Lucid Has An Obligation To Build Saudi EV Plant And It Could Prove Costly: WSJ

Lucid Motors Inc, which is going public through a merger with the special purpose acquisition company Churchill Capital Corp IV CCIV, has committed to building a potentially expensive plant in Saudi Arabia, the Wall Street Journal reported Tuesday.

What Happened: The automaker has not made a public disclosure of the commitment, but one large institutional investor involved in the SPAC-deal was informed about it, people familiar with the matter told the Journal.

The Journal’s sources said the investment in the middle-eastern Kingdom could cost in the excess of several hundred million dollars. The sources said that Saudi Arabia is devoid of much of the necessary manufacturing footprint for building cars, which would mean vehicle parts would need to be imported. 

Manufacturing costs at the plant would be doubled as a result, the people told the Journal.

A company spokesperson said Lucid “expects to establish manufacturing facilities in multiple geographies, including Asia-Pacific, the Middle East and potentially Europe in the coming years.”

Why It Matters: The Churchill-Lucid merger was announced last month and values Lucid at an equity value of $11.75 billion, based on the $10 offering price. Churchill is putting in $2.1 billion into the deal.

Churchill is headed by Michael Klein, who has worked as a financier in the Middle East and has advised Saudi Arabia on the 2019 listing of Saudi Arabian Oil Company, also known as Aramco, according to the Journal.

The Saudi Public Investment Fund acquired a 67% stake in Lucid for nearly $1.3 billion in 2018.

Lucid is led by former Tesla Inc TSLA engineering lead Peter Rawlinson and is often pitted as an emerging rival to the Elon Musk company.

Price Action: Churchill Capital shares closed nearly 10.7% higher at $24.46 on Tuesday and gained 0.82% in the after-hours session. 

Read Next: How Lucid's Plans For The Future Differ From Rival Tesla

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Photo courtesy of Lucid Motors