Deal aims to help Silicon Valley company launch its first electric vehicle in 2020
Saudi Arabia’s sovereign wealth fund has made its second major investment in a US electric vehicles maker, striking a $1bn deal to provide much-needed financing for Tesla-rival Lucid Motors on Monday.
The move comes just weeks after the Financial Times revealed the Saudi Public Investment Fund, the state vehicle being used by Crown Prince Mohammed bin Salman to overhaul his nation’s economy, had built a near 5 per cent stake in Elon Musk’s car group Tesla.
The PIF said the deal would provide funding to help Lucid launch its first electric vehicle in 2020, ending months of speculation over whether the private Silicon Valley-based company would be able to secure the backing needed to allow further development of its products.
Lucid is one of a handful of electric car start-ups trying to model themselves on Tesla, though they are years behind and, in several cases, struggling to raise cash.
Lucid’s chief technology officer, Peter Rawlinson, was previously the chief engineer for Tesla’s Model S. Copying the game plan of the Model S, Lucid’s first car, called the Air, is a high-end sedan designed to reach production capacity of about 50,000 a year, acting as a showcase for the company’s brand and technology as it tries to open a wider market.
“By investing in the rapidly expanding electric vehicle market, PIF is gaining exposure to long-term growth opportunities, supporting innovation and technological development and driving revenue and sectoral diversification for the Kingdom of Saudi Arabia,” the $250bn fund said.
Saudi Arabia, the world’s largest oil exporter, is investing in new industries to diversify the kingdom’s economy away from its vast hydrocarbon resources, in preparation for a time when global demand for its barrels could peak. While Saudi Arabia is investing in a sector that is primed to erode oil’s dominance in transportation, the kingdom still sees growth in vehicles powered by traditional fuels led by fast-growing emerging economies in Asia and Africa.
However, unlike its move to purchase a stake in Tesla, the decision to invest in Lucid was the source of major debate within the PIF, said people with direct knowledge of the matter.
That was partly because of the troubled financial position of Lucid, one of these people said. The company has yet to build its planned factory in Arizona, a facility it predicted would cost $700m and produce 10,000 vehicles in 2019. The company’s backers include Jia Yueting, the entrepreneur behind ambitious Chinese electronics conglomerate LeEco until the group ran into financial difficulties.
Lucid’s links to Tesla include former employees such as Bernard Tse, who was an early board member and executive at Tesla before Elon Musk came in to take full management control, and Martin Eberhard, the Tesla founder who fell out with Mr Musk.
Details of the PIF investment, including whether the Saudi fund would in effect take control of Lucid’s equity or whether the deal would require approval from US national security regulators, were not immediately available.
The decision to invest in Lucid comes as the PIF’s own finances are under scrutiny, with the fund earlier on Monday finalising an $11bn loan package.
With the initial public offering of state energy giant Saudi Aramco shelved indefinitely, the PIF has been on the hunt for new means to generate funds, including raising debt and a potential $70bn sale of its stake in state chemical group Sabic to Aramco.