A bold move in the face of protectionist policy: Lucid Motors is turning its Saudi Arabian manufacturing base into a strategic bypass for some of the highest U.S. tariffs in history. CFO Taoufiq Boussaid made clear the intent in speaking at the UBS Global Industrials and Transportation Conference: the next-generation midsize EV platform will be built in the Kingdom, thereby letting the company import China-sourced components without having to incur duties that can add 8% to 15% to vehicle costs.
The reason lies in some brutal realities of the present-day EV supply chain. High-end electric vehicles-especially those with tariff-sensitive content such as battery cells from China-are predominant, along with power electronics and structural castings. These components often account for a very high share of the BOM, and the midsize platform that Lucid will be using is likely to be “on an entirely different planet” in terms of BOM than models currently available, with an estimated BOM roughly half that of some U.S. rivals’ segment-level BOM and fewer components than the Tesla Model Y. Manufacturing in Saudi Arabia lets Lucid avoid a newly applied 100% U.S. tariff on Chinese EVs and related parts, intended to protect American automakers but assailed as raising consumer prices while dampening the green transition.
It is not a singular move. Tariff pressure has companies across U.S. industry redesigning their production footprint. Some firms are reshoring supply chains to North America, while others, such as Lucid, are offshoring more aggressively in an effort to preserve margins. A recent Supply Chain Management survey captured the shift: The permanent change one transportation equipment firm identified was “development of additional offshore manufacturing that would have otherwise been for U.S. export”.
Lucid’s Saudi plant, which was opened two years ago to satisfy a large purchase order from the Kingdom, is now positioned as a dual-purpose asset: satisfying regional demand and serving as a cost-efficient export hub. Motors for the mid-size line will be built there also, although for now production remains in Arizona. The company targets late 2026 for initial builds, with full capacity achieved by 2028.
The timing is critical. In the U.S., EV demand has slumped sharply following the September expiration of the $7,500 federal tax credit. October new EV sales fell 48.9% month-over-month, with used EV sales down 20%, according to Cox Automotive. Market share for EVs in October dropped to just 5.2% of retail sales, down from September’s record 12.9%. Analysts point to both the credit’s expiration and a “pull-ahead” effect from buyers rushing to purchase before the deadline.
Lucid, however, is faring better overseas. Boussaid cites “very positive momentum in Europe and the Middle East” for the Gravity SUV, a model for which the production ramp has been steep of late. Interim CEO Marc Winterhoff said the majority of deliveries through year’s end would be Gravity, with the limited Dream Edition already sold out. The premium EV segment has proven resilient versus mass-market EVs, somewhat insulated by higher-income buyers less sensitive to incentives.
The mid-size platform represents a significant scaling challenge from an engineering perspective. Maintaining the range, performance, and in-vehicle technology hallmarks of Lucid while cutting BOM cost in half requires tight integration of battery pack design, lightweight structures, and advanced driver-assistance systems. Lucid is dual-tracking development of both its Level 2++ and Level 3 autonomous stacks via internal development and external partnerships, with a robotaxi program linked to Uber.
The EV market’s center of gravity is shifting worldwide. In 2023, one in three new cars sold in China and over one in five in Europe was electric, whereas only one in ten was sold in the U.S. America’s slower adoption is compounded by infrastructure gaps-80% of surveyed consumers claim inadequate charging networks make them wary-and lingering range anxiety.
Manufacturers face high production costs: Boston Consulting Group estimates legacy automakers lose about $6,000 on each EV sold at $50,000, even after incentives. Lucid’s Saudi strategy is thus both a tariff workaround and a bid to align production costs with global competitive realities. By leveraging lower-cost component imports and tapping into markets where premium EV demand is growing, the company is positioning itself to weather the U.S. slowdown while preparing for a broader product ladder-from the high-end Air and Gravity down to mid-size models starting near $50,000.
