Here Comes Saudi Arabia’s Hedge Against Lucid Group: The JV Between Enovate Motors and Sumou Holding Will Start Producing 100,000 Affordable EVs Annually in 18 Months

Rohail Saleem
Lucid Group Enovate Motors Sunmou Holding JV Saudi Arabia

This is not investment advice. The author has no position in any of the stocks mentioned. has a disclosure and ethics policy.

For a time, Lucid Group remained the only major EV player with plans to establish a significant production footprint in Saudi Arabia. Well, that distinction is about to end, and much sooner at that.

To wit, the Chinese EV player Enovate Motors entered into a joint venture (JV) with Saudi-based Sumou Holding Company back in December 2022. Under the terms of the JV, Enovate was slated to establish a production facility capable of manufacturing 100,000 electric vehicles in the Kingdom annually. Well, as per the comments of the CEO of Sumou Holding Company in the tweet above, Enovate’s production facility is now slated to go live in just 18 months!

Bear in mind that Enovate has a fairly limited portfolio of electric vehicles: the ME5 crossover retails between $23,000 and $25,000 and offers a range of 1,012 km, while the ME7 crossover is priced between $32,000 and $44,000 and offers a maximum range of 530 km. In contrast, Lucid Group’s Air electric sedan starts retailing at over $90,000.

Of course, one of the first deliveries of the Air EV took place on the 01st of January 2023 in Riyadh, the capital city of Saudi Arabia. The year 2023 will see the reservations for the Lucid Gravity SUV open up, with deliveries expected to commence in 2024. As a refresher, Lucid Group’s AMP-1 facility in Casa Grande, Arizona, currently has a production capacity of 34,000 units per annum. The company is adding a second assembly line at the facility to handle the production of the Lucid Gravity SUV. Once the upgrade is complete, the facility’s annual production capacity will increase to 90,000 vehicles per year. Separately, Saudi Arabia recently awarded Lucid Group around $3 billion in incentives to establish a 155,000-units-per-year production facility in the Kingdom. The Saudis have also signed an agreement to purchase up to 100,000 electric vehicles from the company over the next ten years.

While Lucid Group and Enovate Motors will not be direct competitors in Saudi Arabia, given the different price points that both of these companies are targeting with their products, the Enovate-Sumou JV does allow the Kingdom to hedge its bets vis-à-vis Lucid Group.

As we noted in a previous post, Lucid Group is currently burning around $1 billion in cash every quarter. Back in November 2022, the company raised around $600 million by selling 56.2 million additional shares. Then, Lucid Group announced that it was raising approximately $915 million by selling some of its shares to the Ayar Third Investment Company, an affiliate of the Saudi PIF, via a private placement of shares. Bear in mind that the Saudi PIF is by far the biggest shareholder of Lucid Group. In total, the company has now gained a whopping $1.515 billion in fresh liquidity to bolster its cash position. The company is likely to have ended the fourth quarter of 2022 with a cash balance of $4.365 billion.

Even so, as Tesla and other automakers embark on aggressive price cuts to reignite waning demand, Lucid Group finds itself in an unenviable position of shrinking margins and low sales. About two weeks back, the company revealed that it “produced 3,493 vehicles during Q4 at its manufacturing facility in Arizona and delivered 1,932 vehicles during the same period.” This means that around 1,561 EVs ended up in Lucid Group’s inventory during the quarter. Elevated inventory is usually not considered an indicator of healthy demand. Moreover, as illustrated in the tweet above, used Lucid Air EVs are now being sold at steep discounts. Of course, the broader used auto market has already cracked in the US. Even so, these figures are horrendous by any definition.

Given the weakening demand outlook for Lucid Group, along with its incessant need for repeated cash infusions, it is hardly a surprise that the Saudis are now hedging their bet via Enovate.

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