Amidst the aggressive price war in the electric vehicle (EV) industry, Lucid Motors (LCID) finds itself plummeting to record lows alongside fellow startups like Rivian (RIVN) and VinFast (VFS). The recent move by Ford (F) to slash prices of its F-150 Lightning pickup has further exacerbated the financial woes haunting these burgeoning companies.
Lucid Motors, in particular, has been grappling with mounting losses, with an operating loss of approximately $3.1 billion in 2023 – a figure surpassing their already hefty $2.6 billion loss in 2022.
The dearth of cash in the EV sector has left companies gasping for funding, as investors grow increasingly reluctant to endorse perpetual cash burn. However, Lucid has stood apart due to the unwavering support of Saudi Arabia’s public investment fund (PIF), their largest shareholder.
The Lifeline from PIF
PIF has injected billions into Lucid Motors, participating in pivotal financing rounds and enhancing their liquidity. The fund engaged in a private investment in public equity (PIPE) transaction during the 2021 merger, acquiring shares at $15 each. Subsequently, PIF continued their financial backing with substantial investments in capital raises throughout 2022 and 2023, funneling over $3 billion into the company.
A recent development saw an affiliate of PIF channeling $1 billion into a new series of Lucid’s convertible preferred stock through a private placement. The strong ties between Lucid Motors and PIF, with the latter holding approximately 60% of the company’s common stock, have sparked speculations of a potential Saudi acquisition as a strategic move amidst the EV industry turmoil.
Historical Context: PIF’s Tryst with Elon Musk and Tesla
It’s worth noting the historical relationship between PIF and the EV sector, particularly their past dalliance with Elon Musk and Tesla. While Musk had prematurely invoked PIF’s backing for a privatization deal in 2018 – a move that eventually led to regulatory repercussions – the fund later found synergy with Lucid Motors, actively participating in their growth trajectory since 2018.
A Potent Alliance: Saudi Arabia and Lucid Motors
Contemplating a Saudi acquisition of Lucid Group unveils a promising symbiosis, with Saudi Arabia eyeing EVs as a strategic pivot from oil reliance. The kingdom’s substantial investments in clean energy initiatives, including a partnership with Foxconn for local electric vehicle production, underscore their commitment to sustainable mobility.
Lucid’s pivotal role in Saudi Arabia’s green energy roadmap, marked by manufacturing facilities and burgeoning production capacity, underscores the strategic value of a prospective buyout amidst current depressed stock valuations.
From Lucid Motors’ vantage point, a Saudi acquisition could inject newfound financial stability, pivotal in weathering the storm of declining stock prices tarnishing the brand image. Navigating the treacherous waters of the EV market, characterized by bankruptcies and investor skepticism, demands sustainable financial backing – a void that a Saudi buyout could effectively address.
While Lucid Motors boasts a robust balance sheet relative to its EV counterparts, the specter of bankruptcy looms large over the industry. A potential acquisition by Saudi Arabia not only mitigates this risk but also allows Lucid to redirect focus towards product development and sales, unshackling from the burdens of public scrutiny.
