Saudi Wealth Fund to Invest $1 Billion in Tesla's Rival Lucid
Tesla shares drops as much as 1.9 percent in New York.
(Bloomberg) -- Saudi Arabia’s sovereign wealth fund signed an agreement to invest more than $1 billion in aspiring electric-car maker Lucid Motors Inc., months after building a stake in Elon Musk-led Tesla Inc.
The deal clinches crucial funding needed for Lucid to start making its first model, the Air sedan, in 2020. The Silicon Valley-based startup is years behind schedule in building a plant in Arizona and starting production of the car that it’s said will start at $60,000.
Saudi Arabia, the world’s biggest oil exporter, has been diversifying its economy after the collapse in crude prices. As part of the plan, the kingdom plans to turn its Public Investment Fund into the world’s biggest sovereign fund, controlling more than $2 trillion by 2030, and to hedge against fluctuations in oil prices.
“By investing in the rapidly expanding electric vehicle market, PIF is gaining exposure to long-term growth opportunities, supporting innovation and technological development and driving revenue and sectoral diversification for the Kingdom of Saudi Arabia,” the PIF said in a statement.
The PIF’s investment in Lucid adds to the uncertainty surrounding Tesla, whose Chief Executive Officer Musk tweeted on Aug. 7 that he had secured funding to take the company private. Musk clarified six days later that while the Saudi wealth fund had expressed interest in helping take Tesla private, it still needed to conduct due diligence on the potential deal. On Aug. 24, he announced that the carmaker would stay public.
Musk, 47, stirred unease among Saudi officials about the publicity surrounding their potential role, people familiar with the matter told Bloomberg News last month. The Saudis were unhappy about Musk detailing his talks with the PIF in his Aug. 13 blog post, the people said. On top of that, there were concerns about potential fallout from his tweets drawing shareholder lawsuits and an investigation by the Securities and Exchange Commission, the people said.
While the Saudis were open to making a significant investment in the effort as a way to help the kingdom hedge against oil and attract technology expertise to the region, the fund mainly was interested in a minority stake to limit its exposure to a single deal and save resources for other projects, the people said. The Saudi fund had built up a stake of less than 5 percent in Tesla.
Tesla shares initially extended declines on news of the PIF’s investment but traded up 0.7 percent to $297.19 as of 12:05 p.m. Monday in New York. The stock is down 4.6 percent this year.
Lucid’s Backstory
Lucid was co-founded by Sam Weng, who came from software maker Oracle Corp., and two partners as a maker of battery systems. The company has since assembled a team recruited from Mazda Motor Corp. and Tesla. Chief Technical Officer Peter Rawlinson was chief engineer of the Model S before joining Lucid in 2013.
Lucid has said the Air will boast as much as 400 horsepower and 240 miles of range on a charge, with higher-end versions of the sedan costing more than $100,000. When the company announced in November 2016 that it would build a plant in Casa Grande, Arizona, it said it planned to break ground and begin hiring in the first half of 2017 and start production this year.
Within less than six months, it was clear that timeline had slipped. Rawlinson said in April 2017 that Lucid wanted to secure a fourth round of funding, known as a Series D financing round, before breaking ground on the Arizona factory.
Last year, PIF announced plans to invest as much as $45 billion in a technology fund run by Japan’s SoftBank Group Corp., put $20 billion into a U.S infrastructure fund managed by Blackstone Group LP and build a $500 billion city called Neom on the Red Sea. It finalized an $11 billion loan this week.
To contact the reporters on this story: Matthew Martin in Dubai at mmartin128@bloomberg.net;David Welch in Southfield at dwelch12@bloomberg.net
To contact the editors responsible for this story: Stefania Bianchi at sbianchi10@bloomberg.net, ;Craig Trudell at ctrudell1@bloomberg.net, Jamie Butters
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