Lucid, Long Before SPAC, Promised to Build Saudi Auto Plant

Lucid Motors Inc. has pledged to build an assembly plant in Saudi Arabia, a potentially costly promise the company has made since raising more than $1 billion in funding from the Saudi public investment fund in 2018, according to people familiar with the matter.

The commitment to establish the plant represents a significant investment for the start-up company, which has yet to sell any vehicles from its only existing plant in Arizona. It is also a potential boon for Saudi Arabia, which is trying to lure Western companies to the country following the 2018 murder of Saudi journalist Jamal Khashoggi.

Last month, Lucid agreed to the merger of the special purpose entities, a move that, if completed, will allow the company to go public later this year. The merger deal values the Silicon Valley startup at about $24 billion.

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Lucid has not spoken publicly about the Saudi car plant plans, but at least one major institutional investor who agreed to invest in the SPAC deal is aware, according to people familiar with the discussion.

A Lucid Motors spokesman said the company plans to expand its production capacity in several regions over the next few years, including Asia-Pacific, the Middle East and possibly Europe. A spokesman said the company’s immediate priority is to begin production at the Arizona plant this year.

Press officer for

Churchill Capital Corp.

CCVA 10.73%.

IV, RASH, which has agreed to merge with Lucid, and PIF did not respond to requests for comment.

Churchill’s capital is owned by a former member of the European Union.

Citigroup Inc.

Investment banker Michael Klein. He has been a financier in the Middle East for many years and has advised Saudi Arabia on local listings in 2019.

Saudi Arabian Oil Co.

or Aramco.

PIF, the Saudi sovereign wealth fund, has pledged to invest more than $1 billion in a bright future for the first time in 2018. It agreed to increase that investment through Lucid’s merger with SPAC and recently provided the automaker with $600 million in bridge financing to provide stability during the transaction, Lucid CEO Peter Rawlinson told The Wall Street Journal last month. PIF will remain Lucid’s majority shareholder after the listing as part of the SPAC deal announced by the company.

Lucid, originally called Atieva, was founded in 2007 as a battery company before moving into manufacturing its own vehicles. In 2013 it hired Mr Rawlinson, who had previously worked at

Tesla Inc..,

where he worked as a chief engineer on the first production version of the Model S luxury sedan. Lucid has yet to sell a single car, but it is one of the most mature electric car startups, analysts say, rivaling Tesla. The company plans to begin selling its first model, a luxury sedan called Air, later this year.

Lucid recently completed the first phase of a $700 million plant in Casa Grande, Arizona, which the company says can produce 34,000 vehicles per year. With the expansion of the facility, the company claims to be able to increase production to 365,000 vehicles per year. In a presentation to investors, Lucid said it plans to produce up to 500,000 vehicles a year by 2030.

Lucid’s SPAC deal is part of a wave of similar deals between acquirers of special purpose vehicles (SPVs), also known as private equity firms, and startups looking to take their shares public quickly. Merger with SPAC, essentially a large pool of already listed cash, allows companies to bypass the more typical IPO process.

According to some individuals familiar with the Saudi investment pledge, such an investment could be worth hundreds of millions of dollars or more. Saudi Arabia has very little production space to manufacture cars, which means that many car parts will probably have to be imported. As a result, the plant’s production costs could double.

Workers assemble a prototype of the Lucid Air electric vehicle in California.

Photo:

David Paul Morris/Bloomberg News

Bright executives have called for more Saudi incentives to cover costs and offset inefficiencies that would result from building the plant, they said. FIP executives are urging the company to meet its 2018 commitments, they said.

PIF, headed by the crown prince.

Mohammed bin Salman,

To make the Saudi economy less dependent on the petrochemical industry, steps have been taken to invest the country’s oil wealth internationally. Many of the fund’s bets were clearly aimed at attracting direct investment to Saudi Arabia in the hope of creating jobs for young Saudis in growth sectors such as technology and advanced manufacturing.

Private companies are turning en masse to specialized acquisition companies, or SPACs, to bypass the traditional IPO process and go public. The WSJ explains why some critics say investing in these so-called empty-handed companies isn’t worth it. Illustration: Zoe Soriano/WSJ

Those efforts have stalled as many Western companies have distanced themselves from Saudi Arabia in the wake of Khashoggi’s murder in 2018. The murder occurred after PIF invested in Lucid that same year. Last month, the United States made public a report accusing Crown Prince Mohammed of ordering the killing. Prince Mohammed said the killing took place on his watch, but did not say what he had ordered.

In particular, the Saudi authorities have been trying to persuade the automaker to build an assembly plant in Saudi Arabia for nearly a decade. Jaguar Land Rover, owned by India’s Tata Group, signed a memorandum of understanding with the government in 2012 to study the feasibility of building an assembly plant in Saudi Arabia. The factory was never built.

-Mike Colias contributed to this article.

Email Summer Said at summer.said@wsj.com and Ben Foldy at Ben.Foldy@wsj.com.

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