$Lucid(LCID.US)$ said on Tuesday it has entered a deal with the government of Saudi Arabia to sell up to 100,000 electric vehicles over the next 10 years, sending shares of the luxury electric vehicle startup higher after the bell.

What Happened: The deal will see the monarch buy 50,000 EVs with an option to buy an additional 50,000 vehicles during the 10-year time frame.

The Saudi king will, under the deal, buy the Lucid Air and its upcoming models that will be built and assembled at the company's existing Arizona factory and its planned factory in Saudi Arabia. 

The order volume will initially be between 1,000 to 2,000 vehicles annually and ramped up to between 4,000 and 7,000 vehicles starting in 2025. The first shipment begins no later than the second quarter of 2023.

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Why It Matters: Saudi Arabia's Public Investment Fund is a majority shareholder in Lucid and owns about a 61% stake in the company.  

The recently-listed Lucid, which competes with Tesla Inc (NASDAQ:TSLA), last month slashed its 2022 production target to between 12,000 to 14,000 Lucid Air models, much below the 20,000 units that it had forecast earlier. 

Lucid's Air entry-level sedan is priced at $77,400, excluding an up to $7,500 federal tax credit for plug-in vehicles, while its Dream edition variant is sold at $169,000 and has a 520-mile range.

The company has a manufacturing facility in Casa Grande, Arizona, and has confirmed plans to build a new manufacturing facility in Saudi Arabia where it expects to make up to 150,000 vehicles per year.

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Price Action: Lucid closed 8.7% higher at $17.6 on Tuesday and traded 5.9% higher after hours.

Photo courtesy: Lucid