Can Saudi Arabia keep pace with its ambitious mega-project spending spree?
Digital render of NEOM’s The Line project in Saudi Arabia
The Line, NEOM
In Saudi Arabia’s northwestern desert, a sprawling construction site replete with cranes and pile drivers sits encircled by a recently-built road. A pair of tracks cuts through the site like deep gashes through the sand, comprising the spine of what planners say will be a high-speed rail system.
The skeletal infrastructure forms the foundations of The Line, a multi-billion dollar high-tech city that its architects say will eventually house 9 million people between two 106-mile long glass skyscrapers more than 1,600 feet high.
The project, whose estimated cost is in the hundreds of billions, is just one of the hyper-futuristic venues planned in Neom, the brainchild of Saudi Crown Prince Mohammed bin Salman and a region that the kingdom hopes will bring millions of new residents to Saudi Arabia and revolutionize living and technology in the country. It’s a core pillar of Vision 2030, which aims to diversify the Saudi economy away from oil revenues and create new jobs and industries for its burgeoning young population.
The cost of Neom has been estimated to be as high as $1.5 trillion. In the years since it was announced, Saudi Arabia’s Public Investment Fund, the mammoth sovereign wealth fund now overseeing $925 billion in assets, has poured billions into overseas investments, with ever-increasing waves of foreign investors flying to the kingdom to raise cash.
This year, however, has seen a sharp change in direction in terms of spending, with a stated emphasis on keeping investments at home along with reports of cutting costs on megaprojects like those in Neom. The changes come as the Saudi deficit grows and the outlook for oil demand, along with global oil prices, sees sustained lows.
Construction for The Line project in Saudi Arabia’s NEOM, October 2024
Giles Pendleton, The Line at NEOM
That begs the question: does Saudi Arabia have enough money to meet its lofty goals? Or will it have to be more flexible to make its spending trajectory sustainable?
One Gulf-based financier with years of experience in the kingdom told CNBC: “The PIF’s pivot towards domestic investments, widely acknowledged but now officially admitted, suggests that there is still a lot of spending needed. Saudi Arabia has poured tens of billions into projects that have yet to hint of any financial returns.”
The financier spoke anonymously as they were not authorized to speak to the press.
Andrew Leber, a researcher at Tulane University who focuses on the political economy of the Middle East, believes that the current pace of spending won’t last.
“The number of ‘we pay up front and hope for economic returns later’ giga projects that are currently underway is not sustainable,” Leber said.
“With that being said,” he added, “the Saudi monarchy has shown itself to be somewhat flexible whenever economic realities assert themselves. I do think that eventually, a number of projects will be quietly shelved in order to bring its fiscal outlays back into greater sustainability.”
Digital render of NEOM’s The Line project in Saudi Arabia
The Line, NEOM
Saudi Arabia in October cut its growth forecasts and raised its budget deficit estimates for the fiscal years 2024 to 2026 as it expects a period of higher spending and lower projected oil revenues. Real gross domestic product is now expected to grow 0.8% this year, a dramatic drop from a previous estimate of 4.4%, according to the ministry of finance.
The kingdom’s economy also swung dramatically from a budget surplus of $27.68 billion in 2022 to a deficit of $21.6 billion in 2023 as it ramped up public spending and decreased oil production due to its OPEC+ supply cut agreement. Its government forecasts a deficit of $21.1 billion for 2024, projecting revenue at $312.5 billion and expenditures at $333.5 billion.
Saudi authorities expect that the budget will remain in deficit for the next several years as it pursues its Vision 2030 plans, but they add that they are fully prepared for this.
“Our non-oil revenues have grown significantly, now it covers about 37% of expenditure. That’s a significant diversification, and that gives you a lot of comfort that you can maneuver and be stable despite the fluctuation in oil price,” Saudi Finance Minister Mohammed Al-Jadaan told CNBC in October. “Our aim is to make sure that our plans are stable and predictable.”
“We are not going to blink, we have significant fiscal resource under our disposal, and we are very disciplined in our fiscal position,” the minister said.
Saudi Arabia has an A/A-1 credit rating with a positive outlook from S&P Global Ratings and an A+ rating with a stable outlook from Fitch. That combined with high foreign currency reserves — $456.97 billion as of September, a 4% percent increase year-on-year, according to the country’s central bank — puts the kingdom in a comfortable place to manage a deficit, economists told CNBC.
Riyadh is successfully issuing bonds, tapping debt markets for more than $35 billion so far this year. The kingdom has also rolled out a series of reforms to boost and de-risk foreign investment and diversify revenue streams, which S&P Global said in September “will continue to improve Saudi Arabia’s economic resilience and wealth.”
When asked if the kingdom’s spending trajectory is sustainable, Al-Jadaan replied: “Absolutely, yes,” adding that the government recently published its numbers for the next three years and that “we think it is very sustainable.”
Still, many analysts outside the kingdom, as well as individuals working within the kingdom and on NEOM projects, are skeptical of the megaprojects’ feasibility. Reports that some projects have been dramatically cut down — in the case of the Line, its size target slashed from 106 miles to 1.5 miles and population target down from 1.5 million by 2030 to less than 300,000 — attest to that concern on a higher level.
