Lucid Motors, the California-based electric vehicle (EV) startup, has obtained its operating license to initiate EV production within one of Saudi Arabia's Special Economic Zones (SEZs). This milestone aligns with Saudi Arabia's broader economic diversification efforts under its ambitious “Saudi Vision 2030” plan, aiming to reduce dependence on oil revenue.
Saudi Arabia inaugurated four new Special Economic Zones in April, strategically positioned to tap into the burgeoning growth of key sectors, including electric vehicles, manufacturing, cloud computing, medical technology, and more. These economic zones are designed to attract foreign investment by offering enticing incentives, such as reduced corporate tax rates, tax-free imports of machinery and raw materials, 100% foreign ownership, simplified establishment processes, and labor flexibility.
Lucid Motors secured its permit for EV production in the King Abdullah Economic City (KAEC), situated along the Red Sea. Given that approximately 13% of global trade traverses the Red Sea, this location offers a robust foundation for establishing a global supply chain network.
KAEC's special economic incentives encompass a 5% corporate income tax rate for up to 20 years, a 0% customs duties deferral for goods within the SEZ, and a 0% value-added tax on goods traded within the zone and other SEZs, among other benefits. Lucid Motors is poised to become an anchor investor in this economic zone, with plans to manufacture 150,000 EVs annually in Saudi Arabia's economic megacity.
Construction of the facility commenced in May, where Lucid intends to reassemble its Air electric sedan models, previously pre-built at its Casa Grande, Arizona facility. Mass production is anticipated to commence by the following year.
This permit approval comes at a pivotal moment as Saudi Arabia seeks to diversify its economy amid the approaching peak of oil production. A key component of the Kingdom's “Saudi Vision 2030” entails increasing the share of non-oil GDP from 16% to 50% by the end of the decade. In the previous year, Saudi Arabia's non-oil revenue reached $110 billion, a substantial increase from $44 billion in 2015, with non-oil GDP growing at a rate of 5.4%.
Highlighting its commitment to Lucid Motors, Saudi Arabia's Public Investment Fund (PIF) injected an additional $1.8 billion into the company in June. As of the end of June, the PIF held approximately 60.5% of Lucid's common stock, with the investment fund having provided approximately $9 billion in funding to the EV manufacturer thus far.