As the storm clouds gather over the electric vehicle (EV) sector, startup companies like Lucid Group (LCID) find themselves sailing rough waters. A recent nosedive in stock prices has left players such as Lucid, along with Rivian (RIVN) and VinFast (VFS), at record lows. These grim tidings come hot on the heels of Ford’s (F) decision to engage in a price war by slashing prices on its F-150 Lightning pickup, further intensifying the strain on the EV market.
This price warfare has significantly impacted the bottom line of startup EV ventures, exacerbating their financial woes. Lucid Motors, for one, recently reported an operating loss exceeding $3.1 billion in 2023, surpassing the $2.6 billion deficit from the previous year.
The Lifeline of Saudi Investment in Lucid Motors
Amidst the financial turmoil plaguing the EV industry, concerns about liquidity loom large. Potential investors seem wary of fueling these enterprises’ perpetual cash hemorrhage. Nevertheless, Lucid Motors stands as somewhat of an outlier in this respect, with Saudi Arabia’s public investment fund (PIF) standing steadfast as its primary shareholder, staunchly propping up the company’s finances.
PIF’s robust support for Lucid stretches back several years, with the sovereign wealth fund injecting billions into the company through various capital injections and private equity transactions. Recent financial maneuvers saw an affiliate of PIF channeling $1 billion into a new series of Lucid’s convertible preferred stock, securing a sizeable stake in the enterprise.
Rumors have long swirled about a potential acquisition of Lucid Motors by Saudi Arabia, fueled by PIF’s ownership of approximately 60% of Lucid’s common stock and the additional 12% held through the issuance of preferred shares. As the EV sector faces escalating strife, is a Saudi buyout the final recourse for Lucid Motors?
Exploring Saudi Ties and EV Industry Turbulence
Interestingly, the notion of a Saudi buyout has historical precedents, with past ties to the EV arena. When Elon Musk infamously mused about taking Tesla (TSLA) private in 2018, he erroneously cited PIF’s backing, a claim subsequently debunked, leading to regulatory entanglements and corporate repercussions for the Tesla CEO.
In a parallel narrative, PIF’s eventual investment in Lucid Motors in 2018 marked a pivotal moment for the company, once heralded as the ‘next Tesla,’ helmed by a former Tesla engineer. The tapestry of Saudi involvement in the EV landscape appears intricate, hinting at the potential symbiotic relationship between the kingdom and innovative ventures like Lucid.
The Strategic Imperatives of a Saudi Acquisition
A Saudi acquisition of Lucid Group could offer a strategic boon to both parties, aligning with the nation’s green energy aspirations and diversification away from traditional oil revenue streams. Saudi Arabia’s substantial investments in clean energy initiatives, coupled with joint ventures aimed at domestic electric vehicle production, underscore its commitment to this burgeoning sector.
Lucid Group, pivotal to Saudi Arabia’s eco-friendly roadmap, holds promise as a linchpin in the kingdom’s automotive ambitions. An acquisition could potentially bring synergies and operational efficiencies, particularly given the current downtrend in Lucid’s valuation.
For Lucid Motors, a Saudi acquisition might offer a lifeline, bolstering its financial stability amid turbulent market conditions. The erosion of LCID’s stock value not only undermines its market standing but also raises questions among prospective consumers wary of entrusting their investment to ailing EV startups.
While Lucid boasts one of the sturdiest balance sheets among its startup peers, uncertainties persist. The specter of bankruptcy looms large over the sector, making a Saudi buyout an enticing prospect for fortifying the company’s future trajectory, away from the tempestuous public markets.
