Saudi Arabia’s sovereign wealth fund signed an agreement to invest more than $1 billion in aspiring U.S. electric-car maker Lucid Motors Inc., months after building a stake in Elon Musk-led rival Tesla Inc.
The deal clinches crucial funding needed for Lucid to start making its first model, the Air sedan, in 2020. The Silicon Valley start-up is years behind schedule in building a plant in Arizona and starting production of the car that it has said will start at $60,000.
Saudi Arabia, the world’s biggest oil exporter, has been diversifying its economy after the collapse in crude prices. As part of the plan, the kingdom plans to turn the Public Investment Fund into the world’s biggest sovereign fund, controlling more than $2 trillion by 2030, and to hedge against fluctuations in oil prices.
“By investing in the rapidly expanding electric vehicle market, [the Public Investment Fund] is gaining exposure to long-term growth opportunities, supporting innovation and technological development and driving revenue and sectoral diversification for the Kingdom of Saudi Arabia,” the fund said in a statement.
The fund’s investment in Lucid adds to the uncertainty surrounding Tesla, whose chief executive, Musk, tweeted Aug. 7 that he’d secured funding to take Tesla private. Musk clarified six days later that while the Saudi fund had expressed interest in helping take Tesla private, it still needed to conduct due diligence on the potential deal. On Aug. 24, he announced that Tesla would remain a publicly traded company after all.
Musk, 47, stirred unease among Saudi officials about the publicity surrounding their potential role, people familiar with the matter told Bloomberg News last month. The Saudis were unhappy about Musk detailing his talks with the fund in an Aug. 13 blog post, the people said. On top of that, they said, there were concerns about potential fallout from his tweets drawing shareholder lawsuits and an investigation by the Securities and Exchange Commission.
Although the Saudis were open to making a significant investment in the effort as a way to help the kingdom hedge against oil and attract technology expertise to the region, the fund mainly was interested in a minority stake to limit its exposure to a single deal and save resources for other projects, the people said. The Saudi fund had built up a stake of just under 5% in Tesla.
Last year, the Saudi fund announced plans to invest as much as $45 billion in a technology fund run by Japan’s SoftBank Group Corp., put $20 billion into a U.S. infrastructure fund managed by Blackstone Group LP and build a $500-billion city called Neom on the Red Sea. It raised a loan of $11 billion this week.
Tesla shares initially extended declines on news of the fund’s investment in Lucid, but soon recovered that ground; the stock was up 0.8% at $297.59 shortly before 10 a.m. Pacific time. It is down 4.4% this year.
Lucid was co-founded by Sam Weng, who came from software maker Oracle Corp., and two partners as a maker of battery systems. The company has since assembled a team recruited from Mazda Motor Corp. and Tesla. Its chief technical officer, Peter Rawlinson, was chief engineer of the Model S before joining Lucid in 2013.
Lucid has said the Air will boast as much as 400 horsepower and 240 miles of range per charge, with higher-end versions of the sedan costing more than $100,000. When the company announced in November 2016 that it would build a plant in Casa Grande, Ariz., it said it planned to break ground and begin hiring in the first half of 2017 and start production of cars this year.
Within less than six months, it was clear that timeline had slipped. Rawlinson said in April 2017 that Lucid wanted to secure a fourth round of funding, known as a Series D financing round, before breaking ground on the Arizona factory.
10 a.m.: This article was updated with details about Saudi officials’ thinking and with additional information about Lucid Motors.
This article was originally published at 8:45 a.m.