Luxury EV maker Lucid to raise $1 bln from Saudi’s PIF affiliate

March 25 (Reuters) – Lucid (LCID.O) announced on Monday that it is securing $1 billion in funding from a subsidiary of Saudi Arabia’s Public Investment Fund (PIF), leading to an approximately 8% surge in the luxury electric carmaker’s stock.

This fresh injection of capital from the sovereign wealth fund highlights Lucid’s advantageous position in the competitive landscape of struggling EV startups.

With a 60% stake, the Saudi government has committed significant investments in Lucid’s prosperity as part of its broader strategy to diversify the Kingdom’s economy away from oil dependency.

Ayar Third Investment Company, an affiliate of PIF, is set to purchase $1 billion worth of convertible preferred stock, with the option to convert it into approximately 280 million shares, as disclosed in a filing with the U.S. Securities and Exchange Commission (SEC).

Based in California, Lucid, which has been grappling with softer demand, intends to allocate the proceeds towards various corporate purposes and capital expenditures.

Lucid, along with other EV startups, has been impacted by the deceleration in demand growth and a pricing competition instigated by Tesla (TSLA.O).

Under the leadership of a former Tesla executive, the EV manufacturer anticipates producing 9,000 units in 2024, up from the 8,428 vehicles manufactured last year.

Competing with Tesla’s Model S and luxury EVs from brands like Mercedes-Benz (MBGn.DE), BMW (BMWG.DE), Audi, and Porsche (PSHG_p.DE), Lucid’s Air luxury sedans are vying for market share.

According to Andres Sheppard, a senior equity analyst at Cantor Fitzgerald, this announcement likely prolongs the company’s capital runway, with Lucid potentially ramping up production to 9,500 vehicles this year and 20,000 units in 2025.

In its fourth-quarter financial presentation last month, Lucid reassured investors of its liquidity status, asserting it has ample funds “at least until 2025,” with a projected $1.5 billion in capital expenditure for 2024 to support the launch of its Gravity SUV line later this year.

As of the end of 2023, the company possessed $4.8 billion in available funds, including $4.3 billion in cash reserves.