Lucid Group Inc (LCID) 2024 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Lucid Group second-quarter 2024 earnings conference call.

(Operator instructions)

I would now like to turn the conference over to your speaker for today, Maynard Um, Senior Director of Investor Relations.

Please go ahead, sir.

Thank you, and welcome to Lucid Group's second-quarter 2024 earnings call.

Joining me today are Peter Rawlinson, our CEO and CTO; and Gagan Dhingra, our Interim CFO and Principal Accounting Officer.

Before handing the call over to Peter, let me remind you that some of our statements on this call include forward-looking statements under federal securities laws.

These include, without limitation, statements regarding the future financial performance of the company, production and delivery volumes financial and operating outlook and guidance, macro economic and industry trends, company initiatives and other future events.

These statements are based on predictions and expectations as of today, and actual events or results may differ due to a number of risks and uncertainties.

We refer you to the cautionary language and the risk factors in our most recent filings with the SEC and the forward-looking statements on page 2 of our investor deck available on the Investor Relations section of our website at ir.lucidmotors.com.

In addition, management will make reference to non-GAAP financial measures during this call.

A discussion of why we use non-GAAP financial measures and information regarding reconciliation of our GAAP versus non-GAAP results is available in our earnings press release issued earlier this afternoon as well as in the investor deck.

With that, I'd like to turn the call over to Lucid CEO and CTO, Peter Rawlinson

.

Peter.

Please go ahead.

Thank you, Maynard.

And thank you, everyone, for joining us on our second quarter 2024 earnings call.

Now before I get to my prepared remarks, I'd like to extend a heartfelt thank you to all listed employees as well as all our suppliers and partners.

Our record deliveries in the second quarter were no small part due to your hard work.

We generated great momentum and progress in this first half of the year, and we'll look to build upon this through the back half of the year and into the scheduled start of production of Lucid gravity, which is of course, highly anticipated.

I'm also pleased to announce today that we executed financing agreements with an affiliate of the public investment fund for additional commitments of $1.5 billion.

Through strategic investments in Lucid, the PIF is not only advancing the country's commitment to sustainable energy and innovation, but also propelling it towards achieving the ambitious goals of Vision 2030.

This partnership underscores their dedication to fostering our diversified economy and positioning itself as a global leader in the electric vehicle industry.

I'd like to thank them for their continued support.

Now turning to deliveries.

And we delivered a record 2,394 vehicles in the second quarter, and that was up 21.7% sequentially and up 70.5% year-upon-year.

The increase was driven by strength in North America, where deliveries were up sequentially.

Now turning to production.

We produced 2,110 vehicles in the second quarter, and we're on track to produce approximately 9,000 vehicles in 2024.

As I've noted previously, production is not our bottleneck, and we are managing production to prudently optimize cash flow and to match deliveries.

Lucid's brand awareness continues to grow, reaching an all-time high in June since we started tracking the metrics.

Now we still have more work to do, but the combination of a science-based data-driven approach to marketing, an increasing number of Lucid Airs on the road and the word of mouth advocacy of our loyal customers is building momentum.

I think customers are also increasingly becoming aware of the tremendous value in technology and technology the Lucid Air.

In many ways, we've reached parity or even surpassed gas cars in our class when it comes to range, performance, technology and pricing.

And this is especially true when compared to other electric vehicles.

So it may come as no surprise that Lucid Air once again been named the best luxury electric car by US News & World Report.

This is the third year in a row that this award has been bestowed upon the app and no other car has ever achieved this, but we're moving beyond being known as a luxury carmaker.

We're a technology company and people are recognizing that we have the most advanced electric vehicle.

We announced in July that we achieved a landmark 5 miles per kilowatt hour with the Lucid Air Pure, a critical element in achieving this was our software and innovations in our advanced motor control mathematical algorithms.

And I'm pleased to announce that with an over-the-air software update coming soon, I expect all vehicles in the fleet will see some further efficiency improvements, bringing greater value to the car well after a customer's initial purchase.

2025 Air Sedans will also have the Sapphire heat pump and of course, the latest advancements in motor design.

Now this collectively is how we were able to obtain at 5 miles of EPA estimated range for the Lucid Air Grand Touring under the more stringent EPA testing and achieve 5 miles per kilowatt hour with the new Air Pure.

And we'll continue to provide more features and value.

We are planning an over-the-air software update that will significantly enhance our advanced driver assistance system or ADAS.

And it's including the introduction of hands-free highway assist, lane change assist, curb rash assist and more.

We also have plans for a comprehensive update to the user experience, new interfaces, new functions and further app enhancements.

I think customers are going to be delighted.

We're making a really big push on many aspects of our user interface software.

