California-based EV startup Lucid Motors (LCID) just gained its operating license to begin EV production in one of Saudi Arabia’s special economic zones.

Saudi Arabia launched four new Special Economic Zones (SEZs) in April, designed to take advantage of growth in key sectors like electric vehicles, manufacturing, cloud computing, medical tech, and more.

The economic zones are spread strategically throughout the Kingdom, offering foreign investors the opportunity to invest with special incentives.

Some of the incentives may include lower corporate tax rates, tax-free imports of machinery and raw materials, 100% foreign ownership, easy set-up, and labor flexibility.

The King Abdullah Economic City (KAEC), where Lucid obtained its permit to begin EV production, is located on the Red Sea. With 13% of global trade passing through the Red Sea, it offers a solid location to establish a global supply chain network.

Special economic incentives in KAEC include 5% corporate income tax for up to 20 years, 0% customs duties deferral for goods inside the SEZ, 0% value-added tax on goods traded within the zone and other SEZs, and more.

Lucid to begin EV production in Saudi Arabia

Lucid is considered an anchor investor in the economic zone, with plans to produce 150,000 EVs annually in Saudi’s economic megacity.

Construction on the facility began last May where Lucid plans to re-assemble Air electric sedan models pre-built at its Casa Grande, Arizona facility. Mass production is expected to begin by next year.

The permit approval comes as Saudi looks to diversify its economy with peak oil approaching. Part of the Kingdom’s “Saudi Vision 2030” includes raising the share of non-oil GDP from 16% to 50% by the end of the decade.

Last year, Saudi’s non-oil revenue accounted for $110 billion, compared to $44 billion in 2015. Non-oil GDP grew 5.4% last year.

Saudi’s Public Investment Fund (PIF) invested an additional $1.8 billion into Lucid in June. At the end of June, Saudi’s PIF owned around 60.5% of Lucid’s common stock. The investment fund has injected roughly $9 billion in funds into the EV maker to date.

Electrek’s Take

Meanwhile, Lucid has struggled in the US. Of the 26 EV brands in the US, Lucid placed 18th with 0.6% of the share.

Lucid had 348 Air EV registrations in July, bringing the total to 3,789 through the first seven months of the year. The luxury EV maker cut prices by up to $12,400 last month to boost demand.

Perhaps a global port in Saudi will help fuel overseas sales with special incentives to help Lucid get its network up and running.