Saudi Wealth Fund injects $1 bn lifeline into Lucid Motors

California-based electric vehicle (EV) startup Lucid Motors (LCID.O) secured a cash injection of $1 billion on Monday. The funding comes from Ayar Third Investment Company, an affiliate of Saudi Arabia’s Public Investment Fund (PIF), according to a filing with the U.S. Securities and Exchange Commission (SEC).

Lucid’s stock price surged by around 8% following the announcement. This investment strengthens Lucid’s position in the fiercely competitive electric car market, where several startups are struggling to survive.

“This latest investment by the PIF underscores a key advantage Lucid has,” industry analyst Andres Sheppard of Cantor Fitzgerald said in a Reuters report. “The Saudi government, which already holds a 60% stake in Lucid, has been pouring billions into the company’s success.” This financial backing aligns with Saudi Arabia’s strategy to diversify its economy and move beyond its dependence on oil revenue.

The $1 billion will be delivered in the form of convertible preferred stock, which can be converted into roughly 280 million shares of Lucid stock. The California-based company plans to use the funds for various purposes, including ongoing operations and capital expenditures.

Lucid, like many other EV startups, has been grappling with weaker-than-expected consumer demand and a price war triggered by industry leader Tesla. Led by a former Tesla executive, Lucid is aiming to produce 9,000 vehicles in 2024, a modest increase from the 8,428 units manufactured in 2023.

Lucid’s flagship Air sedan competes directly with Tesla’s Model S, as well as luxury EVs from established automakers like Mercedes-Benz, BMW, Audi, and Porsche.

Sheppard believes the new funding will extend Lucid’s financial runway. “We expect them to produce around 9,500 vehicles this year and potentially reach 20,000 units in 2025,” he said.

Lucid previously expressed confidence in its financial health, stating sufficient liquidity “at least until 2025” during its fourth-quarter earnings report. The company also forecast $1.5 billion in capital spending this year as it gears up for the launch of its Gravity SUV later in 2024.

With this fresh injection of capital, Lucid appears better positioned to navigate the challenges of the EV market and potentially establish itself as a major player in the luxury electric vehicle segment.

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