Complex Made Simple

Electric vehicles and batteries in the driver seat in 2021. LUCID cars clear launch

Lucid Motors was desperate for cash in 2018 when it was handed a lifeline by Saudi Arabia’s Public Investment Fund (PIF) which invested $1.3 billion in the electric car start-up. Now, it and the EV world are revving forward

SPACs offer a quicker, easier, more secretive way to take a private company public versus the conventional IPO Tesla’s mind-blowing $800-billion valuation stoking imaginations and looking like a bubble Electric vehicles are likely to become the most economic choice in the next five years

Lucid Motors was desperate for cash in 2018 when it was handed a lifeline by Saudi Arabia’s Public Investment Fund (PIF) which invested $1.3 billion in the electric car start-up. 

Lucid regained its full health.

Now, in 2021, PIF and Lucid’s founders are poised to cash in by taking advantage of the manic market in so-called blank-check shell companies, also known as SPACs. 

In a deal that is near completion, according to a source familiar with the negotiations, the company would draw a hefty but as-yet-undetermined amount of cash to fund its operations. 

An increasing number of private companies are looking to cash out through special purpose acquisition companies or SPACs.

SPACs offer a quicker, easier, more secretive way to take a private company public versus the conventional initial public offering, or IPO. Through a sale to a blank-check entity, a company that wants its shares traded on public markets can get there much faster — typically several months versus up to a year for an IPO — with much less disclosure of its inner workings and the associated red tape.

Once considered a sketchy alternative, in the high-momentum markets of 2020 into 2021, SPACs have become very popular. Last year, $73 bn was raised in SPAC deals, up from $13 bn in 2019, according to Goldman Sachs. For the first time last year, the volume of SPAC deals outpaced that of traditional IPOs, which came in at only $67 bn.

Electric vehicles and related companies are driving a lot of that activity. Fuel cell truck company Nikola, electric car maker Fisker, electric bus company Proterra, electric truck maker Lordstown, electric robotaxi company Canoo, and many more have completed or announced SPAC deals.

“EV entrepreneurs have figured out they can ride the Tesla wave,” said David Kirsch, a business professor at the University of Maryland and co-author of the recently published book “Bubbles and Crashes.”

Read: No, Tesla’s secret sauce isn’t EV technology

Read: Oil, electric vehicles and the environment: Driving climate change plans

It’s a phenomenon he thinks has all the hallmarks of a bubble, with Tesla’s mind-blowing $800-billion valuation stoking imaginations.  

“Lucid Motors has always been clear about its intent to go public at some point in order to accelerate the adoption and global availability of Lucid’s exclusive electric vehicle and sustainability technologies,” the company said in an emailed statement. “Currently, our focus continues to be on bringing Lucid Air to production in spring of this year, with the strong support of key investors and our partners at the Public Investment Fund.”

Retail investors may know that Lucid is a hot electric car company, but probably don’t know much at all about how the pending SPAC deal is structured.

Saudi Arabia has been investing heavily in alternative energy projects to prepare for the oil industry’s decline as electric-powered vehicles replace internal combustion engine cars and trucks.  

EV’s battery costs way down

Electric vehicles are close to the “tipping point” of rapid mass adoption thanks to the plummeting cost of batteries.

Global sales rose 43% in 2020, but even faster growth is anticipated when continuing falls in battery prices bring the price of electric cars dipping below that of equivalent petrol and diesel models, even without subsidies. The latest analyses forecast that to happen between 2023 and 2025.

The tipping point has already been passed in Norway, where tax breaks mean electric cars are cheaper. The market share of battery-powered cars soared to 54% in 2020 in the Nordic country, compared with less than 5% in most European nations.

Transport is a major source of carbon emissions and electric cars are vital in efforts to fight the climate crisis. But, while they are already cheaper to run, their higher purchase price is a barrier to mass uptake. The other key factor is “range anxiety,” but this week the first factory production began of batteries capable of giving a 200-mile charge in five minutes.

In 2020, 4.2% of new cars were electric.

BloombergNEF’s analysis predicts lithium-ion battery costs will fall to the extent that electric cars will match the price of petrol and diesel cars by 2023, while Lenton suggests 2024-2025. 

McKinsey’s Global Energy Perspective 2021, published on January 15th , forecasts that “electric vehicles are likely to become the most economic choice in the next five years in many parts of the world.”

In 2010, even a small-car battery of 30kWh would have cost $30,000, far more than the total price of an equivalent fossil-fuelled car. Today, BloombegNEFs research shows the battery pack costs $4,100, thanks to a scale-up in production and cuts in material costs, such as reducing the amount of expensive cobalt required.

Battery packs passed the milestone of $100/kWh in 2020 for buses in China.  

Electric cars are quieter and have faster acceleration, and rapid mass adoption will also be increased by the fact that, once motorists have one, they will not want to return to a petrol or diesel vehicle. 

In a recent poll of 2,000 electric car owners, 91% said they would not want to go back.

An even more advanced technology, solid-state batteries, could enter the mass market by 2030 if new manufacturing methods can be mastered.

EVgo goes public

EVgo, the wholly-owned subsidiary of LS Power that owns and operates public fast chargers for electric vehicles, has reached a deal to become a publicly-traded company through a merger with special-purpose acquisition company Climate Change Crisis Real Impact I Acquisition Corporation.

The combined company, which will be listed under the new ticker symbol “EVGO” will have a market valuation of $2.6 bn.

EVgo has raised about $575 million in proceeds through the business combination, including a $400 million in private investment in public equity, or PIPE.