On Monday, Lucid Motors, a luxury EV maker, announced it is raising $1 billion in capital from an affiliate of Saudi Arabia’s Public Investment Fund (PIF). The news resulted in an approx 8% increase in the company’s stock price.
The fresh injection of capital from the sovereign wealth fund shows that Lucid has a significant advantage compared to other struggling EV startups. Investing billions in Lucid’s success, the Saudi government holds a majority stake of 60%.
As per a filing with the U.S. securities regulator, Ayar Third Investment Company, a PIF associate, will acquire $1 billion in convertible preferred stock. Moreover, the company will get the option to convert it into roughly 280 million shares.
Why Such a Heavy Investment?
Demand for the California-based EV maker has fallen short of expectations. Thus, the company plans to allocate the funds for general corporate needs and capital expenses. Also, Lucid, like many other EV startups, has suffered from a downturn in demand growth and ongoing price battles.
Further, the automaker has failed to attract buyers for its costly Air Sedan and has consistently reduced prices to boost its demand. The Lucid Air competes with Tesla’s Model S and luxury EVs from Mercedes-Benz, BMW, Audi, and Porsche. In addition, by the end of 2024, Lucid intends to launch its electric Gravity SUV into production.
The EV maker expects to produce 9,000 units in 2024 and 20,000 units in 2025. It indicates an increase from the 8,500 units in 2023 but falls below the 14,000 units expected by analysts.
Diverse EV Investments from Saudi Arabia
Oil is the primary reason Saudi Arabia is one of the wealthiest nations in the world. However, with the growing urgency of climate change, the nation is shifting its focus to cleaner options, particularly electric vehicles.
Notably, in 2018, the government’s PIF negotiated with Elon Musk to privatize Tesla. Moreover, it held onto millions of shares in the automaker until 2020. But recently, after Lucid revealed plans for production slowdown, Musk made a sarcastic remark about the company, posting on X that, “Their Saudi sugar daddy is the only thing keeping them alive.”
Last October, the PIF launched a new enterprise to increase EV production in the country and foster local supply chains. By 2030, the company plans to install more than 5,000 EV charging stations in the country.
What About the Lucid Facility?
Currently, Lucid’s manufacturing facility in Jeddah can assemble 5,000 vehicles per annum. The EV maker plans to switch its advanced manufacturing plant to complete build unit (CBU) production by the middle of the decade. It will be able to produce 150,000 cars annually.
Lucid will play a significant role in meeting the Saudi Green Initiative’s aim of ensuring that 30% of new car sales in the Kingdom are electric by 2030.
