Lucid, Lengthy Earlier than SPAC, Promised to Construct Saudi Auto Plant

Electrical-car startup Lucid Motors Inc. has an undisclosed dedication to construct an meeting plant in Saudi Arabia, a doubtlessly pricey promise the corporate made after accepting greater than $1 billion in financing from the Saudi Public Funding Fund in 2018, in response to individuals aware of the matter.

The plant promise represents a major funding dedication for the startup, which hasn’t but bought a automobile from its one present manufacturing unit in Arizona. It is usually a possible boon for Saudi Arabia, which has struggled to lure Western corporations to the nation within the wake of the 2018 homicide of Saudi journalist Jamal Khashoggi.

Final month, Lucid agreed to a special-purpose acquisition firm merger, a deal that if consummated would permit it to commerce publicly later this 12 months. The merger settlement valued the Silicon Valley startup at some $24 billion.

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Lucid hasn’t mentioned the Saudi automobile plant plans publicly, however at the least one massive institutional investor that has agreed to speculate as a part of the SPAC deal was instructed about them, in response to individuals aware of the dialogue.

A Lucid Motors spokesperson mentioned it “expects to determine manufacturing services in a number of geographies, together with Asia-Pacific, the Center East and doubtlessly Europe within the coming years.” The spokesperson mentioned the corporate’s “near-term precedence” is starting manufacturing later this 12 months at its Arizona facility.

Spokespersons for Churchill Capital Corp. CCIV 10.73% IV, the SPAC that agreed to merge with Lucid, and PIF didn’t return requests for remark.

Churchill Capital is run by former Citigroup Inc. funding banker Michael Klein. He has labored for years as a financier within the Center East and suggested Saudi Arabia on the 2019 native itemizing of Saudi Arabian Oil Co. , or Aramco.

PIF, a Saudi Arabia sovereign-wealth fund, first agreed to speculate greater than $1 billion in Lucid in 2018. It has agreed to spice up that funding by means of Lucid’s SPAC merger, and it just lately offered the auto maker with $600 million in bridge financing to supply stability by means of the deal’s conclusion, Lucid Chief Govt Officer Peter Rawlinson instructed The Wall Avenue Journal final month. PIF will proceed to be Lucid’s majority shareholder as soon as it lists by means of its SPAC deal, the corporate has disclosed.

Lucid, initially known as Atieva, was based as a battery-technology firm in 2007 earlier than pivoting to creating its personal vehicles. In 2013, it recruited Mr. Rawlinson, previously of Tesla Inc., the place he was chief engineer on the corporate’s first mass-produced Mannequin S luxurious sedan. Lucid hasn’t bought any vehicles, however it ranks among the many most mature electric-vehicle startups in a race to in the future compete with Tesla, in response to analysts. The corporate plans to start promoting its first mannequin, a luxurious sedan known as the Air, later this 12 months.

Lucid just lately completed the primary part of a $700 million plant in Casa Grande, Ariz., which the corporate says is able to making 34,000 vehicles yearly. With growth, the location is able to rising manufacturing as much as 365,000 automobiles a 12 months, the corporate has mentioned. In a presentation to buyers, Lucid mentioned by 2030 it plans to provide upward of 500,000 automobiles yearly.

Lucid’s SPAC deal comes within the midst of a torrent of comparable agreements between special-purpose acquisition corporations, also called blank-check corporations, and startups trying to listing their shares rapidly. By merging with a SPAC, basically a giant pool of money that’s already listed on an trade, corporations can bypass the extra typical preliminary public providing course of.

Some individuals aware of the Saudi manufacturing unit promise mentioned such an funding might value a number of hundred million {dollars} or extra. Saudi Arabia has little or no of the manufacturing footprint needed for constructing vehicles, which means lots of the vehicles’ components would possible should be imported. That may doubtlessly double the manufacturing prices on the plant, in response to these individuals.

Employees assembling a Lucid Air prototype electrical car in California.

Picture: David Paul Morris/Bloomberg Information

Lucid executives have been pushing for extra Saudi incentives to assist cowl the prices and make up for the inefficiencies that constructing the plant would create, these individuals mentioned. Senior PIF executives are pushing the corporate to comply with by means of on their 2018 dedication, these individuals mentioned.

PIF, underneath the course of Crown Prince Mohammed bin Salman, had taken to investing the nation’s oil wealth internationally, aiming to make investments that might cut back the Saudi economic system’s reliance on the petrochemical business. Most of the fund’s bets explicitly sought to draw direct funding again into Saudi Arabia, in hopes of making jobs for younger Saudis in progress sectors akin to tech and superior manufacturing.

Personal corporations are flooding to special-purpose acquisition corporations, or SPACs, to bypass the standard IPO course of and achieve a public itemizing. WSJ explains why some critics say investing in these so-called blank-check corporations isn’t well worth the danger. Illustration: Zoë Soriano/WSJ

These efforts stalled as many Western corporations distanced themselves from Saudi Arabia after the 2018 homicide of Mr. Khashoggi. The homicide occurred after the PIF invested in Lucid that very same 12 months. Final month, the U.S. declassified a report that blames Crown Prince Mohammed for ordering the killing. Prince Mohammed has mentioned the killing occurred on his watch however hasn’t mentioned he ordered it.

Saudi officers have, specifically, been making an attempt for almost a decade to entice an auto maker to construct an meeting plant in Saudi Arabia. Jaguar Land Rover, owned by India’s Tata Group, signed a letter of intent with the federal government in 2012 to judge the feasibility of a Saudi meeting plant. The plant was by no means constructed.

Write to Summer season Stated at summer.said@wsj.com and Ben Foldy at Ben.Foldy@wsj.com

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