money for a stadium that the city would own.
Chicago also collect 9 percent of ticket sales and I believe cook county collects 3 percent. They have a 12 percent stake in ticket sales already.
If I recall correctly, the $630 million or so spent to build the current Soldier Field is roughly the same amount still owed 20 years later. So unsure how your argument makes sense. That same $630 million could’ve been either not spent at all or on much better things. Go back and see how the United Center was built with private money and paid off in about 7 years. Would that method not be preferable to larding taxpayers in the state with the most public debt per capita in the country with another couple billion? Yes, by far. The Bears… Read more »
I didn’t take a position on the stadium either way. Just pointing out that the taxpayers would have a stake in it. Bringing up how much is still owed on the first renovation doesn’t make any sense. That is more the result of Chicago’s fiscal mismanagement rather than anything the Bears did. That’s like people complaining their student loan amount is greater than their original note. That’s their own fault and nobody else’s.
Taxpayers own the park district, of course we have a stake. That stake isn’t providing a meaningful financial return for taxpayers as it is. Dumping in several billion more won’t change that either. Likewise, an assets value isn’t truly determined until the asset is sold. Perhaps the Bears could purchase the existing stadium from taxpayers at market cost and then rebuild as they see fit with their own resources.
I think you miss the point. Past studies have shown stadium subsidy deals are not fiscally responsible as the revenue is just shifted from other activities- namely a net wash to the state/city/whatever. If building and owning a stadium is financially attractive then private money would be attracted to a good opportunity. Any takers? Probably not. Anyway, what the taxpayers should get if foolish enough to put up the money is a piece of the Bears/White Sox franchise- equity.
I think the Bears would love to own a stadium outright that’s why they bought the property in AH. Unfortunately, they know it doesn’t make sense in Illinois with our extremely high property taxes. Why else would you put up 2 billion for something that you wouldn’t even own?
Again, I’m not taking a position either way on the stadium but acting like the taxpayers get nothing out of it is disingenuous.
Not disingenuous, factual. Google search for stadium/public subsidies- here’s one:
https://www.stlouisfed.org/publications/regional-economist/april-2001/should-cities-pay-for-sports-facilities
There are plenty more.
Saying they wouldn’t get anything out of it is disingenuous. They would get 2 billion towards the funding of the stadium that the city would own. What if they gave them a 20 percent stake in the equity of the team instead? You would be happy with that? I get that people don’t want to fund these types of initiatives but it’s silly to say the city would get nothing out of it. I’ve read similar studies as the one that you’ve linked. I tend to believe that these types of deals never benefit the local community as much as… Read more »
I did get a chuckle out of this portion of the article you linked. “Another glaring omission from these economic impact studies is the value of the next-best investment alternative—what economists call the opportunity cost. “There’s no such thing as a free lunch” is a favorite economist expression because it sums up exactly what opportunity cost means: When making a choice, something always has to be given up. The value of the “losing” choice must be considered when making the decision and when calculating the value, or return, of the “winning” choice. In other words, when a city chooses to use taxpayer dollars… Read more »
PPF – you are a bright guy. You are being argumentative on this stadium deal for emotional reasons. Whether the City would get anything out of is largely irrelevant. The City will have a significant negative return on a stadium investment, and will lose money. The folly of stadium invests is indeed something virtually all economists agree upon. Again, you know this. On a holistic basis the City would receive losses, and lots of them. I also don’t understand why you aver the existing debt is irrelevant. It reflects the foolishness of extending public financing far longer than the useful… Read more »
Thinking about this further, I would not purchase a Rivian. I would not want to be mocked for owning a lefty-only vehicle, and for willfully participating in Pritzker’s apparent vote-buying scheme.
All these negative comments about Illinois, mostly from people that still live there. Who’s the bigger fool, the person deciding to waste the tax dollars or the person that is giving the tax dollars to waste?
As much as people complain about Illinois, it still has its advantages otherwise these people would have left by now. Sure the taxes are high but maybe they can’t replicate their salary elsewhere or don’t want to leave their family. Bottom line, the good must outweigh the bad otherwise they wouldn’t live here.
LOL. The state has really only gone off the rails since about 2018 when JB was elected and insane progressives have become laser focused on destroying the state. NOT EVERYONE HAS LEFT THE STATE IN THE LAST SIX YEARS SO THE GOOD MUST OUTWEIGH THE BAD. Just ignore the fact we have the highest or one of the highest outbound migrations of any state.
Yet, you remain in the great state of Illinois. Something must be causing you to stay? Your job, family (I kid. I know you don’t care about them), friends, cost of living, etc…? The good must outweigh the bad or someone like yourself wouldn’t continue to live in Illinois. Keep in mind, you’re in a small minority that pays attention to the issues around Illinois. If guys like you won’t leave, why would the average Illinois Joe? Either it has its advantages to moving or people are just dumb and irrational. Which camp do you fall into?
Circular logic….you stay here because the good outweighs the bad; and the good outweighs the bad, so you stay here. See?
Why do you stay here debtsor? If the state was as bad as you say, why would you continue to live here? What keeps you here?
I also want to know why you stay debstor? You bitch and moan about everything about this state, but yet you’re still here.
Once Great State of Illinois.
The Public Sector Unions have destroyed the quality of life for so many people.
People are fleeing the “Great State to Escape from- Illinois”.
