Luxurious EV startup Lucid Motors isn’t promoting practically sufficient automobiles, and its CEO, Peter Rawlinson, is aware of it.
“We’ve bought the perfect expertise,” Rawlinson informed buyers and Wall Road analysts throughout the startup’s fourth-quarter earnings name earlier this week. “What we haven’t bought is scale and an economic system of scale.”
The California-based producer, which launched its debut car in 2021, produced 8,428 Air sedans final yr. Of these, it was in a position to promote simply 6,001 to clients. Lucid mentioned on Wednesday that it goals to make 9,000 automobiles in 2024, barely an enchancment year-over-year.
For a corporation that when projected it could crank out 49,000 autos in 2023 and 90,000 in 2024, that steering lands like a intestine punch. The flat outlook has buyers rattled; Lucid’s share worth slid practically 17% within the day following its earnings launch.
What’s change into more and more clear is that not practically as many individuals are lining as much as purchase Lucid’s fancy four-door as the corporate anticipated, regardless of how technologically spectacular it’s. (And it’s very spectacular.) That’s a giant downside for a startup that’s burning by a whole lot of tens of millions of {dollars} every quarter and badly wants more cash coming in to remain afloat.
Lucid, for its half, says it has sufficient money available, $4.78 billion, to final it into 2025. Plus, it’s majority-owned by the sovereign fund of the enormously rich Saudi authorities, which may provide a liferaft if issues get too uneven.
Extra importantly, Rawlinson has a three-part plan to repair that “economic system of scale” downside, which he detailed on Wednesday.
Lucid’s Path To Scale
Half one, Rawlinson mentioned, includes slicing the value of the Air, thus making it extra interesting to extra folks. (He says that was at all times within the playing cards. But when Lucid may preserve costs excessive and nonetheless promote sufficient autos, it could do exactly that.) Final week, Lucid slashed the value of the entry-level Air Pure RWD by $7,500. It now begins at $69,900, a worth that Rawlinson mentioned expands Lucid’s complete addressable market (TAM) threefold—“as a result of now we go into E-Class Mercedes territory quite than S-Class.”
For Lucid and the opposite considerably mature US EV startup, Rivian, the secret is scale. They’ve erected factories and began promoting autos to paying clients at an infinite monetary price. Now they face the much more treacherous job of transferring sufficient steel to take action profitably, a journey some journalists have known as crossing the EV valley of loss of life.
The extra automobiles an EV firm can construct and promote, the simpler it turns into to drive down prices and cease dropping cash on each sale. This is similar downside established automakers are dealing with with their electrical efforts. However Ford and Basic Motors can depend on earnings from extremely worthwhile fuel autos as they sink billions into beefing up their battery-powered portfolios.
Lucid and its ilk don’t have that luxurious. And ramping up gross sales of the Air, a high-end sedan that competes with the likes of the BMW and Mercedes, has confirmed tough. The corporate has a imaginative and prescient for attending to the promised land, although. Most of that plan rests on the success of future fashions coming over the following few years.
“It’s all about scale,” Rawlinson mentioned.
Step two is the Gravity, a big, three-row SUV slated to start out manufacturing by the tip of this yr.
SUVs are scorching proper now—a lot hotter than sedans are—so the Gravity has the potential to drive gross sales greater than the Air ever may. Rawlinson mentioned the SUV will enable Lucid to faucet into six instances the TAM because it has at the moment.
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It isn’t precisely an apples-to-apples comparability, however take into account the fiercer development of Rivian, which began making a rugged pickup truck and SUV across the identical time as Lucid launched the Air. Rivian cranked out some 57,000 autos final yr. (Identical to Lucid, it couldn’t promote all of them, although, amid a wider slowdown in EV demand development.)
Step three could be the most important. It includes Lucid’s upcoming midsize platform, which can underpin a smaller and extra inexpensive car than the Air or Gravity. That thriller mannequin is ready to enter manufacturing in late 2026, Rawlinson revealed on Wednesday, and represents 20 instances Lucid’s present addressable market.
That is smart; a cheaper price tag interprets to a wider potential buyer base. Extra folks purchase Toyotas than Lexuses.
“At this time, we’re competing with Mercedes and Porsche,” Rawlinson mentioned. “With midsize, we compete instantly with Tesla Mannequin Y and Mannequin 3. That’s the best-selling automotive on the earth.”
Massive Questions Forward
To its credit score, Lucid has created some exceptional expertise. The Air is probably the most environment friendly EV you should buy (tied with the Hyundai Ioniq 6) and gives by far the very best vary of any electrical on sale within the U.S. Rawlinson, by the best way, pressured that that effectivity will probably be enormous for driving down prices over time, since Lucid can use fewer costly battery cells than rivals do.
Nonetheless, large questions loom over Lucid’s subsequent couple of years. Primarily, there’s fiercer competitors within the EV house than ever. Tesla caught the auto business flat-footed and constructed a vastly profitable enterprise out of it. There’s no assure different newcomers will handle to do the identical now that established giants from Porsche and BMW to Hyundai and Toyota are on board with EVs. And there is the query of uneven EV demand proper now, although that feels unlikely to be a long-term downside given the trajectory of the automotive business and world laws.
Lucid additionally must construct model consciousness, one thing Rawlinson has acknowledged is a weak spot prior to now. It’s engaged on that, the CEO mentioned on Wednesday, by initiatives like take a look at drives at Saks Fifth Avenue areas.
That’s to not point out the essentially excruciating job of truly constructing new autos on a big scale. Famously, Tesla practically went bankrupt whereas ramping up manufacturing of the Mannequin 3 sedan. Elon Musk’s automaker looks like an unstoppable power now, however it was a protracted highway to get there. Tesla solely achieved its first full yr of earnings in 2020, practically twenty years after its founding, and constant earnings did not come till its manufacturing unit in China went on-line.
Scale will try this for you.
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