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Saudi Arabia invests billions in automaker Lucid, despite significant challenges; understand why an oil-rich country continues to invest in electric cars

Written by Bruno Teles
Published 25/05/2024 às 12:28
Saudi Arabia invests billions in automaker Lucid, despite significant challenges; understand why an oil-rich country continues to invest in electric cars
Photo: LUCID/Disclosure

Saudi Arabia invests billions of dollars in automaker Lucid, an electric car company that many consider a failure. But why does such a rich country continue to invest in a project that seems to have no future?

Saudi Arabia is surprising the world by invest heavily at automaker Lucid Motors, an electric car company facing numerous difficulties. Since 2018, the Saudi sovereign wealth fund has injected more than $6,4 billion into Lucid, even as the company struggles with quality issues and production challenges. What motivates a country so dependent on oil to invest so much in an electric vehicle manufacturer?

Lucid Motors was founded in 2007, initially focusing on electric powertrains for other automakers. In 2013, under the leadership of Peter Rawlinson, formerly of Tesla, Lucid changed its strategy to producing its own electric cars. In 2016, the company launched the Lucid Air, a luxury electric sedan with a range of 830 km and acceleration from 0 to 100 km/h in 3 seconds. Despite impressive specifications, Lucid faced difficulties scaling production and maintaining quality.

Saudi Arabia invested a billion dollars in Lucid

In 2018, Saudi Arabia invested one billion dollars in Lucid, enabling the construction of a factory in Arizona. However, quality problems in early cars and difficulties in increasing production damaged the company's reputation. In 2023, Lucid has produced just 8.400 cars, far below its planned capacity of 10.000 vehicles per year, and sold just 6.000 units, well short of initial expectations.

The Saudi sovereign wealth fund continues to invest in Lucid as part of a long-term strategic vision known as Vision 2030. The Saudi economy is heavily dependent on oil exports, accounting for 70 to 80% of government revenue. With the global transition to more sustainable energy sources, Saudi Arabia seeks to diversify its economy by investing in sectors such as automotive.

Partnership also aims to develop a domestic automotive industry

In addition to the economic aspect, Saudi Arabia sees Lucid as an opportunity to position itself as a leader in technological innovation. The partnership also aims to develop a domestic automotive industry, with the construction of a factory in the King Abdullah economic city. Initially, this factory will function as an assembly plant, but the long-term goal is to produce vehicles entirely in Saudi Arabia, creating jobs and fostering a local industrial base.

Saudi Arabia's insistence on supporting Lucid, even in the face of major challenges, sends a clear message to the market: the kingdom is committed to leading the electric vehicle industry. This support could catalyze changes in global perceptions about the ability of Middle Eastern countries to diversify their economies away from oil.

Saudi Arabia can truly become a leader in the electric vehicle industry

For Lucid, the Saudi strategy is vital. The company is investing in improvements to production lines, team training and technological partnerships to overcome its challenges. The expansion of the factory in Arizona and the development of the plant in Saudi Arabia are important steps to increase production capacity and reduce costs.

Lucid's success could set a new standard for automotive startups, demonstrating that, with the right support, it is possible to overcome significant challenges and emerge as a relevant player in the market. On the global stage, Lucid can play a crucial role in the transition to electric vehicles, contributing to the reduction of carbon emissions and the adoption of sustainable technologies.

The story of Lucid Motors and its relationship with Saudi Arabia is a fascinating study in ambition and innovation. The next steps will be crucial in determining whether the company can consolidate its market position and whether Saudi Arabia can truly become a leader in the electric vehicle industry. The world will be watching, and the lessons learned will shape the future of the global automotive industry.

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Bruno Teles

I talk about technology, innovation, oil and gas. I update daily about opportunities in the Brazilian market. Agenda suggestion? Send it to brunotelesredator@gmail.com

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