Shares of Lucid (NASDAQ:LCID) stock are in full focus following a Reuters article that warns of a rocky road ahead for the company in Saudi Arabia. The publication also warns that the Kingdom’s lack of infrastructure, human capital and raw materials will play a challenging role in the production of vehicles.
Saudi Arabia and its sovereign wealth fund, the Public Investment Fund (PIF), have invested at least $10 billion into LCID stock. PIF alone has invested at least $5.4 billion as of August 2023, equating to a 60% ownership stake. The Kingdom has a goal of producing 500,000 Lucid vehicles per year by 2030 and has already placed an order for 100,000 Lucid vehicles.
In September, the electric vehicle (EV) company opened the first-ever vehicle manufacturing facility in Saudi Arabia, called the Advanced Manufacturing Plant, or AMP-2 for short. During phase one, the facility will be able to assemble 5,000 vehicles annually. Upon completion of construction, AMP-2 will be able to produce an estimated 155,000 vehicles per year.
By December, AMP-1 had only assembled less than 800 vehicles.
LCID Stock: Reuters Warns of Trouble in Saudi Arabia for Lucid Motors
Reuters pointed out that Saudi Arabia has tried to attract automotive talent in the past but ran into difficulties due to the lack of an auto-component supply chain.
“There is tremendous competition that the country will face from established manufacturing power houses and from established supply chains,” said EY analyst Gaurav Batra. “A lot of things need to come into place before this industry takes shape and really ignites.”
Right now, Saudi Arabia is setting itself as an assembly location with hopes that its AMP-2 facility will attract other automotive companies to set up assembly locations in the Kingdom with the added benefit of incentives. At the same time, this could be problematic for local manufacturing.
Still, Saudi Arabia has a lot of resources backing it up due to its lucrative petroleum industry. The big question is whether that will be enough to turn the Kingdom into an automotive manufacturing hub.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
