Lucid Pushes for Saudi Tariffs to Bolster Domestic EV Manufacturing

Lucid Group Inc., backed by Saudi Arabia’s sovereign wealth fund, is advocating for tariffs on foreign vehicles to strengthen the kingdom’s nascent auto manufacturing sector and reduce its heavy reliance on imports. Interim CEO Marc Winterhoff stressed the urgency of such measures during an interview at the Saudi-US Investment Forum in Riyadh, stating, “Not doing so would run the risk that you kill the industry in its infancy.” He added, “It doesn’t mean that this has to go on forever, but in order to have that kind of change in the market, you need to support local players in the beginning.”

Developing a Saudi Auto Manufacturing Hub

Saudi Arabia imports nearly all its vehicles, with Lucid being the only automaker currently assembling cars in the country. The market is dominated by U.S. brands like Ford and General Motors’ Chevrolet, Japanese manufacturers such as Nissan and Toyota, and Chinese electric vehicle (EV) brands leading EV sales. To shift this dynamic, the kingdom is building an auto manufacturing hub on the Red Sea Coast, involving Lucid, Hyundai Motor Co., and tire maker Pirelli SpA. This initiative is expected to contribute $25 billion to Saudi Arabia’s gross domestic product by 2035, aligning with the nation’s economic diversification plan to move away from oil dependency.

Lucid has been assembling its flagship Air sedan at a facility in Saudi Arabia since 2023 and plans to begin deliveries of its Gravity sport utility vehicle by December 2025. A new manufacturing plant in King Abdullah Economic City, designed to produce 150,000 vehicles annually, is on track for completion in 2026. Winterhoff outlined plans for local deliveries of fully manufactured Saudi EVs starting in 2027, alongside exports to European and Asian markets, excluding China. Additionally, discussions are underway with an undisclosed third party to establish EV battery manufacturing in the kingdom, a critical step to localize supply chains.

Trade and Diplomatic Challenges

Implementing tariffs could create friction with the United States, which leverages import levies to negotiate favorable trade terms. Saudi Crown Prince Mohammed bin Salman, who met with U.S. President Donald Trump in Riyadh to discuss a $1 trillion investment pledge, may be cautious about actions that could strain deepening U.S.-Saudi ties. Tariffs would also affect Chinese EV brands, which dominate the Saudi EV market, potentially raising prices and altering consumer preferences. Lucid has engaged in talks with the Saudi government about potential tariffs, though Winterhoff declined to provide specifics.

Technical and Economic Implications

Localizing EV production offers technical advantages, including shorter supply chains, reduced shipping costs, and faster delivery times. For instance, assembling the Lucid Air (priced at $69,900) and Gravity locally avoids international logistics delays, which can span weeks. Establishing battery manufacturing in Saudi Arabia could further lower costs, as batteries constitute 30–40% of an EV’s price. The new King Abdullah facility, with its 150,000-vehicle capacity, will incorporate advanced automation to boost production efficiency, potentially reducing per-unit costs by 10–15% compared to imported vehicles.

Economically, tariffs could make imported cars—ranging from $20,000 to $80,000 in Saudi Arabia—less competitive, giving Lucid’s models an edge. However, this risks increasing consumer prices, particularly for buyers of affordable Chinese EVs, which often retail below $30,000. Regulatory hurdles include ensuring tariffs comply with World Trade Organization rules to avoid trade disputes, a challenge given Saudi Arabia’s import-dependent market.

Lucid’s Expansion Strategy

Lucid’s ambitions are supported by Saudi Arabia’s $925 billion Public Investment Fund (PIF), its largest shareholder, which has provided multiple cash infusions to address liquidity challenges and fund expansion. The company is expanding its Middle East presence, with Winterhoff noting, “We have started Abu Dhabi and we’re looking into Qatar and other additional markets coming very soon.” Lucid also plans to enter new European markets in 2025, leveraging its Saudi production to meet demand. The focus on exports by 2027 positions Saudi Arabia as a potential EV manufacturing hub, competing with established players in Asia and Europe.