What happened

In case you missed it, the stock market had kind of a bad day on Wednesday, with the S&P 500 falling 4% and the Nasdaq down nearly 5%. Surprisingly, though, one of the more volatile companies on the market -- electric car start-up Lucid Group (LCID -1.39%) -- outperformed a lot of its tech peers, declining by only 2.8%.

News out of Saudi Arabia appeared to be the factor that saved Lucid from falling harder Wednesday. It's also very likely the reason why  Lucid stock rebounded even higher on Thursday -- up a lucky 13% as of 12:30 p.m. ET.  

Three Arab men in traditional garb reading news on a tablet and cheering.

Image source: Getty Images.

So what

As Lucid announced Wednesday, it has struck a deal to build a new electric car factory in Saudi Arabia -- one with the capacity to churn out 155,000 EVs per year, contributing to what will eventually be a global production capacity of 500,000 EVs per year for the company. Moreover, under a previous deal, the Saudi government agreed to buy 100,000 of those EVs over a 10-year period. And to sweeten the deal even further, the Saudi government will provide Lucid $3.4 billion in financial assistance to get the factory project off the ground.

Those are the broad strokes, and they explain both why Lucid stock lost relatively little ground Wednesday and why it's performing so strongly Thursday.

Saudi Arabia's commitment to buy 100,000 cars over 10 years means that Lucid will still need to find buyers for another 145,000 electric cars annually.

Lucid said its deliveries to Saudi Arabia would begin no later than Q2 2023 -- well before the new factory is up and running, which is expected to happen by 2025. Those initial EV deliveries -- in quantities expected to be in the 1,000, to 2,000 a year range -- will come from its Arizona plant.

Finally, the $3.4 billion in support that the Saudi government is providing won't all come in cash. Some will be in the form of "financing and incentives" -- terms vague enough to cover everything from loan guarantees to tax abeyances.

Now what

Even if not all that support comes in the form of actual riyals or dollars, this is still pretty good news for Lucid.

Whatever cash the Saudis provide will add to the $5.4 billion cash cushion Lucid has already built up. Any loan guarantees can be expected to lower Lucid's cost of borrowing more funds. (The company has already taken out $2.2 billion in debt.) And any tax abeyances or other support the Saudis provide will help slow Lucid's cash burn rate -- which at last report was approaching $1.9 billion per year.  

If my back-of-the-napkin math is right, in fact, the Saudis' support looks like it will be just barely enough to tide Lucid over until it gets that new factory up and running in 2025, at which point it can start to generate cash for the company. For Lucid shareholders, that's very good news indeed.