So despite the market dynamics, we are making inroads, making constant improvement and gaining market share with Air.

Yet again in Q2 in the US markets for Lucid Air outsold many of the largest and most storied brands in the industry within our competitive set of electric vehicles.

And in some cases, we outsold our competitors by more than double.

And with the Lucid Gravity, I suspect we will find greater success in the large and growing SUV market.

In late July, the first Lucid Gravity preproduction body shell drop down from the roof conveyor and into the main production line at our factory in Casa Grande, Arizona.

This marks the beginning of the Lucid Gravity preproduction run on our assembly line.

And just last week, I had the honor of driving the first preproduction Lucid Gravity of the production line, a key milestone in the journey to the schedule starts of production later this year.

Each units will help us perfect the process and will be used for final validation testing to ensure top-tier build quality in full-scale production.

Now we'll be hosting a technology and manufacturing day at our factory on September 10.

To showcase our technology, and also give you a closer look at the Lucid Gravity and the new advanced factory where the machines build the machine.

We've made significant advances to the factory that will help drive down costs, and I can't wait to show it to you.

Now I'd like to emphasize something that may still not be well appreciated by the market.

Whilst many may never understand the concept of efficiency and which means how many miles can one go with a given amount of battery.

It may not be broadly known as to why this energy efficiency is so damn critical.

It's quite interesting.

Some might believe that it's the engineer in me driving the narrative of the importance of efficiency.

But actually, it's the businessman in me that's driving the efficiency story.

So let me explain.

According to the database A2MAC1, nearly 40% of the bill of materials or the cost of the materials to make an electric vehicle is attributable to the battery pack, almost 40% in cars above $60,000 and in lower priced car, the battery cost as a percentage of the bill of materials can be even higher than that 40%.

And this is why energy efficiency matters so much because the higher the energy efficiency, the smaller the battery needed for a given amount of range.

And this is worth repeating.

The energy efficiency, the fewer battery cells we need for a given amount of range.

And this is an essential factor to lowering cost when it comes to making an EV and a key element in improving gross margins.

It also means less battery raw materials, which is better for the environment.

And this is critically important.

This is truly our life's mission.

And we can start having a greater impact through our technology because not all EVs are born equal.

And our technology licensing and access business enables our partners to accelerate their EV transition and reduce emissions with the goal of achieving the mission of a cleaner environment.

I've said this before, making good EV technology is really hard.

In fact, using publicly available ETA data.

We estimate that if the closest competitor were to continue at its rate of operational efficiency progress, it would take them many years to match where Lucid's core EV technology is today.

By this measure, Lucid is many years ahead of the number two player.

And of course, the traditional car brands are even further behind them.

And I think you're seeing this play out.

Some are recognizing just how hard it is.

And I think it's a matter of time before car brands might look to enhance their own know-how with Lucid advanced technology.

Because remember product defines brand.

I believe many of the products in the market are not yet commensurate to the heritage of their brands, and I believe that technology can be a key enabler.

Whilst it's difficult to identify the exact timing of when we will reach a tipping point, we have been seeing increased interest in our technology.

Now there's been more questions that relate about or ECU and general architecture.

An ECU or I should say electronic control unit is essentially a computer that controls certain specific functions of the car.

Now Lucid has been at the forefront of this for quite some time.

And I really would like to share my thoughts here because this is an element of our technology licensing and access business.

We were very early on in bringing Ethernet ring architectures to electric vehicles when we launched the Lucid Air back in 2021.

We were also early with Air and Gravity programs incorporating aspects of the zonal electrical architecture.

We have 16 in-house ECUs, all of which are over-the-air updatable.

And in midsize platform, we'll introduce our next zonal architecture.

We will further reduce the number of ECUs down to single digits.

These are only possible when you take a clean sheet approach to vehicle design.

It's interesting to note that others are just now getting to this place where we have taken the lead for quite some time.

Now these are important because the architecture plays a role in helping costs and efficiency.

But we've go much further than that.

We've been able to improve efficiency at a pace that's truly unheard of any industry through innovations in our core powertrain technology.

This isn't just hardware, but it's also the software.

Indeed, we could not achieve the level of efficiency that we've been able to hit without advanced software developed in-house.

So in closing, I'm very encouraged by the momentum that we're seeing in the market.

The benefits we're realizing from our cost optimization programs and the excitement has been building into the Lucid Gravity launch.

I believe our strategic initiatives and dedicated team position us well for continued growth for momentum and innovation in the coming quarters and years, and we look forward to updating you on our progress in the future.

So with that, I'd like to turn it over to Gagan Dhingra to provide an update on our financials.

Gagan?

Thank you, Peter, and thank you to those who are taking the time to join us today.