Neom executives acknowledge that the current phase of work on The Line is for a building length of 1.5 miles — which would still make it the longest building in the world. However, the eventual goal of 106 miles has not changed, they say, stressing that cities are not built overnight and that construction is continuing apace.
For Tarik Solomon, chairman emeritus at the American Chamber of Commerce in Saudi Arabia, “it’s promising to see transparency and some project cutbacks.”
“The Kingdom’s rising external borrowing reflects challenges with Vision 2030 feasibility,” he told CNBC.
“Though debt remains manageable at 26.5% of GDP, continued small pressures add up, underscoring the need for fiscal discipline and achievable goals.”
Solomon pointed to the desire of many Saudi residents for improvements to the infrastructure they use in their daily lives — like Riyadh’s public transport, network connectivity, schools, and health care.
“The road to resilience for Saudi Arabia isn’t in figuring out ski slopes in the desert but in building with innovation, complexity, and the courage to pursue what’s truly impactful,” he said.
Over the next two years, homebuilder Lennar is outfitting more than 1,500 new Colorado homes with Dandelion Energy’s geothermal systems in one of the largest residential geothermal rollouts in the US.
The big draw for homeowners is lower energy bills and cleaner heating and cooling. Dandelion claims Lennar homeowners with geothermal systems will collectively save around $30 million over the next 20 years compared to using air-source heat pumps. Geothermal heat pumps don’t need outdoor AC units or conventional heating systems, either.
Geothermal systems use the sustained temperature of the ground to heat or cool a home. A ground loop system absorbs heat energy (BTUs) from the earth so that it can be transferred to a heat pump and efficiently converted into warmth for a home. Dandelion says its ground loop systems are built to last for over 50 years and should require no maintenance.
Dandelion’s geothermal system uses a vertical ground closed-loop system that is installed using well-boring equipment and trenched back into the house to connect to a heat pump. The pipes circulate a mixture of water and propylene glycol, a food-grade antifreeze, that absorbs the ground’s temperature. A ground source heat pump circulates the liquid through the ground loops and it exchanges its heat energy in the heat pump with liquid refrigerant. The refrigerant is converted to vapor, compressed to increase its temperature, then passed through a heat exchanger to transfer heat to the air, which is circulated through a home’s HVAC ductwork.
Daniel Yates, Dandelion Energy’s CEO, called the partnership with Lennar a “new benchmark for affordable, energy-efficient, and high-quality home heating and cooling.” By streamlining its installation process, Dandelion is making geothermal systems simpler and cheaper for homebuilders and homeowners to adopt.
This collaboration is happening at a time when Colorado is pushing hard to meet its clean energy targets. Governor Jared Polis is excited about the move, calling it a win for Coloradans’ wallets, air quality, and the state’s leadership on geothermal energy. Will Toor, executive director of the Colorado Energy Office, said that “ensuring affordable access to geothermal heating and cooling is essential to achieve net-zero emissions by 2050, and we’re excited to be part of such a huge effort to bring this technology to so many new Colorado homes.”
And it’s not just about cutting emissions – geothermal heat pumps help reduce peak electric demand. Analysis from the Department of Energy found that widespread adoption of these systems could save the US from needing 24,500 miles of new transmission lines. That’s like crossing the continental US eight times.
Colorado is making this transition a lot more attractive through state tax credits and Xcel Energy’s rebate programs. These incentives slash upfront costs for builders like Lennar, making geothermal installations more financially viable. The utility’s Clean Heat Plan and electrification strategy are working to keep energy bills low while meeting climate goals.
Read more: This will be the first geothermal energy storage system on the Texas grid
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Polestar has removed the Polestar 2 from its US website header in an early sign of how new tariffs will restrict choice and competition for American consumers, thus increasing prices.
The Polestar 2 is Polestar’s first full EV – the original Polestar 1 was a limited-edition plug-in hybrid.
It started production in 2020 in Luqiao, Zhejiang, China, where Polestar and Volvo’s parent corporation, Geely, was founded.
And there’s the rub: while Polestar’s newer EV, the 3 (which we just drove the new single motor version of last week), is built in South Carolina, the 2 is not.
Unfortunately, that interacts with some news that has been getting a lot of play lately: tariffs.
The US has been gradually getting stupider and stupider on the issue of tariffs, apparently determined to increase prices for Americans and decrease the competitiveness of American manufacturing in a time of change for the auto industry.
It is widely acknowledged (by anyone who has given it a few seconds of thought) that tariffs increase prices and that trade barriers tend to reduce competition, leading to less innovation.
It started with 25% tariffs on various products from China, implemented in the 2018-2020 timeframe. Then, in 2024, President Biden implemented a 100% tariff on Chinese EVs, effectively stopping their sale in the US. These tariffs included some exceptions and credits based on Volvo’s other US manufacturing, which Polestar had used to keep the most expensive versions of the 2 on sale in the US, while restricting the lower-priced versions from sale. Nevertheless, they were a bad idea.
