Electric car startup Lucid Motors Inc. has an undisclosed commitment to build an assembly plant in Saudi Arabia, a potentially expensive promise the company made after accepting more than $ 1 billion in funding from the Saudi Public Investment Fund. Saudi in 2018, according to people familiar with the matter.
The plant promise represents a significant investment commitment for the startup, which has yet to sell a car from its only existing factory in Arizona. It’s also a potential boon for Saudi Arabia, which has struggled to attract Western companies to the country in the wake of the 2018 assassination of Saudi journalist Jamal Khashoggi.
Last month, Lucid agreed to merge a special-purpose acquisition company, a deal that, if completed, would allow it to go public later this year. The merger deal valued the Silicon Valley startup at about $ 24 billion.
Share your thoughts
Can Lucid compete with Tesla? Join the conversation below.
Lucid has not publicly discussed the plans for the Saudi Arabian car plant, but at least one large institutional investor who agreed to invest as part of the SPAC deal was briefed on them, according to people familiar with the discussion.
A Lucid Motors spokesperson said it “expects to establish manufacturing facilities in multiple geographies, including Asia Pacific, the Middle East and potentially Europe in the coming years.” The spokesperson said the company’s “short-term priority” is to start production later this year at its Arizona facility.
Churchill Capital Spokespersons Corp.
IV, the SPAC that agreed to merge with Lucid, and PIF did not return requests for comment.
Churchill Capital is run by former Citigroup Inc.
investment banker Michael Klein. He has worked for years as a financier in the Middle East and has advised Saudi Arabia on the local listing of Saudi Arabian Oil in 2019. Co.
PIF, a sovereign wealth fund in Saudi Arabia, first agreed to invest more than $ 1 billion in Lucid in 2018. It agreed to boost that investment through the Lucid SPAC merger, and recently provided the automaker with $ 600 million in financing. bridge to provide stability through the conclusion of the deal, Lucid Chief Executive Peter Rawlinson told The Wall Street Journal last month. PIF will remain Lucid’s majority shareholder once it is listed through its agreement with SPAC, the company has revealed.
Lucid, originally called Atieva, was founded as a battery technology company in 2007 before going on to make its own cars. In 2013, he recruited Mr. Rawlinson, a former Tesla member Inc.,
where he was chief engineer on the company’s first series-produced Model S luxury sedan. Lucid hasn’t sold any cars, but is among the most mature electric vehicle startups in a race to one day compete with Tesla, according to analysts. The company plans to start selling its first model, a luxury sedan called the Air, later this year.
Lucid recently completed the first phase of a $ 700 million plant in Casa Grande, Arizona, that the company says is capable of making 34,000 cars a year. With the expansion, the site is capable of increasing production up to 365,000 vehicles a year, the company said. In a presentation to investors, Lucid said that by 2030 it plans to produce more than 500,000 vehicles a year.
Lucid’s SPAC deal comes amid a torrent of similar deals between special-purpose acquisition companies, also known as blank check companies, and startups looking to list their stocks quickly. By merging with a SPAC, essentially a large amount of cash that is already publicly traded, companies can avoid the more typical initial public offering process.
Some people familiar with the Saudi factory’s promise said such an investment could cost several hundred million dollars or more. Saudi Arabia has very little of the manufacturing footprint needed to build cars, which means that many of the car parts would likely need to be imported. That would potentially double manufacturing costs at the plant, according to these people.
Lucid executives have been pushing for more Saudi incentives to help cover costs and offset inefficiencies that the plant’s construction would create, these people said. Senior PIF executives are pushing the company to deliver on its 2018 pledge, these people said.
PIF, under the leadership of Crown Prince Mohammed bin Salman, had dedicated itself to investing the country’s oil wealth internationally, with the aim of making investments that could reduce the Saudi economy’s dependence on the petrochemical industry. Many of the fund’s bets were explicitly seeking to attract direct investment to Saudi Arabia, hoping to create jobs for young Saudis in growth sectors such as technology and advanced manufacturing.
Those efforts stalled as many Western companies distanced themselves from Saudi Arabia after Khashoggi’s assassination in 2018. The assassination took place after the PIF invested in Lucid that same year. Last month, the United States declassified a report blaming Crown Prince Mohammed for ordering the assassination. Prince Mohammed has said that the murder occurred under his command, but has not said that he ordered it.
Saudi officials, in particular, have been trying for nearly a decade to entice an automaker to build an assembly plant in Saudi Arabia. Jaguar Land Rover, owned by India’s Tata group, signed a letter of intent with the government in 2012 to assess the viability of a Saudi assembly plant. The plant was never built.
—Mike Colias contributed to this article.
Copyright © 2020 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8