It’s not a done deal just yet, but a high-tech Tesla rival, headquartered just a few miles away from Elon Musk’s Palo Alto, California base of operations, might receive the Saudi funding the Tesla CEO so desperately craves.
According to sources who spoke to Reuters, PIF, Saudi Arabia’s sovereign wealth fund, is ready to pour $1 billion into Newark, California-based Lucid Motors. The two entities have reportedly drawn up a term sheet for the deal, which would see the the Saudis become a majority owner of the private automaker.
What does Lucid have to offer the Saudis in return for the investment? A large, technologically advanced automobile.
Lucid Motors made a splash at the 2017 New York auto show with its Air — an electric sedan with style and range to spare. First revealed in December of 2016, the Air promises Mercedes-Benz E-Class-like size and S-Class-like interior volume, with pampered occupants able to travel up to 400 miles between charges.
To build the Air, Lucid needs cash. Last year saw the company push back the anticipated start of production to 2019 amid ongoing fundraising. The company hopes to build an assembly plant in Arizona in three phases, with mass production taking place by early next decade. Should the quarter-trillion Saudi fund come through, Lucid has it made.
Per the term sheet, PIF would initially invest $500 million, the sources said, with two subsequent cash dumps tied to production milestones. Though the Saudi fund remains bullish about the potential return from startup electric car makers, recent large investments in other ventures means PIF can’t fling money around with reckless abandon.
That’s something Musk might be dismayed to hear of. Tesla’s CEO said last week that he expects the Saudi sovereign wealth fund to put up much of the money needed to take his company private, though there’s no ironclad deal to back up his “funding secured” tweet at the moment.
While Lucid generated copious amounts of hype by playing up the most impressive Air model, the vehicle’s range actually starts at a modest $52,500 after a federal tax credit. For that sum, buyers would receive a sedan with 240 miles of range. Further up the trim ladder lies a 100 kWh and 130 kWh battery pack, capable of taking the Air 315 and 400 miles between charges, respectively. A planned twin-motor, all-wheel drive model reportedly packs 1,000 combined horsepower, warranting a six-figure price tag.
[Images: Lucid Motors]
$750M may sound like a lot of money, but it doesn’t come close to what it would take to get an actual car company up and running. More like 5 to 10 billion dollars is more realistic. And any of these startups is going to be at a huge disadvantage compared to entrenched auto makers who already know how to make seats, interiors, suspensions; can leverage tooling and automation from other models, and have established dealer networks and supply chains. Good luck.
Quite right. And in the EV space, Tesla is the ‘entrenched’ mfr.
For its part, Lucid was the only hopeful prospect I saw to make an interesting EV. Their track demonstrations last year were very impressive. But without a factory, lots of employees, a solid supply chain, and billions to spend on it, they’re stuck.
For me, selling out to the Saudis would not be an option. Maybe Lucid will do it, but I hope Tesla does not.
Apparently Saudi Arabia wants to invest in a company that is lucid.
Clever, but you seem to have more faith in a company that has produced nothing, over one that has built ~300k cars.
Personally, I doubt the Saudis are seriously committed to Lucid since it will take many billions to make them a viable mfr. The ROI is pretty questionable.
Design and engineering can be done here. Outsourcing the build to China shouldn’t be too hard, if the tariff war is over. The Chinese manufacturers have plenty of build experience and supply chains.
In the end cars will be like computers – architected in US and Japan and designed and made in Taiwan and China from same components.
Lose $1 billion on Lucid or $70 billion on Tesla? Portfolio managers have such difficult decisions.
I think Lucid would be a much bigger loss than $1 billion.
If you only invest $1 Billion you can only lose 1 billion in real cash money.
@stingray: not if they keep going back to you for more money and you try to keep it alive.
Watch out for your corn hole, Elon