Such a deal would have required significantly more than $1 billion from the Saudi fund.
The money provides Lucid with enough funding to commercially launch its first electric vehicle, the futuristic-looking Lucid Air by 2020, and underlines the fact the world's biggest oil producer sees the future is in renewables, and clean transport. The cheapest Tesla Model 3 is priced at about $50,000, and the Model S can top out above $100,000.
The vehicle will have a battery range of 240 miles to 400 miles per charge, depending on what kind of extras are ordered.
Newark, California-based Lucid Motors had raised a total of $131 million in funding prior to the PIF's investment, according to Crunchbase.com.
Lucid plans to make the Air at a factory it's building in Casa Grande, Arizona.
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In a statement, a spokesperson for Saudi Arabia's sovereign wealth fund said "This investment in the electric vehicle industry, which is now experiencing rapid growth, is an added value to the Fund's portfolio which aims to achieve long-term, growing returns".
"PIF's worldwide investment strategy aims to strengthen PIF's performance as an active contributor in the global economy, an investor in the industries of the future and the partner of choice for worldwide investment opportunities", a spokesperson for the PIF said in a statement.
Tesla stock dropped Monday on reaction to the news, the same day that the Saudi fund announced it had taken its first loan, an $11bn borrowing from global banks as it tries to expand its investments. The fund is reportedly worth about $250 billion, but also has other commitments.
"We will demonstrate the full potential of the electric-connected vehicle in order to push the industry forward", said Peter Rawlinson, Lucid's chief technology officer and former the lead engineer of the Tesla Model S. This is inhibiting the pace at which sustainable mobility and energy are adopted.
Under the terms of the agreement, the parties made binding undertakings to carry out the Transaction subject to regulatory approvals and customary closing conditions.