The good news keeps coming for bright investors

Like many electric vehicle (EV) startup manufacturers, The Lucid Group (LCID 1.27%) has had an incredibly bumpy road since the initial hype around EV start-ups died down pretty quickly. The automaker is burning cash, working through ramping up production and facing questions about Saudi Arabia’s investment commitment.

Fortunately for investors, good news continues to emerge, and some of these questions have been answered.

Recapitulating the good news

After a troubled year, Lucid investors may finally be able to breathe a sigh of relief. Not only did the EV start-up post two solid quarters in a row with increased deliveries, but it posted a record second quarter with 2,394 vehicle deliveries, beating estimates. This 70.5% increase in shipments compared to the prior year’s second quarter helped boost revenue to $200.6 million, which beat analysts’ estimates of $192.1 million.

Management also confirmed its goal of achieving 9,000 deliveries for the full year. This suggests that its production ramp-up is going well, as it delivered just 3,838 in the first half of 2024.

Next, Lucid has started pre-production of its long-awaited Gravity SUV. That means the company is working through assembly line hiccups and slowly ramping up to commercial production volume to get the vehicle into consumers’ garages before the end of 2024.

Management is also doing its part to roll back expenses. It cut its 2024 capital spending forecast by $200 million from its previous full-year forecast of $1.5 billion.

Enter Saudi Arabia

Perhaps the best news coming this week for Lucid investors 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 for to help accelerate the Gravity SUV in the US. the investments will also contribute to the development of its factory in Saudi Arabia, where the latter has committed to purchase 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 line of credit. If investors are counting, this is the PIF affiliate’s second investment in 2024.

Saudi Arabia’s commitment has been questioned by many analysts, who have openly wondered if the government is fed up with Lucid’s slow progress and seemingly endless cash drain.

“The $1.5 billion helps strengthen the relationship between PIF and Lucid even further. There was some investor concern there that if the PIF was frustrated by the company, that it would not provide any additional commitment,” said Andres Sheppard, senior equity analyst at Cantor Fitzgerald, according to Reuters.

PIF’s investment in Lucid has already grown to $8 billion and it owns about 60 percent of the automaker.

This is a huge deal because if Saudi Arabia were to ever withdraw its funding from the automaker, it would drastically change investors’ outlook on the company’s ability to finance its near-term operations. If the PIF were to start selling its stake in the company, it would greatly affect Lucid’s stock price for months.

What does it all mean?

Most importantly for investors, the recent cash infusion gives the company a funding runway through the fourth quarter of 2025. That nearly closes the gap until the company’s planned mid-size and high-volume SUV hits the road in 2026 at a much more affordable price. of approximately $48,000.

After a hectic year or two, investors finally have some positive news with new PIF investments, production starting on the Gravity SUV, high-volume plans for a 2026 SUV and rising deliveries.