Before I get to my prepared remarks, I would also like to start by thanking the entire Lucid team for their tireless work in achieving very solid results.

Turning to our 2024 second quarter financial results.

During the second quarter, we produced 2,110 vehicles, and we reaffirm our guidance to produce approximately 9,000 vehicles this year.

More importantly, deliveries of 2,394 vehicles were ahead of our expectations in the second quarter, up 70.5% year-over-year and up 21.7% sequentially.

As Peter mentioned, we are pleased with the demand we have been experiencing thus far.

Deliveries outpaced production in the quarter, which was according to plan and we worked down inventory to much more manageable levels while still enabling a hub-and-spoke model to facilitate shorter customer delivery times.

We reported revenue of approximately $200.6 million in the second quarter, up 32.9% year-over-year and up 16.1% sequentially, driven primarily by higher deliveries.

Cost of revenue in the second quarter was approximately $470.4 billion.

The LCNRV impairment was approximately $154.2 million.

Gross margin was essentially flat from the first quarter, in line with what we guided to on the last earnings call despite the full quarter impact of pricing actions taken in Q1.

We continued to see improvements in our BOM costs, inbound freight and labor cost per vehicle as part of our cost optimization initiatives, which were offset by a special provision related to warranty campaign.

Excluding this campaign, gross margin would have improved 800 basis points sequentially.

Although we don't explicitly provide gross margin guidance, let me provide some direction to help with your modeling.

We expect to build inventory of components for the Lucid Gravity, which will result in an increase in LCNRV of impairments from an accounting standpoint.

We also expect to incur incremental depreciation in the back half of the year for Phase two activations in our Arizona factory.

We expect this will impact gross margin in Q3.

However, we expect to see the meaningful benefits from vertical integration and lowering our bill of materials as we move forward.

Longer term, I would echo Peter's comments that our technology and increased scale will be key enablers of our gross margin.

As with ramp volume, you will see improving gross margins with efficiency the key enabler to driving a lower bill of materials.

Now moving to operating expenses.

R&D expense in Q2 totaled approximately $257.2 billion, up less than 1% sequentially.

We expect R&D to increase in back half of the year, which is typical in the run-up to start of production of new vehicle programs.

SG&A expense in Q2 was approximately $210.2 million, down 1.4% from Q1.

The sequential decrease was primarily due to lower professional services and other cost optimization initiatives.

Although we have identified further cost reduction opportunities to execute this year, we expect SG&A to increase in the second half, primarily due to higher stock-based compensation expenses and continued investments into strategic growth initiatives.

We ended the second quarter with 53 studio and service centers, excluding our temporary and satellite service locations, up from 50 in Q1.

On the service side, we ended Q2 with 64 mobile wins in the fleet and 113 approved body shops worldwide.

We plan to continue to strategically expand our studio and service center footprint as well as satellite service centers, which will cost effectively provide additional locations as well as ensure high customer satisfaction as we continue to grow.

We recorded restructuring charges of $20.2 million related to the recent reduction in force announcement.

Our stock-based compensation expense in the quarter was $58.5 million.

We expect this expansion to grow substantially in the second half due to the timing of new grants.

In Q2, we recorded a gain of $103 million in other income from a change in fair value of derivative liability and a corresponding total accretion of $146.9 million associated with our redeemable convertible preferred stock under a line item below net loss.

The adjusted EBITDA loss was $647.6 million.

GAAP net loss per share in Q2 was $0.34, and non-GAAP net loss per share was $0.29.

Moving to the balance sheet.

We ended the quarter with approximately $3.9 billion in cash, cash equivalents and investments and total liquidity of approximately $4.28 billion.

We remain committed to maintaining a healthy balance sheet to execute on our strategic vision and will continue to be opportunistic in exploring financing.

We also announced after market close today that Lucid executed financing agreements with an affiliate of the public investment fund for an additional capital commitment of $1.5 billion.

This is made up of $750 million of convertible preferred stock, where a private placement and a $750 million unsecured delayed drought term loan facility.

Turning to inventory.

Total inventory decreased 9.9% sequentially, consistent with the decrease over the last few quarters and driven primarily by higher vehicle deliveries.

CapEx in Q2 was $234.3 million, up from $198.2 billion in Q1.

Moving to outlook for 2024.

We reiterate our 2024 production guidance of approximately 9,000 vehicles and we will continue to prudently manage and adjust our production to meet our sales and delivery needs.

As Peter mentioned, I would also remind you that Q3 is typically a seasonally down quarter for the industry given summer holidays and then ramps up in Q4.

So something to consider in your modeling.

Turning to our liquidity outlook, we expect total liquidity inclusive of the $1.5 billion commitment from an affiliate of the PIF to give us sufficient runway at least into the fourth quarter of 2025.

