(Reuters) – Lucid said on Monday it was raising $1 billion in capital from a subsidiary of Saudi Arabia’s Public Investment Fund (PIF), sending shares of the luxury electric vehicle maker up about 8%.
The sovereign wealth fund’s latest investment underscores Lucid’s (NASDAQ:) key advantage in the race for survival among struggling electric vehicle startups.
The Saudi government, which owns a 60% stake, has invested billions of dollars in Lucid’s success as part of a strategy to diversify the kingdom’s economy beyond oil.
A third investment company, Ayar, a subsidiary of PIF, will buy $1 billion worth of convertible preferred shares and will be able to convert the preferred shares into about 280 million shares, according to a filing with U.S. securities regulators.
The California-based company, which faced weaker-than-expected demand, said it intends to use the proceeds for corporate purposes and capital expenditures, among other things.
Lucid is one of several electric vehicle startups hit hard by slowing demand growth and the price war unleashed by Tesla (NASDAQ:).
The electric vehicle maker, led by a former Tesla executive, expects to produce 9,000 units in 2024, up from the 8,428 vehicles it produced last year.
Lucid Air’s luxury sedans compete with the Tesla Model S and luxury electric vehicles from Mercedes-Benz (OTC:), BMW (ETR:), Audi and Porsche, among other brands.
The announcement is likely to increase the pace of capital outflows, said Andres Sheppard, senior equity analyst at Cantor Fitzgerald, adding that Lucid will likely produce 9,500 vehicles this year and 20,000 units in 2025.
In its fourth-quarter financial presentation last month, Lucid said it had sufficient liquidity “through at least 2025” and forecast capital spending of $1.5 billion in 2024 as it plans to launch its Gravity line of SUVs later this year.
At the end of 2023, the company had $4.8 billion in available funds, including $4.3 billion in cash.