Now, in yet another step to make America less competitive and inflate the prices of goods more for Americans, we got more tariff announcements today from a senile ex-reality TV host who wandered into the White House rose garden (which he does not belong in). These tariffs do not include the same exceptions as the previously-announced Biden tariffs.
Apparently this has all been enough for Polestar, as even in advance of today’s tariff announcements, the company suddenly removed its Polestar 2 from its website header today.
The change can be seen at polestar.com/us, where only the Polestar 3 and 4 are listed in the header area. On other sites, like the company’s Norwegian website or British website, the car is still there. The Polestar 2 page is still up on the US website, but it isn’t linked to elsewhere on the site (we’ll see how long it stays up).
We reached out to Polestar for comment, but didn’t hear anything back before publication. We’ll update if we do.
It makes sense that the Polestar 2 would still be for sale elsewhere, as it only started production in 2020. Most car models are available for at least 7 years, so this is an earlier exit than expected.
So it’s likely that all of the tariff news is what had an effect in killing the Polestar 2.
Then again, this is also just the second day of a new fiscal quarter. Perhaps the timing offers Polestar an opportunity to make a clean break – especially now that the lower-priced version of its Polestar 3 is available.
Despite the lower $67.5k base price of the new Polestar 3 variant, that represents a big increase in price for the brand, which had sold the base model Polestar 2 for around $50k originally, before all of these tariffs.
Update: Polestar got back to us with comment, but understandably, it doesn’t say much:
Polestar is a three-car company and Polestar 2 is available for customers now. There are a select number of Polestar 2s in stock at retailers that can be found on Polestar.com, but Polestar 3 and Polestar 4 will be the priority in the North American market.
Electrek’s Take
This isn’t the first car that America has been deprived of due to tariffs. The Volvo EX30, one of our most anticipated vehicles, and Electrek’s Vehicle of the Year for 2024, had its American availability pushed back due to tariffs.
Volvo decided to build the car in Belgium and export it to the US, but now that new tariffs apply to the EU as well, maybe that low-priced, awesome, fast, small EV will instead stay in Europe instead of being shipped overseas.
This shows how mercurial tariff fiats from an ignoramus are bad for manufacturing, as they mean that companies can’t make plans – and if they can’t make plans, eventually, they’ll probably just write the country making the random decisions out of their plans so they don’t have to deal with the nonsense.
And we’ve heard this from every businessperson or manufacturer representative we’ve talked to at any level of the automotive industry. Nobody thinks any of this is a good idea, because it objectively is not. All it does is make business harder, make the US less trustworthy, make things more expensive, and overall just harm America.
Yet another way that Americans are getting screwed by this stupid nonsense. 49% of you voted for inflation, and 100% of Americans are now getting it. Happy Inflation Day, everyone.
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Lucid Motors (LCID) has now had six straight quarters with higher deliveries. The delivery record comes just as Lucid prepares to begin delivering its first electric SUV, the Gravity, to customers by the end of this month.
Lucid sets sixth straight delivery record in Q1 2025
Lucid delivered 3,109 vehicles in the first quarter, up 58% from last year and topping its previous record of 3,099 set in Q4 2024.
The company also produced 2,213 vehicles at its Casa Grande, Arizona, plant in the first three months of 2025, an increase of 28% from last year. Another 600 vehicles were in transit to Saudi Arabia, where they will be assembled at its new AMP-2 plant, Lucid’s first international manufacturing facility.
At this pace, Lucid will easily top the roughly 10,200 vehicles it delivered last year in 2025 at around 12,500. Lucid will likely see even more growth this year, with customer deliveries of its first electric SUV starting soon.
During the Gravity SUV’s “celestial arrival” last week in NYC, Lucid’s interim CEO Marc Winterhoff said the EV maker is “nearly finished building all the vehicles that we wanted to build to put them into our studio and for test drives.”
| Q4 2022 | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Full-year 2023 | Q1 2024 | Q2 2024 | Q3 2024 | Q4 2024 | Full-year 2024 | Q1 2025 | |
| Lucid EV deliveries by quarter | 1,932 | 1,406 | 1,404 | 1,457 | 1,734 | 6,001 | 1,967 | 2,394 | 2,781 | 3,099 | 10,241 | 3,109 |
Winterhoff added, “by the end of April, we will resume customer deliveries of the Gravity.” Lucid delivered the first models in December, but they were for employees, friends, and family.
Lucid calls the Gravity a “no compromise” SUV with a range of up to 450 miles, 120 cubic feet of interior space, advanced technology, and sports car-like performance. The Gravity Grand Touring starts at $94,900, while the Touring model will arrive later this year at $79,900.
The new delivery record comes after Winterhoff told Fox Business last week that Lucid has seen a “dramatic uptick over the past two months” in orders from former Tesla drivers.
Currently, “50% of all the orders we have are from former Tesla owners,” Lucid’s CEO said. Winterhoff added that many are “looking for an option to not continue having a Tesla.”
Will we see the trend continue? Tesla announced earlier today that it delivered 336,681 vehicles in the first quarter, far less than the 390,000 Wall Street analysts expected.
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