Moving to CapEx, we are updating our 2024 CapEx guidance to approximately $1.3 billion from our prior guidance of $1.5 billion.

This reflects a meaningful reduction as a part of our cost optimization efforts as well as certain [deffers] in our capital outlay into 2025.

From a product perspective, the Lucid Gravity start of production is scheduled for late 2024 and start up production of our high volume midsize platform is scheduled for late 2026.

I want to close by sharing my experience with Lucid Gravity and why I'm very excited about the future.

I've recently had the opportunity to get on the road in elusive gravity beta better vehicle, and I have to tell you the right was turning the way the car handle the performance, I don't think there's any other electric SUV like this in the market today.

With new products on the horizon, the strong financial commitment by the PIF and progress on cost optimization, I feel we are well positioned for the future.

With that, let me turn it back to Maynard to get to your questions.

Thanks, Gagan.

Will now start the Q&A portion of the call.

(Operator instructions)

Our first question comes from Paul C. Can you provide more information on what you're doing to cut costs?

For example, Rivian recently announced a 35% reduction in costs and expect to have positive gross margin in Q4.

Can you share your path to positive margins?

Yes.

I mean, this is an absolute key activity and Gagan and his team are absolutely focused on this.

We do tremendous amount across the entire company, looking at cost cutting as well as efficiencies, direct vehicle costs, supplier partnership, manufacturing efficiencies, quality assurance, logistics, transportation, inventory management, development strategies, we're looking at go to market models.

We're looking at internal policies, professional services and CapEx.

I can't think of any more.

I mean, it's really across the board.

And we're also, of course, focused on using our technology to reduce costs and efficiency.

This is a huge enabler.

For example, we're testing service machinery that I think can not only save us millions across our service centers, but it could also reduce our real estate footprint.

It could increase employee efficiencies, reduce repair times and it could improve customer satisfaction.

I think we made great progress, but we're really working, it's work in progress.

And addition, we take a lot of the learnings from Air and, of course, incorporated them into the Lucid Gravity early on.

And I think we'll see significant benefits from that learning transition from one product to the other.

But Gagan, you're right at the heart of this, could you answer this, please?

Yes.

Thanks, Peter.

Cost optimization has become an essential part of our life at Lucid.

First, let me start with company-wide initiatives of cutting costs and part to improving margins, and then I will cover similar focus around OpEx and CapEx.

On cost of revenue, starting with bill of materials, we are able to bring the cost down by double digit percentage since we launched Air and we have identified more cost action that we plan to implement in the second half of this year.

On logistics, the cost has reduced by more than double-digit percentage year-over-year.

On transportation, we have made meaningful improvements in reducing the cost since the beginning of this year.

Further, we also reduced labor cost per vehicle this year through efficiency improvements.

Looking at our journey over the last few quarters, our gross margin improved from negative 240% to negative 134%.

We are also looking into the longer term, although we believe the best way to reduce battery costs is to reduce the number of batteries by increasing efficiency.

We are also evaluating every opportunity to drive down cell cost.

For example, we recently signed a supply agreement with Graphite One. In addition to BOM and logistics cost, I want to remind that a meaningful portion of our cost of goods sold is related to the depreciation of our factories and equipment.

We've made a very deliberate choice of making our long-term investments, including a leading in-house powertrain and battery technology, software and state of art manufacturing facilities.

So as we start to ramp volumes, you'll not only see improvement in gross margins, but will also have a significant cost advantage to our competition, which we are very proud of.

On other areas on OpEx, we are looking each and every corner, whether it is headcount optimization, professional services or overhead.

Each expense is monitored and challenged, which is evident from our results that the SG&A expense went down in the current quarter despite our increased footprint and higher number of deliveries.

On CapEx, we updated our guidance today to reduce the annual spend by $200 million and a significant portion is related to savings and cost reduction.

Thanks, Gagan.

Thanks, Peter.

Question two is also from Paul C. There are companies working on axial radial flux motors and claiming highest torque and power density while using less materials, some claim to be production ready within one to two years.

How does this compare to Lucid Motors and how are you staying ahead of the upcoming tech?

Maynard, I will get me started here.

So there's two sort of categories of permanent magnet motors.

There is the axial flux motor, which is larger diameter and its shortest market pancake shape.

And then Lucid Motors are radio flux.

They're more like a drum shape.

And it's quite fascinating.

I mean, really, I think there's a fundamental lack of understanding just how technically advanced Lucid's radial flux motors are.

The axial flux motor stack up reasonably well against other people's radial flux.

But compared with what the level of technology that we got at Lucid for a battery EV and axial modes of a flux motor really sucks.

Now because they are large diameter, relatively low revs, and quite flat.

