An affiliate of Saudi Arabia’s Public Investment Fund has stepped in to support struggling electric car maker Lucid Group with a $1.5 billion lifeline, marking the second infusion of funds this year. This injection of capital comes as Lucid gears up to launch its first sport utility vehicle amidst a challenging period in the EV automotive sector.
Lucid has disclosed that it has inked agreements with its majority stockholder, Ayar Third Investment Company, an affiliate of the Saudi PIF, to acquire $750 million of convertible preferred stock through a private placement and extend a $750 million unsecured loan. This latest financial boost follows a previous $1 billion investment from Ayar in March. Subsequently, Lucid announced plans to reduce its workforce by approximately 6% by the end of Q3, following a tumultuous 2023 characterized by production challenges, staff cuts, and senior management changes.
CEO Peter Rawlinson has indicated that the fresh funds from Ayar will be utilized to facilitate the production of the Gravity SUV and establish a factory in Saudi Arabia with an annual capacity of 150,000 vehicles. The announcement of the funding led to a significant surge in Lucid’s premarket trading, although the company’s shares are down nearly 29% for the year. Furthermore, Lucid’s float currently stands at 26.29% short.
In addition to the funding news, Lucid has reported its second-quarter earnings, surpassing Wall Street estimates with revenue of $200.6 million. However, the company posted an adjusted loss per share of 29 cents for the quarter, slightly higher than analysts’ forecast of a 27 cents-per-share loss.
Financial analysts have weighed in on the developments, with Cantor Fitzgerald’s senior equity analyst Andres Sheppard noting that the $1.5 billion infusion strengthens the partnership between PIF and Lucid. Meanwhile, Citi analyst Itay Michaeli and RBC analyst Tom Narayan believe that the Saudi deal’s liquidity cushion and PIF’s commitment to Lucid’s long-term success could drive a significant uptick in the company’s shares.
Looking ahead, Bloomberg Intelligence analyst Steve Man has pointed out that while the $1.5 billion capital raise bolsters Lucid’s position, it may not fully address the company’s liquidity needs for launching a high-volume vehicle scheduled for late 2026.
As the EV industry continues to evolve, collaborations between legacy automakers and EV startups are becoming increasingly common. Rivian’s recent partnership with Volkswagen exemplifies this trend, as predicted earlier this year by Morgan Stanley’s autos expert, Adam Jonas.
In a potential shift that could impact the EV market, former President Trump has indicated plans to eliminate EV subsidies if re-elected in November. This move, supported by Tesla CEO Elon Musk, could have far-reaching implications for the industry.
Overall, Lucid’s latest financial injection from Saudi Arabia’s PIF underscores the challenges and opportunities facing the EV sector, with implications for both the company and the broader industry landscape.