Lucid Group (NASDAQ: LCID) shares plunged almost 6% on Thursday after a ReutersReuters article warned of challenges for the company in Saudi Arabia. The report also cautions that the Kingdom’s insufficient infrastructure, human resources, and raw materials will pose significant challenges in the manufacturing of vehicles.
Saudi Arabia and its sovereign wealth fund, the Public Investment Fund (PIF), have injected a minimum of $10 billion into LCID stock. As of August 2023, PIF has independently injected a minimum of $5.4 billion, securing a 60% ownership stake. The Kingdom aims to manufacture 500,000 Lucid vehicles annually by 2030, with an order already placed for 100,000.
The electric vehicle (EV) company started operating in Saudi Arabia in September, opening the first-ever vehicle manufacturing facility in the region, the Advanced Manufacturing Plant (AMP-2). The plant, in its initial phase, can assemble 5,000 vehicles annually. Once constructed, AMP-2 is anticipated to have the capability to manufacture approximately 155,000 each year.
As of December, AMP-1 had assembled fewer than 800 vehicles.
Reuters Warns of Challenges for Lucid Motors in Saudi Arabia
Reuters highlighted that Saudi Arabia has previously made efforts to draw in automotive expertise; however, these endeavors faced challenges arising from the absence of an auto-component supply chain.
EY analyst Gaurav Batra said,
“There is tremendous competition that the country will face from established manufacturing power houses and from established supply chains.”
He added,
“A lot of things need to come into place before this industry takes shape and really ignites.”
Saudi Arabia is positioning itself as a hub for automotive assembly, banking on its AMP-2 facility to entice other car manufacturers to establish assembly plants within the Kingdom, supported by various incentives. However, this strategy may pose challenges for existing local manufacturing endeavors.
Nevertheless, Saudi Arabia possesses substantial resources supported by its prosperous petroleum industry. The big question remains whether this alone will elevate the Kingdom into an automotive manufacturing powerhouse.
Lucid Group (NASDAQ: LCID) Stock Movement
LCID stock fell -5.67% on Thursday. The traders had exchanged hands with 46,488,599 (46.48 million) shares compared to the average daily trading volume of 36.04 million.
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