They've got a great application in a gasoline hybrid, and you see these in super sports cars.

And they're great for that because they rev about 8,000 RPM like a fast, internal combustion engine.

But really, the problem they've got is there a very high thrust pauses, and they effectively because they're large diameter, they can't spin very fast.

And if you want to get the speed up to maybe 10,000 RPM, you really need to resort to carbon wrapping.

And believe me, anyone who has to resort to carbon ramping doesn't really know what they're doing with electric motors because it's super high cost.

It's super difficult to manufacture.

You do not want to do carbon wrapping.

It is a last resort.

And also actual flex motors are super difficult to manufacture.

They have got the segmented laminations and they are radial laid so each laminations are different sizes.

They are nightmare to put together.

And so here's the thing that you plan for similar per to weight ratio get more torque out of an axial flux.

But it's about 23% more something like that are really good example compared with where Lucid radial flux is.

But the Lucid radial flex will spin about 20,000 RPM compared with the axial flux of 8,000 RPM.

And what I said in one of my tech talks and motors is what really matters is not just not even grabbing power density.

It's this bandwidth between maximum spin speeds and bottom end torque.

And we are just so far ahead of an axial flux motor.

And as I say, I think there's a fundamental lack of understanding just how far advance we are.

We're not going to get to 5 miles per kilowatt hour anywhere close if we went axial flux, I'm sorry.

Thanks, Peter.

And we'll take our last say question.

Can you give an update on the progress for retail ESS product?

Are you still running prototypes?

And can you provide information on their performance?

Okay.

Well, yes, we are.

I mean, first of all, I'd like to say we're closely engaged in this energy sector.

The end of last year, we launched our range exchange feature, and it's got innovative feature.

It gives enabled by the Lucid's bidirectional Wunderbox and the software enables Lucid Air to directly charge other electric vehicles.

But that's beside the point in many ways, specifically related to energy storage.

I've got all my engineering teams, absolutely laser focused on three things.

We're further enhancing Lucid Air.

We're looking for further advancements.

We've got the launch of Lucid Gravity coming imminently and as a whole advanced team working on the development of our midsize vehicle, which path to have that laser focus on our products have that take priority.

Now that said, technology leadership is core to our business and it's the biggest strength.

And I believe our core competency in the future in battery tech will allow us to develop engineer and engineer in energy storage solutions.

But right now, our main focus is the vehicles, not ESS.

Great.

Thanks, Peter.

Now we'd like to take some questions from the phone lines.

Wanda, can we move to the instructions and first question?

(Operator instructions) John Murphy, Bank of America.

This is actually John Babcock on for John Murphy.

Just quickly for the first question.

I did want to ask, I mean, are you going to be able to reach free cash flow positive with the small-ish mid CV.

Ultimately, we've been calling it the space, but I'm not sure if it's going to come out with a different product name or that?

And, or should we expect that you might get to free cash flow positive before that?

Well, I certainly plan to, I mean, that is the vision.

Our whole business model is a long-term model of a successive growth through successive periods and the phasing of product.

We move now with Lucid Air off the back of two record quarters for deliveries, just 6 times the TAM with a Lucid Gravity to potentially 30 times the TAM with our midsize platform.

And it's that scale that's going to lead us to cash flow positive.

Gagan, would you like to

--

Yes, I think Peter welfare.

We are a high-growth technology company, and we are operating in a capital intensive space.

And at the same time, we have in house the way we made our investments, we are like leading in house powertrain and battery technologies.

So that will give us a competitive advantage when our volume increases and we are very proud of that one.

And I'd really want to add something here, John, as well.

I think the key USP of us as a company, when we get to scale, is this efficiency story because we will not rest.

We're advancing the technology.

We're significantly ahead of the competition, all competition.

We have leadership with from 5 miles per kilowatt hour.

And this is going to play.

That means we can make a car of a given range with a smaller battery pack than other people.

And that is really going to play to our midsize.

We'll be able to make it more cost effectively.

And that will lead directly to help us to become free cash flow positive.

Okay.

That's helpful.

And then next question.

I was wondering if you might be able to talk about price elasticity of demand for the year.

And also does it, whether it makes any sense to reduce prices or go down on trend to drive volume?

Or if ultimately, the goal would be to protect the brand for future vehicles?

What we've done is we've introduced Lucid Air Pure, which is a real drive car at just $69,900.

A lot of people think of Lucid is much more expensive than that.

But we did actually promise that back in 2020, when we launched the product in our 2020 residual that we would hit $69,900.

So think of this really as us introducing successively more accessible versions of the car rather than price cuts.

But clearly there is a degree of price sensitive in the marketplace.

Thanks, John.

Let's go to the next--

Stephen Gengaro, Stifel.

