No ‘material’ Saudi revenue boost for Lucid in Q3

Analysts not expecting quick fix for the US EV pure play’s sluggish sales

No ‘material’ Saudi revenue boost for Lucid in Q3
The new Lucid Gravity, another potential revenue booster, is unveiled in November

California EV maker Lucid will begin vehicle reassembly in Saudi Arabia (KSA) this month. But any revenue boost from increased deliveries under its Saudi sales agreement is not expected to boost third quarter revenue significantly.

Deliveries to the KSA come as part of a deal, initially signed in 2022, for the government of Saudi Arabia to purchase at least 50,000 Lucid vehicles. With the deal, the KSA became Lucid’s largest single customer, as well as the country’s sovereign Public Wealth Fund becoming a 60pc shareholder in Lucid.

Lucid’s Saudi Arabian facility will be the site of vehicle reassembly, which involves “re-assembly of Lucid Air vehicle ‘kits’ that are pre-manufactured at the company's facility in Casa Grande, Arizona, and, over time, for production of complete vehicles”.

Lucid has not commented on any potential technical stumbling blocks to this novel manufacturing method. Nor has it guided to a date at which complete vehicles may roll out of the KSA factory.

After the company reported around $700mn in adjusted losses in the second quarter, investors will be looking for any uptick in revenue. The company has already tried lowering its prices to stimulate demand, but Lucid is banking on the KSA orders to provide an additional volume boost.

Executives asked for patience from investors at the end of Q2 by stating that revenue generated from the agreement had not yet been recognised in the quarter — since, although shipments had begun, no vehicles had been delivered. Analysts, however, are not holding their breath for a significant boost to revenue this quarter.

“We expect the first revenue from this [KSA] agreement in Q3, although we do not expect it to be material,” says US financial services firm Cantor Fitzgerald.

Lucid guides a larger boost to Q4 revenue this year, once its SaudiaArabian manufacturing facility is fully operational, but it has not yet disclosed what levels of revenue is expected from Saudi Arabian deliveries this year or next. Nor has it disclosed the capex commitment to the KSA plant.

Cantor Fitzgerald projects initial orders to KSA to be modest in 2023, then growing gradually. “In our model, we expect initial orders to Saudi Arabia to be roughly 1,200 in 2024, and to increase to 4,000-8,200 annually over 2025-32,” says Andres Sheppard, an analyst at the firm.

The agreement commits the KSA to an order of 50,000 vehicles but includes an option for 50,000 more by 2032. The base case of 50,000 deliveries by 2032, assuming Lucid is able to meet them, “translates to combined revenue of c.$6.85bn”, Sheppard says.

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