The big announcement by the governor’s office this week that a California firm will invest $700 million to build an auto manufacturing plant in Casa Grande left out one important fact: The company doesn’t have anywhere near that much.
In fact, a spokesman for Lucid Motors put the company’s bank account in the range of “a few hundred million” even after several rounds of fundraising. Much of that cash has come from Chinese investors and even a Chinese state-owned company.
But David Salguero said the company is sure it can raise the rest of the money by 2022 to turn out at least 130,000 all-electric vehicles a year with price tags north of $100,000 from a plant Lucid says will hire 2,000.
He said Lucid is courting new investors. And Salguero said the company is counting on profits from the first vehicles, which are scheduled to roll off the assembly line in late 2018 — years before the company will have the cash to finish the plant.
That lack of cash has not dimmed the views of the projects by Gov. Doug Ducey who engineered the Tuesday press conference, complete with two prototypes of the car Lucid hopes eventually to build.
The Arizona Commerce Authority already has promised a $5 million grant. ACA spokeswoman Susan Marie said the company also wants $1.5 million for job training. And she said it could theoretically qualify for up to $40 million if it actually creates all 2,000 jobs.
But Marie said there is no risk to Arizona taxpayers, with all that contingent on Lucid actually building the plant and hiring the workers.
“Should it for some reason not move forward, the state will not have spent any money,” she said.
But the situation is a bit different in Pinal County, which has agreed to buy the 493 acres Lucid wants for the plant.
Tim Kanavel, the county’s program manager for economic development, said that land purchase will go ahead once Lucid signs a development agreement. At that point the plan is to lease the property to Lucid, with the company purchasing it outright at the end of five years.
“There’s always risk involved,” he said. But Kanavel said the county has done what it can to limit its financial exposure.
“If for some reason this company, between now and when they purchase the property, say, ‘We don’t want it,’ well then we own 493 acres of prime industrial real estate,” he said.
“And we can always sell that,” he continued. “So we feel that the risk is very minimized on that.”
He said the price of the parcels the county will buy is still being worked out but put it as “way less than $100 million.” And the price Lucid will pay also remains subject to negotiation.
Kanavel said, though, he is “absolutely” confident that Lucid will be able to complete the deal despite the fact it does not yet have the money. That’s also the view of the Arizona Commerce Authority.
“It is no secret that Lucid is a startup company,” said Marie. “Startup companies raise money in rounds and based on milestones as they commercialize their products.”
But it may be something of a misnomer to call Lucid a startup.
It’s true the company did not exist before October. But that’s only because that’s when Lucid jettisoned the name it started with nine years ago: Atieva.
Still, state officials believe the company has a future.
Ducey press aide Daniel Scarpinato said his boss toured the plant and met multiple times with company officials.
“And I think the fact that I think 60 different locations across the country were competing for this manufacturing center speaks to the very fact that this is a company that’s seen as on the rise … and that this is a recruitment that many states and cities across the country felt was very attractive to get,” he said. “And Arizona got it.”
Marie said the company has raised cash in prior fundraising operations from “reputable venture investors” like Venrock Capital and Mitsui Inc.
There also is a lot of Chinese money involved. That includes BAIC Automotive Group, the state-owned holding company of several car manufacturing firms, and Jia Yueting, who is CEO of LeEco, a Chinese consumer electronics company.
Salguero acknowledged that some of these investors, like Yueting, are no longer interested in putting additional funds into Lucid. In fact, Yueting has moved on, with LeEco unveiling its own LeSee prototype last month in San Francisco.
But Salguero said there are other options.
“We will be going out for another round of funding,” Salguero said. “There will be more.”
Marie said ACA officials are not concerned that the company does not expect to have all the money before 2022.
“The ACA is comfortable that Lucid Motors currently has sufficient funding for the initial phase of the project,” she said. She said that $700 million is the price tag to have a full-blown manufacturing plant capable of turning out 130,000 vehicles a year.
Marie also defended the incentives being offered to Lucid. She said even if the company qualifies for the entire $46.5 million in assistance, it “pales in comparison to the $1.3 billion package for Tesla (Motors) and the $335 million package for Faraday Future that Nevada did.” Tesla already is producing vehicles; Faraday is still in the development stage.
Salguero said it’s not surprising that people are generally unaware of Lucid Motors — and not just because the name did not exist before October.
“There’s not much that we’ve been saying about our car until very recently,” he said.
“As a marketing manager, my approach to marketing is you don’t say things unless you can really do them,” Salguero explained. “It’s why we didn’t start talking about our car until we actually had a prototype running and the final design locked in.”