The Irvine, California-based company's shares rose nearly 10% in afternoon trade after having lost more than 60% of their value this year, as of Wednesday's close.
The Illinois plant, where Rivian also makes its electric delivery vans for its largest investor, Amazon.com, can produce 150,000 vehicles a year, the company said.
Rivian will be producing its less-expensive midsize SUV R2 model, unveiled in March and will take on Tesla's Model Y, at the plant
With the addition of the R2, Rivian expects a total annual capacity of 215,000 vehicles.
The company said the funds from the state of Illinois would be spent on expanding the plant, improving public infrastructure and job training programs for its workforce.
The incentive package would add to Rivian's balance of cash and cash equivalents of USD7.86 billion at end of last year.
Earlier this year, Rivian had said it expects to spend about USD1.75 billion in capital expenditures in 2024, driven by additional investment in a second facility just outside of Atlanta, Georgia facility, but it has since paused construction of the plant.
Construction would resume later in Georgia as that site "remains an extremely important part of its long-term strategy," Rivian said.
Rivian, which is set to report first-quarter results next week, raised more than USD3 billion with two bond issuances last year, but some analysts and investors say it will need additional capital by 2026.
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