Some people are leaving. The vast majority are staying put. The ones that have left decided that moving was in their best interest. Those that stay, like yourself, have decided that Illinois has more to offer them than other locations. People that say they will leave soon believe that they are better off remaining in Illinois for the time being but will eventually leave. It sounds like you have decided that Illinois, with all of its faults, remains better for you to stay at this current moment in time.
Let’s see if I understand your reasoning. This state is full of people who stay because they love their families. The good outweighs the bad, so we are free to pursue further destruction.
I said no such thing. As usual, you display your inability to use logic. You are consistent, I’ll give you that.
Of course you said no such thing. You always hide behind silly points like people are staying, so the good must outweigh the bad.
It’s not a silly point at all. I’m just honest about why people stay here instead of playing the victim like you. I’m not happy with the way Illinois is run either. However, I’m honest with myself and know that I continue to stay and put up with Illinois because currently the benefits outweigh the alternative. That will probably change in a few years but for now I’m staying.
Stop being a victim and own your life. It’s pathetic.
I’m not playing a victim. I do just fine.
The good outweighs the bad, it’s better than the alternative are just lame justifications for what’s been going on in the state. Try finding something to actually defend, instead of inviting people to leave.
That only makes you arrogant, as usual.
You have a serious reading comprehension issue. When did I tell people to leave? If anything I was telling Honest J that it’s not that bad otherwise people would move. I even explained that as bad as Illinois is, I am also hanging around because the benefits outweigh the costs.
You should really seek a doctors help as you are hearing or seeing things that aren’t there. This isn’t a one off issue with you but a pattern. What are you late 70’s or early 80’s? It’s ok to ask for help.
Thanks for the diagnosis. Is that part of your “teachers are just like doctors” routine?
If this is such a great thing Jp…….use your own money and leave the tax payers alone! Maybe you can become a trillionaire!
Does this mean when Navistars upcoming class 8 EV semi truck fails in the market, Illinois will cut them a check too? Volkswagen, (Traton), an EU company, owns Navistar, (an Illinois company). So we might be paying the EU soon too? If Illinois is going to be handing out EV cash left and right like a dad with four kids at Six Flags, They can’t leave Navistar out.
Terrible investment. Only government invests in losing operations.
The people making the decisions must have gone to the CPS.
Sure, what’s another billion here or there. Jobs will never appear. These funds will be taken by the company and within a year or so, the company will disappear. Ooops. EV are not the way to go now. Loosing $43K on each car they turn out…obviously something is wrong with the business model. What company, doing one thing, can lose $43K on each vehicle and sustain itself. No one. This money is flushed and will just end up in the pockets of the execs on the way out. Another Pritzker win.
Look at Ford they announced last week that they lost 1.2 billion on EV’s, but but Father Pritzker knows best.
Here’s some info from NaturalNews about EV’s
https://www.naturalnews.com/2024-05-02-wright-evs-climate-agenda-threaten-national-security.html
Because Pritzker inherited billions does not make him a business genus. If he is convinced electric is the way to go (Rivian and Chinese battery plants) then he should invest his own money, not taxpayers.
That was my first thought. Let him invest $827,000,000 of his trust fund money into Rivian.
Is Pritzker an investor in Rivian, or would he put his own money into that (luxury) EV company? I’ve read that an average EV doesn’t become “carbon neutral” until about 75,000 miles and that’s only if it is recharged with electricity from renewable sources only. Who knows if there even is a true carbon neutral break even point. How long before the tax credits would make it to revenue neutral much less generate positive results for the state? Meanwhile, I work daily to “create or save” 3 jobs at my house.
It appears that Pritzker is bribing Rivian with our kids and grandkids future earnings and taxes. Just disgusting, though most Illinois citizens do not have the critical thinking skills to figure this out. Let’s hope for a brutally cold winter this year, with more videos of ICE powered towtrucks pulling useless EVs out of charging stations in Oakbrook. That may help end this democrat government folly.
That’s if the public is smart enough to believe their eyes rather than propaganda.
So far the public has a very short memory. Let’s hope they wake up before this “ride to ruin” pulls into the terminal.
All politicians have a stake in the EV industry along with renewables that’s why they so strongly promote it, if it flops they lose big time, now there demands are writing crappy laws into effect to eliminate natural gas etc etc these people are such blind fools.
I think that Adam Smith is rolling over in his grave.
There has to be a way to stop Pritzker in the courts from foolishly spending taxpayer money like this.
I guess no one in the Pritzker administration reads any business journals or newspapers. Demand for EV’s has plateaued out. Truck EV’s aren’t selling because with any kind of a load their range drops precipitously. I wonder if our ace Treasurer holds any Rivian stock to support this doomed adventure.
These jobs will never appear – Rivian will take the taxpayer handout before doing anything. Where are the protection’s for taxpayers? Imagine all the jobs that have left IL due to high taxes and onerous regulations – how does this taxpayer bailout to Rivian fix any of that?
Pritzker and Democrats are a economic menace.
Having my morning coffee in Tennessee, pulling up Wirepoints to see what new fool thing Illinois government is doing, and once again not disappointed. I want to thank the Illinois taxpayers for funding EV advancement when it’s clear the nation doesn’t want it. Some of what Rivian comes up with may be leveraged someday by other companies after Rivian goes belly up. Again, thank you Illinois taxpayer for your generosity. All of us southern red state taxpayers are more selfish and expect something in return for our taxes.