Thanks.

Good afternoon, everybody.

Just two questions from me.

First, just quickly, when do you think you'll start opening reservations for the gravity?

Okay.

Well, we haven't disclosed that yet.

I would say that, we will do so at an appropriate time.

What we feel is that some companies have really done their customer base of this service by prematurely opening a reservation list, it becomes very speculative and almost meaningless to a certain degree.

What we are thinking of is being a pre order list and we'll let you know as soon as we're in a position to do so.

Thank you.

And the other picture, the other question from a bigger picture perspective is as we think about the mid price vehicle and I think you said by the end of 2026.

How do you, I'm not sure exactly how to ask this, but how do you calibrate or reconfigure the engines based on your phenomenal technology at a lower price point to sort of (multiple speakers) help bring the cost of materials down on that vehicle along with the battery?

Yes.

So we're using all our considerable experience now.

We are creating the most advanced systems in the world to create a much more cost effective variance for our midsize.

And that work is well underway already.

I think what we've done is achieve remarkable efficiency.

I think we've achieved remarkable compactness.

I don't think going further compact is the way we can use our expertise to reduce the cost, the cost of the bearings, the cost of the amount of copper that we're using, the cost of the materials, the heat treatment in the gears.

And this is a laser focus for us now.

But I want to be clear there is this miss understanding that our current technology is so esoteric, so expensive that's driving our losses.

And the truth is so far from this, our current technology is eminently manufacturable and cost-effective for its level of performance.

What I'm trying to do now is take all that knowledge and go for even more cost effectiveness for a lower performance unit, which imminently suits our midsize and would suit licensing for a family come from a traditional OE as well.

Itay Michaeli, Citi.

Great, thanks.

Hi, everyone.

Just two financial questions for me.

First on the capital raise announced today.

Can you just talk about your intentions to actually draw down on the delayed term loan?

Should we expect that to happen this year or just given your cash position should that be maybe more of a next year expectation?

And then secondly, hope you could talk a little bit more about the drivers of the CapEx outlook reduction for this year?

Thank you.

Yes, sure.

Thank you.

So we ended the quarter with $4.28 billion of liquidity.

And yes, we announced $1.5 billion today.

Coming to specifically when we take out the money from the facility.

So we have enough liquidity today.

And also with $750 million convertible, this adds to our liquidity as well.

So at this stage, we don't have intention to withdraw $750 million from term loan in the near future.

We'll in the due course of time.

Yes, I think there was a misunderstanding, Itay, that I've seen it out there that we had $1.28 billion cash.

But of course, we should be looking at the $4.28 liquidity because, of course, we're investing prudently some of that.

And remember that we're investing heavily in a few areas we're looking, we're currently building out.

We just put the full steelwork up in our new factory in Saudi Arabia.

Just got the pictures in this morning.

And so we're putting a significant chunk of money into that.

Then we're completing as major investment in an additional 3 million square feet, close to 3 million in our factory in Arizona, bringing stamping in-house, bringing our logistics center in-house under the same roof to reduce OpEx and bringing our state-of-the-art powertrain plant actually under that same roof and expanding its capability massively.

So there's a huge chunk of investment there.

Then we've got the gravity or the tooling and R&D costs, the launch costs for Gravity.

And on top of that, we're building out ourselves and service network internationally.

And look, we've got to think this is a long-term play.

This is where the money is going in these crucial investments for the long term.

In regard to your second question on the CapEx, this $200 million revising the guidance, a significant amount of that is based on the cost reduction efforts, which basically looking at challenging each and every item, the negotiation, how we want to build our, the factory, how we want to procure our machinery and equipment, the number of units, a very thorough process looking each dollar carefully and we are able to bring down our CapEx cost, yes, as part of revising guidance.

There is also some CapEx deferral, but savings and reductions have played a bigger part.

(multiple speakers)

Thank you, Gagan.

Steven Fox, Fox Advisors.

Hi, good afternoon.

I had two questions.

First of all, when I'm looking at chart 7, it looks like you're back on your efficiency improvement curve with the latest model year.

Can you just talk about, say, over next two to three years of improvements?

How should we think of the mix between coming from software versus electrical versus battery, et cetera?

And then I had a follow-up.

Actually that's right, Steven.

It's a fusion software and hardware.

I mean, we recently announced the most efficient car in production ever with 5 miles per kilowatt hour and 146 [MPGE.] And I think it's just to be good in context because the new way of assessing the cars by the ETA here in the USA become more stringent.

And you see actually some, we saw some today quite a close competitor actually recording worse numbers because it's like having to face a more stringent test.

So I think that's absolutely key.

But this is a technology race.

It's yet to play out.

