Saudi Arabia’s Bet on Lucid Motors Faces Setback as Stake Value Plummets
Saudi Arabia’s investment in Lucid Motors, an electric vehicle (EV) startup that is considered a competitor to Tesla, has taken a downturn in value, despite initial optimism. The country’s sovereign fund, the Public Investment Fund (PIF), holds a 60% stake in Lucid Motors. After the company went public, this stake was valued at over $55 billion. However, recent reports indicate that the value of the stake has plummeted to $5.4 billion, a decline of about 90%.
This decline in value corresponds with the latest quarterly earnings report from Lucid Motors, which revealed a net loss of $630.9 million and a gross margin of -207.74%. This margin indicates that the cost of producing the luxury electric vehicles exceeds the number of cars sold. In the previous quarter, the company reported a net loss of approximately $764 million, resulting in a loss of $500,000 for every car sold.
Challenges and Perspectives
The drastic drop in the value of the PIF’s stake highlights the challenges facing Lucid Motors. Despite this setback, Saudi Arabia has yet to incur a financial loss on its investment in the startup. The PIF initially invested $1.3 billion in Lucid Motors in 2018, demonstrating its significant expectations for the company.
In September, Saudi Arabia celebrated the launch of its first car-manufacturing facility, capable of producing 5,000 electric vehicles annually. The production capacity is set to increase to 155,000 vehicles in the future. While Lucid Motors did not provide an immediate comment on the situation, the company’s Chief Financial Officer, Sherry House, defended the company’s performance, stating that the cash-burn-per-vehicle metrics are misleading and misunderstood.
Conclusion
Saudi Arabia’s bet on Lucid Motors as a competitor to Tesla has faced a setback as the value of its 60% stake in the EV startup has significantly dropped. The decline in value is attributed to Lucid Motors’ quarterly losses and negative gross margin. However, Saudi Arabia has yet to lose money on its investment and continues to demonstrate confidence in the startup’s long-term prospects.
