Lucid Group (LCID -4.93%) has been on a scorching streak of late with 5 consecutive quarters of file deliveries, and it might need an neglected catalyst that got here to the floor just lately: tariffs. Except you discovered a rock to cover underneath, nonetheless tempting that could be, you could not miss the wave after wave of tariffs, updates, retaliatory measures, offers, and truces which have just lately taken place.
Whereas Trump administration tariffs could negatively influence Lucid, potential tariffs elsewhere could possibly be an enormous win. Here is why.
What is going on on
What you most likely already know is that Lucid is massively backed up by Saudi Arabia’s Public Funding Fund (PIF), which holds a greater than 60% stake within the electrical car (EV) maker. The truth is, the PIF is Lucid’s high shareholder. What you may not know is that Saudi Arabia imports practically each automobile, as a result of just one automaker promoting automobiles within the nation assembles them there — and that automaker is Lucid.
Lucid would stand to profit if tariffs have been slapped on automotive imports in Saudi Arabia. The costs on each competing car would rise, giving Lucid a bonus in an space the place it may promote extra automobiles. And the concept may not be as far-fetched as you suppose. In fact, Lucid definitely welcomes the concept.
Not implementing tariffs on international vehicles would “run the danger that you simply kill the business in its infancy,” mentioned Interim Lucid CEO Marc Winterhoff, in an interview, in response to Bloomberg Information. “It does not imply that this has to go on endlessly, however with a purpose to have that type of change available in the market, you must assist native gamers to start with,” he continued.
Additionally per Winterhoff, Lucid has already held talks with the Saudi authorities about these potential tariffs to spice up home auto manufacturing and minimize dependence on imports — and, you recognize, give Lucid an enormous leg up on the home market.
Lucid’s Gravity SUV. Supply: Lucid.
Will it occur?
Here is the place issues get trickier than Lucid merely suggesting to the federal government that auto import tariffs are a good suggestion. If Saudi Arabia have been to undergo with the technique, it may danger butting heads with the U.S. at a time when the latter is aggressively attempting to make use of tariffs on imports as a negotiating tactic. Saudi Arabia slapping tariffs on auto imports may trigger retaliatory measures from the U.S. as Ford Motor Firm and Common Motors are well-liked import manufacturers within the nation.
On the flip aspect, Saudi Arabia has strategic motive to defend its dwelling automotive turf sooner somewhat than later. That is as a result of it plans to cut back dependence on international imports after which start exporting vehicles through an automotive manufacturing hub on the Pink Sea Coast with corporations similar to Lucid serving to lead the cost.
Whereas Lucid is presently burning cash prefer it’s a money furnace, the enterprise has momentum with gross sales rising and Gravity deliveries set to speed up. It additionally plans to increase into new international locations in Europe and the Center East. Potential tariffs in Saudi Arabia on auto imports would simply be one other small catalyst for the corporate — it is price maintaining your eye on.
Daniel Miller has no place in any of the shares talked about. The Motley Idiot has no place in any of the shares talked about. The Motley Idiot has a disclosure coverage.
