Saudi Money Keeps Lucid Motors Afloat In Struggling EV Market, Buys $1 Billion More Stock As Company Struggles to Find Enough Wealthy Buyers

Lucid Group Inc. LCID had a tough start to 2024, with its stock down over 34%. The good news is that for now, Lucid can continue to count on its largest investors' backing to support its massive cash burn.

An affiliate of the Saudi Public Investment Fund (PIF) recently announced purchasing $1 billion of Lucid's convertible preferred stock, giving both Lucid precious funding and its other investors near-term reassurance as the PIF continues to boost its 60% stake.

The new $1 billion in funding might end up being a drop in the bucket as Lucid lost $2.8 billion in 2023 and ended the year with only $1.4 billion in cash.

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Lucid CEO Peter Rawlinson doesn't want to treat the Saudi's continuing investments as a guarantee, telling the Financial Times, "If I adopt a mindset that there is bottomless wealth from [Saudi Public Investment Fund], that is very dangerous."

While news of the additional Saudi investment briefly sent shares spiking close to 20%, they've since settled back to around where they traded before the announcement on March 25.

Part of Lucid's problems stems from its attempt at charging a premium price point to the rest of the EV market at a time when its competitors are also engaging in price cuts, which has left Lucid struggling to find new buyers.

Last August, the company's base Air Pure model was going for $83,900, while today it can be purchased for $69,900.

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Price cuts aren't reassuring investors, especially as it was reported in the third quarter of 2023 that Lucid was losing $338,000 per every car sold.

Lucid Motors isn't the only electric vehicle company struggling. Fisker Inc. FSRN shares have recently been halted from trading as the company announced a possible "event of default." Rivian Automotive Inc. RIVN, which had its own well-funded backer in Amazon.com Inc. AMZN, has seen its stock dive by about 50% to start 2024.

Tesla Inc. TSLA CEO Elon Musk posted on X about Rivian's situation saying the company's executive team "needs to live in the factory or they will die."

Even Tesla has struggled alongside its industry peers, with its stock down about 28% year to date.

Lucid's struggles might even be more personal for Musk, as the company was founded by a former Tesla executive. Commenting on the news of Lucid's most recent earnings report, where the company disclosed it expects to produce 9,000 cars in 2024, Musk shared his belief that "their Saudi sugar daddy is the only thing keeping them alive."

Doubt over how long the Saudis are willing to continue funding Lucid's losses could be a risk for Lucid moving forward, but for now have been put to rest in the immediate term.

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