And I recently was delighted to commission what we call internally Project Chwech, which is the Welsh word for six as we move towards the aspirational 6 miles per kilowatt hour.

So Project Chwech is officially go here. and you heard it first.

And you might have to look that up in the dictionary, but it's an aspirational how much better than 5.0. can we go?

And I've got a brilliant team of scientists and research engineers on that.

That's helpful.

And I just learned some Welsh for the first time in a while.

And then just as a follow-up, can you just talk about the importance to your funding initially with customers in terms of your ADAS features that you have in place and are rolling out?

(multiple speakers)

We're having a big, big push on software.

I personally taken a leading role in driving software.

I was reviewing ADAS this morning with the team.

There is a new vigor in the company.

And we're going to introduce hands free lane assist before the year is out.

We've got a whole range of improvements that I am personally driving and that isn't just ADAS, that's the whole infotainment stack in the car.

And I want to roll a lot of that out this year on Air in the run-up to Gravity.

So people will see [was June] Gravity how awesome it's going to be, and there will be incremental evidence of improvement on as we roll towards Gravity.

Andrew Shepard, Cantor Fitzgerald.

Hey, good afternoon, everyone.

Thanks for taking my questions and congratulations on the quarter.

A lot of my questions have been asked, but maybe to touch on the capital raise again.

Peter, what is the best way we should be viewing this announcement.

Obviously, in the near term, it extends the cash runway into Q4 of '25, which helps to address any near term liquidity issues.

But should we see this as a final straw from the PIF or is this, is it more accurate to view it as kind of restrengthening that relationship and then being more focus on the medium to long term as well.

Thank you.

Thank you, Andrew.

I'll describe it as a resounding further inducement of their long-term commitment of a long-term relationship, and they are the perfect partners.

I couldn't ask for any more and we are so aligned, this transcends a mere financial arrangement.

We are a cornerstone of the Saudi Arabia's ambitious Vision 2030 to transition their company to a sustainable economy.

And we are proud to participate in this.

And that's why we're currently putting up still work in our factory in Saudi Arabia.

This isn't the case.

It's often portrayed.

How long is it before Saudi is going to get fed up with Peter playing with it because it's not that.

We have regular dialogues.

I have with my Chairman, and we are absolutely both committed the dialogue is much more of a Peter, keep things on track.

We want these midsize, we want these products, is Gravity on track?

This is the commitment that we have together.

This is the sense of enduring partnership that Lucid has with the PIM.

And also it's non dilutionary.

So I think this is an ideal manner of raising capital.

And on the significance service, to take us through into well into Q4 next year.

This means that we go through the critical launch period of Gravity through a launch part of its production ramp up.

And remember, Gravity is just the product that everybody wants.

And remember what Gagan has said over and over, our economics are driven by scale.

And gravity is going to be scale.

There's going to be four steps to scale sell more Airs, and that's about brand awareness.

Get gravity ramped up, get the midsize running and see if we can get technical partnerships with other OEs.

Those are the four steps and efficiency is going to play absolutely into all of those right now with Pure, getting the 5 miles per kilowatt hour.

We are 420 miles.

We are just 84 kilowatt hours of energy.

Nobody's even close.

That's why we can make it at $69,000.

So that's why it makes sense at $69,900 and it's going to make even more sense we're going to have a Gravity with the sort of range with half the battery size of some other players out there.

They are just half the battery size.

No one else is even close and it really is going to come this whole chess game is going to play out, we get to mid size we'll be able to have a competitive range with a relatively tiny battery pack and much less cost than anyone else.

Got it.

Thanks, Peter.

That's super helpful.

I appreciate all that color.

(multiple speakers)

Maybe just one last quick question.

Wanted to touch on something we haven't maybe spoken about in a couple of quarters.

But just on the licensing agreement with Aspen Marin, I'm curious if you could maybe expand on how that relationship is going, and particularly when and how that might that you expect that to ramp up in terms of kind of revenue?

There was an announcement.

There is a little delayed on their end, which is disappointing because it's disappointing that any EV is delayed.

But I completely I emphasize with where they are in terms of their customer requirements.

I don't think it makes any long-term difference to the relationship with solid as a rock.

Aston is fully committed.

We are all in to ensure the Aston creates the best electric hyper cars in the world.

And what's great about that is, our price range from $69,900, a week up to $249,000 with Sapphire.

We're not going to go above that, and Aston starts where we finish.

So there's no cannibalization.

There is absolute synergy and a great working relationship.

Tobias Beith, Redburn Atlantic.

Hi, good evening.

Thanks for taking my questions.

I have three, please, and I'll ask them individually.

Peter, I noticed the stated capacity of the 2025 Lucid Pure is 4 kilowatt hours smaller than its predecessor.

