It was a big day for Lucid Group (LCID) .
On Aug. 5, the electric vehicle maker reported second-quarter results and announced a major cash infusion as it prepares to launch its Gravity SUV.
Related: Top analyst defends Tesla stock price target despite earnings slump
“We’re on the back of a second successive quarter of record deliveries,” CEO Peter Rawlinson told CNBC‘s Morgan Brennan. “We delivered nearly 2,400 cars, and this outsold significantly our core competitors, namely the storied German brands, and we’re seeing strong orders continuing throughout this quarter.”
In February, Lucid said it was slashing prices on most of its electric vehicles and would also provide up to $1,000 for customers to purchase charging equipment. The announcement was the company’s third price reduction in seven months.
“We’ve been able to introduce progressively more affordable versions of our cars,” Rawlinson said. “Our car starts now at $69,900 with the Air Pure, which is the most energy-efficient car in the world. We’re debunking the myth that our cars are unaffordable.”
Rawlinson, who worked at Tesla (TSLA) as vice president and chief vehicle engineer of the Tesla Model S, said Lucid’s profitability comes down to one word: scale.
Peter Rawlinson, chief executive officer of Lucid Motors Inc., at AutoMobility LA ahead of the Los Angeles Auto Show in Los Angeles, California, US, on Thursday, Nov. 16, 2023.
Lucid CEO: ‘This is all about scale’
“This is all about scale,” he said. “We’re growing our order book for Lucid Air, we’re about to launch our SUV, the Lucid Gravity, which is going to have a massively more significant TAM (Total Addressable Market), and we’re already well on the way in our engineering of our mid-size platform.”
Separately, the company said that Saudi Arabia’s Public Investment Fund, Lucid’s largest shareholder, will invest up to $1.5 billion into the group.
Related: Analyst reboots Rivian Automotive stock price target on revised growth plans
The agreement comes just ahead of Lucid’s planned production of the Gravity SUV later this year and keeps the company sufficiently funded till the fourth quarter of 2025.
“It is nice on days like this, with uncertainty in the markets, that it shows the value of having a long-term strategic partner in the PIF,” Rawlinson said, “and that’s what truly differentiates Lucid as a company. We’ve got a long-term strategic partnership, which transcends a mere financial investment.”
Rawlinson said Lucid is a cornerstone of helping Saudi Arabia achieve its Vision 2030, the government’s program that aims to increase diversification economically, socially and culturally,
In addition to tooling to produce the Gravity SUV, Lucid will also use the funds to build its factory in Saudi Arabia, with an annual capacity of 150,000 vehicles per year, and other investments, Rawlinson told Reuters. The company rolled out a Gravity prototype on July 31.
Ayar Third Investment has agreed to buy $750 million worth of convertible preferred stock and provide a similar amount as a credit line, marking the second investment from the PIF affiliate this year.
The firm said its new $1.5 billion capital raise with the Public Investment Fund will extend its cash runway into the fourth quarter of 2025.
Lucid reported a second-quarter loss of 29 cents per share, an improvement from a 38 cent per share loss a year ago but below Wall Street’s expectation of a loss of 26 cents per share.
Revenue totaled $200.6 million, up from $150.8 million a year ago, beating consensus expectations of $192 million in sales.
Cantor Fitzgerald upgraded Lucid Group to neutral from underweight with an unchanged price target of $4.
Lucid shares were up 11% in premarket trading and 3% to $3.08 at the last check.
Cantor Fitzgerald sees the capital raise as significant since it extends Lucid’s cash runway and helps solidify Public Investment Fund’s longer-term commitment to the company. As a result, it upgraded the shares to neutral.
Fund’s controversial history
“The $1.5 billion helps to solidify the relationship between PIF and Lucid further,” said Andres Sheppard, senior equity analyst at Cantor Fitzgerald. “There was some investor concern out there that should the PIF become frustrated with the company that they wouldn’t provide any additional commitments.”
PIF is among the largest sovereign wealth funds in the world, with total estimated assets of roughly $925 billion. It was created in 1971 to invest funds on behalf of the Government of Saudi Arabia.
The wealth fund is controlled by Crown Prince Mohammed bin Salman, the Crown Prince and Prime Minister of Saudi Arabia.
More Tesla:
Tesla has a problem attracting ‘normal’ EV buyers to its carsTop analyst defends Tesla stock price target despite earnings slumpAnalyst resets Tesla stock price target on full-service driving future
In 2021, PIF invested $1 billion in the investment fund established by former Trump Administration Treasury Secretary Steven Mnuchin shortly after his departure from the government.
That same year, PIF invested $2 billion into a private equity firm that had been newly formed by Jared Kushner, Donald Trump’s son-in-law, shortly after he left the White House.
The New York Times reported that by April 2022, Kushner’s equity firm primarily depended on Saudi money, as it only had $2.5 billion under its management. Within the Trump administration, Kushner was seen as a staunch defender of bin Salman.
In May, PIF disclosed a $713.7 million stake in Boeing (BA) , around $522 million in Citigroup (C) , a $522 million stake in Meta Platforms’ (META) Facebook, a $495.8 million stake in Disney (DIS) and a $487.6 million stake in Bank of America (BACXL) , Reuters reported, citing a Securities and Exchange filing.
A division of the PIF, Golf Saudi, funded the establishment of LIV Golf Investments. This company offered the richest golf tournaments in history and was able to convince star players to participate.
Related: Analysts adjust Palantir stock price target ahead of earnings
