Photo: Lucid Motors | Edited
Lucid posted terrifying first-quarter losses, worrying investors that their money would get wiped out in a few quarters. Still, Lucid's biggest investor, Saudi Arabia's Private Investment Fund (PIF), seems unfazed by the EV startup's lackluster performance. The Saudis have bigger plans and seem willing to support Lucid for as long as it takes to see their dreams come true.
Lucid was, next to Rivian, the most promising EV startup, with credible chances to challenge Tesla in the luxury car market. Still, the two companies followed very different paths. Rivian seems on track to become profitable, with a clear vision and enough resources to accomplish its goals. On the other hand, Lucid is burning through its last cash reserves, with the production line barely moving and vehicles that nobody wants to buy cluttering the inventory.
It's not like Lucid doesn't have a compelling product. The Lucid Air is still the most efficient electric vehicle on the market, thanks to its advanced drive units and aerodynamics. It also achieved the most impressive EPA range rating, with 520 miles (840 km). This is significantly more than the 300-mile average American drivers consider appropriate for an electric vehicle. Still, despite all these qualities, the Lucid Air is not selling.
The main reason is its price, which starts at $92,900 for the more affordable Pure variant. Its archrival Tesla Model S starts at a more reasonable $88,490, and even this is a hard sell. Lucid also plans an $87,400 version of the Air Pure, but it's not yet available to order. The market conditions are worsening, and people are reconsidering their priorities, favoring more affordable vehicles. It's no wonder Lucid posted such disappointing financial results in the first quarter.
Perhaps more worrying than the $780 million net loss is the lack of any sign of improvement. Lucid's losses keep widening while its cash reserves deplete. All this time, Lucid relies on its biggest investor, the Saudi Arabia Private Invest Fund (PIF), to finance its operations. According to a Reuters report, PIF has invested about $3.6 billion in Lucid since 2018. A PIF-owned company loaned Lucid $266 million in March and about the same amount in April. Besides that, the government-owned Saudi Industrial Development Fund also loaned the company $1.4 billion in 2022.
As you can see, Lucid is living on life support, and the only question is when the Saudis will disconnect it from the machines. PIF is the biggest Lucid shareholder, owning more than 60 percent of the company's shares. In turn, Lucid represents PIF's largest US investment, as the Saudis bet big on the EV startup. Withdrawing from that would not only mean writing off tons of money but also admitting to a failed strategy. The move would also deal a blow to Crown Prince Mohammed bin Salman's plans to diversify away from oil revenues.
For the Saudis, Lucid is not just an investment, it's the spearhead of a strategic plan to build the local EV industry. Under the plan, Lucid will build a manufacturing plant in the kingdom to turn it into an EV powerhouse. Perhaps this also contributed to Lucid's downfall, as the EV startup concentrated on building an expensive vehicle with a limited market in the US. Saudis wanted something glamorous, and that's what they've got.
The new plant in Jeddah will build 155,000 cars per year at its maximum capacity. Local media reported that the construction got underway last year. During the Q1 earnings call, Lucid confirmed that the first vehicles would be assembled starting in September. The factory is instrumental to Saudi's plans and the main reason PIF kept the stake in Lucid despite bleak prospects. PIF intended to take Lucid private and make it its crown jewel. Until all hope is lost, Lucid will soldier on, despite monumental losses.
It's not like Lucid doesn't have a compelling product. The Lucid Air is still the most efficient electric vehicle on the market, thanks to its advanced drive units and aerodynamics. It also achieved the most impressive EPA range rating, with 520 miles (840 km). This is significantly more than the 300-mile average American drivers consider appropriate for an electric vehicle. Still, despite all these qualities, the Lucid Air is not selling.
The main reason is its price, which starts at $92,900 for the more affordable Pure variant. Its archrival Tesla Model S starts at a more reasonable $88,490, and even this is a hard sell. Lucid also plans an $87,400 version of the Air Pure, but it's not yet available to order. The market conditions are worsening, and people are reconsidering their priorities, favoring more affordable vehicles. It's no wonder Lucid posted such disappointing financial results in the first quarter.
Perhaps more worrying than the $780 million net loss is the lack of any sign of improvement. Lucid's losses keep widening while its cash reserves deplete. All this time, Lucid relies on its biggest investor, the Saudi Arabia Private Invest Fund (PIF), to finance its operations. According to a Reuters report, PIF has invested about $3.6 billion in Lucid since 2018. A PIF-owned company loaned Lucid $266 million in March and about the same amount in April. Besides that, the government-owned Saudi Industrial Development Fund also loaned the company $1.4 billion in 2022.
As you can see, Lucid is living on life support, and the only question is when the Saudis will disconnect it from the machines. PIF is the biggest Lucid shareholder, owning more than 60 percent of the company's shares. In turn, Lucid represents PIF's largest US investment, as the Saudis bet big on the EV startup. Withdrawing from that would not only mean writing off tons of money but also admitting to a failed strategy. The move would also deal a blow to Crown Prince Mohammed bin Salman's plans to diversify away from oil revenues.
For the Saudis, Lucid is not just an investment, it's the spearhead of a strategic plan to build the local EV industry. Under the plan, Lucid will build a manufacturing plant in the kingdom to turn it into an EV powerhouse. Perhaps this also contributed to Lucid's downfall, as the EV startup concentrated on building an expensive vehicle with a limited market in the US. Saudis wanted something glamorous, and that's what they've got.
The new plant in Jeddah will build 155,000 cars per year at its maximum capacity. Local media reported that the construction got underway last year. During the Q1 earnings call, Lucid confirmed that the first vehicles would be assembled starting in September. The factory is instrumental to Saudi's plans and the main reason PIF kept the stake in Lucid despite bleak prospects. PIF intended to take Lucid private and make it its crown jewel. Until all hope is lost, Lucid will soldier on, despite monumental losses.
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