Until recently, electric-car startup Lucid Motors Inc. was in dire financial straits. Saudi Arabia has come to the rescue.
Just weeks after it emerged that the kingdom’s Public Investment Fund had built a stake in Tesla Inc., the sovereign wealth giant signed an agreement to invest more than $1 billion in Lucid, which is aspiring to take on the Elon Musk-led company.
The transaction clinches long-sought funding that was crucial to Lucid getting its first model, the Air sedan, into production. It also raises eyebrows because of how quiet the PIF went after Musk portrayed Saudi support as critical to his tweets claiming to have had funding and investor support to take Tesla private. Those claims landed the chief executive officer in hot water with securities regulators, and he abandoned the effort within weeks.
Lucid had delayed the launch of the Air due to lack of funds, but now plans to start producing it in 2020.
Saudi Arabia’s PIF will now have a hand in management and play a significant role in the company’s future, chief technical officer Peter Rawlinson said in an interview.
The plan is to start building a plant in Arizona capable of making 20,000 units of the car in the first year, beginning with versions that will cost more than $100,000 and go from zero to 60 miles per hour in 2.5 seconds.
“This will fund us in some key areas,” Rawlinson said in a phone interview. “We will construct our factory in Arizona, we have to finish testing and development and we have to roll out our sales and marketing strategy.”
The PIF’s investment in Lucid has added to the uncertainty surrounding Tesla.
After tweeting on Aug. 7 that he had secured funding to take the company private, Musk wrote in a blog post that while the Saudi wealth fund had expressed interest in helping take Tesla off the public market, it still needed to conduct due diligence on the potential transaction. On Aug. 24, he announced that the carmaker would stay public.
Musk, 47, stirred unease among Saudi officials by publicising their potential role, people familiar with the matter told Bloomberg News last month.
On top of that, there were concerns about potential fallout from his tweets drawing shareholder lawsuits and an investigation by the Securities and Exchange Commission, the people said.
While the Saudis were open to making a significant investment in Musk’s efforts as a way to help the kingdom hedge against oil and attract technology expertise to the region, the fund mainly was interested in a minority stake and wanted to limit its exposure to a single deal and save resources for other projects, the people said.
The Saudi fund had built up a stake of less than 5 percent in Tesla.
Tesla shares closed down 0.1 percent Monday at $294.84. The stock is down 5.3 percent this year.
Lucid has said the Air will boast as much as 1,000 horsepower and 400 miles of range on a charge. A base version with more toned-down performance will start at $60,000.
When Lucid announced in November 2016 that it would build a plant in Casa Grande, Arizona, it said it planned to break ground and begin hiring in the first half of 2017 and start production this year. But within less than six months, it was clear that timeline had slipped.
Rawlinson said in April 2017 that Lucid wanted to secure a fourth round of funding, known as a Series D financing round, before breaking ground on the Arizona factory. He said Monday that the plant will eventually have the capacity to make as many as 60,000 cars a year, and can expand from there to build more. Lucid will be able to introduce a sport utility vehicle model using the same platform that underpins the Air.
The Lucid Air’s battery pack will be lighter and take up less space than Tesla’s, enabling greater range, Rawlinson said. The Air sedan will be as big as a Mercedes E-Class on the outside but have more space than the larger, long-wheelbase Mercedes S-Class on the inside.
In a Bloomberg Television interview, Rawlinson said one way Lucid’s approach will be less capital-intensive than Tesla’s is it won’t establish its own supercharger network. It’ll announce a strategic partner for this soon, he said.
Rawlinson, who was chief engineer of the Model S before joining Lucid in 2013, also slung some mud at his former employer. He said he sees Mercedes, BMW and Audi as competitors more so than Tesla. Inside, Musk’s cars aren’t as posh as true luxury sedans, he said, and the Air will be just that.
“I contend that Tesla is not truly luxury,” he said. “It’s premium and high tech but not luxury.”
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