The share prices of the electric vehicle company are down after they reported disappointing fourth-quarter and full-year results.
The previous plans for 20,000 units have been scaled back to 12,000 to 14,000 units. The Gravity SUV was supposed to be launched in the first half of 2019.
The report presents a painful blow to investors who were hoping for a strong 2022, while also pushing back many of the company's medium-term goals. The company has the longest range, highest voltage, and fastest-charging electric sedan on the market. The relationship with Saudi Arabia is unique to any other EV manufacturer, and it's something that distinguishes Lucid from the rest. The Saudi Arabia connection could be just what the company needs to get through the short term.
The Saudi Arabia Public Investment Fund has been increasing its investments in renewable and alternative energy to position the country to prosper in a carbon-free world. The country made an early investment in the company.
The Saudi Arabia PIF is one of the most loyal investors. The PIF held 1.015 billion shares of Lucid stock as of December 31, 2021, representing 61.7% of the company. Large shareholders have to announce when they sell positions. There have been no disclosures indicating a change in the holdings of the PIF.
The price of West Texas Intermediate (WTI) crude oil has risen for the first time in three years. Saudi Arabia is the second largest producer of oil and gas behind the U.S. and is likely having a field day in this high oil and gas price environment. Saudi Arabia doesn't have a pressing reason to sell its low-carbon positions given that many renewable energy and electric vehicle investments are down. This is just a reading of the situation.
Saudi Arabia announced in October that it would be carbon-neutral by 2060. Saudi Arabia could use some of its extra cash to make more low-carbon investments because of the combination of high oil and gas prices and long-term commitments.
If Saudi Arabia has a good cash position, the PIF wouldn't start unloading a lot of stock. Saudi Arabia would be one of its core end markets according to the announcement on the third-quarter earnings call. During its Q4 2021 earnings call, Lucid announced plans to build a factory in Saudi Arabia. The factory is expected to produce over $3 billion in financial benefits over the next 15 years. The factory is expected to produce 150,000 vehicles per year and begin production in 2025.
When asked if Saudi Arabia would help pay for the facility, Lucid commented that it has plenty of cash and ways to raise more cash from capital markets or governments. Saudi Arabia is the second primary market outside the U.S. for Lucid. With its first international factory being in Saudi Arabia, it's possible that Lucid could become one of the dominant electric car companies in the Middle East.
I think the oil and gas boom is filling the coffers of Middle Eastern oil-exporting nations. If this is correct, these nations would have the dry powder needed to make long-term investments.
The Middle Eastern market has less competition than the U.S., Europe, and China, so Lucid will benefit from an early mover advantage. The country of Saudi Arabia has a free trade agreement with many countries in the region, which could be a good fit for the company. The technology and in-house produced battery pack is the biggest competitive advantage. The financial backing and majority ownership it has received from the Saudi Arabi PIF, as well as the potential to be a leading automaker in the Middle East, are its ace in the hole.
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