Like many start-up electric vehicle (EV) manufacturers, Lucid Group (LCID 2.96%) has had an incredibly bumpy road since the initial hype around EV start-ups wore off rather quickly. The automaker is burning cash, working through production ramp-ups, and facing questions about Saudi Arabia's investment commitment.
Thankfully, for investors, good news keeps rolling in, and some of those questions have been answered.
Recapping the good news
After a bumpy year, Lucid investors might finally be able to breathe a sigh of relief. Not only has the EV start-up posted two consecutive solid quarters with increased deliveries, it posted a record second quarter with 2,394 vehicle deliveries, topping estimates. That 70.5% delivery increase, compared to the prior year's Q2, helped drive revenues to $200.6 million, which topped analysts' estimates of $192.1 million.
Management also confirmed its target of reaching 9,000 deliveries for the full year. This suggests its production ramp-up is going well, as it only delivered 3,838 during the first half of 2024.
In further good news, Lucid has begun preproduction of its highly anticipated Gravity SUV. That means the company is working through assembly line hiccups and slowly ramping up to commercial production volume for the vehicle to drive into consumer garages before the end of 2024.
Management is also doing its part to pull back on its spending. It decreased its capital expenditure forecast for 2024 by $200 million from the prior full-year outlook of $1.5 billion.
Enter Saudi Arabia
Perhaps the best news coming to Lucid investors this week was that the EV start-up's largest shareholder, Saudi Arabia's Public Investment Fund (PIF), will infuse up to $1.5 billion in cash to help with the Gravity SUV ramp-up in the U.S. This investment will also help develop its plant in Saudi Arabia, where the latter has committed to purchasing 100,000 vehicles over time.
More specifically, Ayar Third Investment has agreed to buy $750 million worth of convertible preferred stock and will also provide up to $750 million as a credit line. If investors are counting, this is the second investment from the PIF affiliate in 2024.
Saudi Arabia's commitment had been questioned by many analysts, who openly wondered if the government was growing tired of Lucid's slow progress and seemingly endless cash burn.
"The $1.5 billion helps to solidify the relationship between PIF and Lucid further. There was some investor concern out there that should the PIF become frustrated with the company that they wouldn't provide any additional commitments," said Andres Sheppard, senior equity analyst at Cantor Fitzgerald, according to Reuters.
The PIF's investment in Lucid has already grown to a staggering $8 billion, and it owns roughly 60% of the automaker.
This is a huge deal because if Saudi Arabia were ever to pull its funding from the automaker, it would drastically change investors' outlook on the company's ability to fund its operations in the near term. If the PIF began selling its stake in the company, it would weigh heavily on Lucid's share price for months.
What it all means
Most importantly for investors, the recent cash infusion gives the company a funding runway through the fourth quarter of 2025. This nearly bridges the gap until the company's planned high-volume, mid-size SUV hits the road in 2026 at a much more affordable price of around $48,000.
After a bumpy year or two, investors finally have positive news rolling in with new PIF investment, production beginning on the Gravity SUV, high-volume plans for a 2026 SUV, and increasing deliveries.
