Rumors that Saudi Arabia's Public Investment Fund (PIF) is set to take electric vehicle maker Lucid private by buying a 34.5% stake from public markets have fuelled a massive rise in its stock price, following months of steep decline.
The development of EVs is part of Saudi Arabia’s Vision 2030, which aims for 30% of vehicle sales to be electric by the end of the decade, supported by locally manufactured cars. PIF also aims to reach net zero by 2060 and is deploying various efforts in the development of renewable energy and sustainable communities. The automotive industry is one of the main targets for carbon emissions reductions, but also it sees the sector as an opportunity for economic diversification with plans to export over 150,000 EVs in 2026 and by 2030. By bringing Lucid back into its full ownership, PIF could better align the carmaker with its vision.
Aligning Lucid to Vision 2030
PIF began its involvement in Lucid in 2018 when it invested US$1 billion in the Tesla rival. In February 2021, PIF, BlackRock and others invested another US$2.5 billion in Lucid as part of its merger with special purpose acquisition company Churchill Capital Corporation IV.
In 2022, Lucid built a total of 7,180 vehicles at its only plant in Arizona. Lucid Group already has ambitions in Saudi Arabia with plans launched last February to produce EVs with a targeted production capacity of 150,000 cars per year, initially using knocked-down kits manufactured in the US. The government plans to order up to 100,000 EVs from Lucid of a 10-year period. Production could start as early as this year, albeit at a fraction of its target.
The Saudi buy-out rumors come after a troubled year for PIF’s investment in Lucid. The diving value of Lucid Motor’s stock in the fourth quarter of 2022 wiped US$7.4 billion off the value of PIF’s holding, representing 1.2% of the Saudi sovereign fund’s AUM. Over the course of 2022, Lucid’s stock price fell by around 84%, a worse performance than its bigger rival Tesla which fell around 70%, before last week’s bounce-back.
PIF has already thrown the car maker lifelines. In a recent SEC filing, Lucid disclosed that PIF bought nearly 86 million shares of the EV manufacturer at an average price of US$10.7 per share, amounting to US$915 million, and raising the fund’s ownership to around 1.1 billion shares. This formed part of a US$1.52 billion capital raise with the rest raised through an offering of 56.2 million shares of its common stock. At the time, the price was a premium over the prevailing market price of US$6.70, but the news of a potential PIF takeover saw it reach a peak of US$14.64 on Friday, before falling back to US$11.75 at close today.
Wider Plans for EVs: Diversification, Value-Added and Net Zero Goals
Lucid is not the only focus of PIF’s domestic EV ambitions. In November, it confirmed the launch of its own indigenous brand, Ceer, in a joint venture with and Taiwan-based Hon Hai Precision Industry Company (Foxconn). Ceer will design and manufacture vehicles in Saudi Arabia and Foxconn will license component technology from BMW for use in the vehicle development process. The first models are scheduled to roll off the production line in 2025 and the brand is projected to contribute US$8 billion to Saudi GDP by 2034, creating 30,000 jobs.
Saudi Arabia’s plan to develop a domestic green hydrogen sector – notably with plans by Air Products and ACWA Power to develop a 4GW green hydrogen project scheduled for completion by 2025 - should also help support the planned production of hydrogen fuel cell trucks by Hyzon Motors.
At present, Saudi Arabia has a small automotive industry, primarily in the commercial vehicle segment, producing around 12,000 vehicles per year. The main obstacle to the development of the Kingdom’s automotive industry is the lack of an integrated auto supply chain. Investment is being channelled into developing a complete EV supply chain and in August the government announced it was planning to develop a US$2 billion battery metals plant, capitalizing on the country’s growing mining industry. Australian battery technology company EV Metals has begun the construction of processing plants for lithium hydroxide monohydrate in Saudi Arabia and there is potential for domestic mining of EV battery metals in the medium- to long-term.
Yet, domestic carmaking is not the only focus with the Saudi fund taking a global approach to energy transition in the automotive sector. PIF became the second-largest shareholder in Aston Martin Lagonda in July with a 16.7% stake. It made an initial GBP78 million investment in the luxury automotive company as part of a GBP653 million fund-raising by the struggling carmaker to reduce its GBP957 million debt burden and assist with its return to Formula 1. The Aston Martin deal came a year after PIF participated in a GBP550 million equity raise by the British supercar manufacturer McLaren, which was badly hit by the pandemic. The investments come as both carmakers undergo their own transition towards zero emissions.
Photo by Lucid Motors