And this seems to me too small to reflect the removal of one battery module from the pack suggesting that the cells themselves could be slightly different and the vehicle weight may have been reduced.

Are you able to comment on this logic and perhaps provide more information on other improvements that were made to reach to 5 miles per kilowatt hour threshold?

Yes, absolutely.

It runs at16 module pack which is, I think, 672 volts.

If you look at Grand touring and Sapphire have a 22 module pack, which runs at 924 volts.

And then Touring has a 16 module pack, which runs at 756 volts and we've reduced that down to a 16 module pack for Pure at 84 kilowatt hours, and that runs at 672 volts.

It's 42 volts per module open circuit on page.

So we've got the most efficient car ever, 146 miles per gallon E and it's magic 5 miles per kilowatt, no one's even close.

And let me tell you, if we were to choose less range, we get even more efficiency because there's even less battery weighs.

So what you got to remember is, we're achieving that 5.0 miles per kilowatt hour with 420 miles range, which has got more range.

There's no other competitive car out there from any other manufacturer.

A little usage that's close to the 420 and we still got a world record for efficiency.

If we dropped that down to 360, would be above 5 miles per kilowatt hour.

Lower range cars, it's easy to get to these efficiency levels.

Well, relatively.

Okay.

What is the end game for Lucid's theoretical advantage on the bill of material costs for an electric vehicle, assuming that the need can be maintained plus volume scale.

Is it to achieve superior profitability?

Yes, absolutely.

It's the endgame is why we exist.

There is a mix understanding, a misinterpretation that with some niche luxury car company when and nothing could be further from the truth.

We're here to make a to advance the state of art of the electric car in order to find ways of driving the cost down so that it can be attained by far more people to have a meaningful impact upon the planet.

If you look at even the Bloomberg numbers of $128 per kilowatt hour at pack level, I mean if we can say with 15, 16 kilowatt hours less than the competition.

This is multi-thousand dollar cost saving today, and that's going to make all the difference when we look at midsize products.

And if we license our tech to another company that maybe wants to do a $25, $30,000 car, this is just like where every dollar counts we can suddenly start saving beyond thousands of dollars.

And in fact, if you look at the the agony that some of the other OEs have put with the wrong product trying to do electric pickup and electricity and electric propulsion isn't the right solution for a usable affordable pickup, believe you may.

But our technology would save those OE's, thousands if that was applied to those pickups because their pickups would require so much smaller battery pack with our high-tech solution.

And to add to this, we made a choice of our long-term investment having in-house power train technology and battery technology.

So as we get to scale, we expect long-term investments to pay dividends many times over.

This also translates to significant cost advantage compared to our competition, better margin profile than where traditional OEM or today.

It's just a matter of scale and we are getting there.

But we already have narrowed down our losses and with scale, we'll be in a better position than competition.

Absolutely, good point, Gagan, because we're going to hold this technology and manufacturing Day on September 10.

I hope you'll be able to join us there because you, I think if seeing is believing, we really got the real leading state-of-the-art in-house advanced power EV powertrain manufacturing plant, like I don't if anyone's got anything to compete with.

James Picariello, BNP Paribas.

Hi, everybody.

I have a question on deliveries for this year.

You obviously have the production guide of 9,000 units.

You saw a nice uptick in North America, demand North American deliveries in the second quarter.

We could see that in the sequentially lower Saudi revenue in the second quarter.

But I think the, the indication was for lower third quarter deliveries.

Just curious what's in play there and what the expectation is for (multiple speakers) full year?

Sure.

So we haven't guided on deliveries.

What we have guided upon is that we plan to make approximately 9,000 cars this year.

And we just reaffirm that today that we're on track for that.

Now, of course, regarding deliveries, we are on the back of two record quarters, 70% up from Q2 this year over last year.

But clearly, what we're trying to do is prudently manage the business, manage the efficiency of our inventory.

We need some inventory.

We need a buffer and we need to be able to supply to customers directly out of inventory.

So we don't want no inventory, but we want a managed amount of inventory.

We don't want the inventory to grow.

So therefore, implicitly, that implies that we want to be delivering a very similar number or more than the number we manufacture, although we haven't guided upon that.

Yes, and right now, we believe our inventory is manageable.

And it also, couple of benefits that bring managing our cash flow better, reducing the risk of obsolescence also reducing the storage costs.

So we believe we are in a good position from that perspective.

And regarding, I think we were cautioning about Q3 because of that the summer months.

I think we've just been prudent about that.

Okay.

Yes, that's just ultimately on the deliveries and the demand side.

Just seems it's more cautionary

(multiple speakers)

Traditionally, you tend to see a bit of a shutdown with people their long summer vacation and then an upturn in Q4, but we will see.

Got it.

And then just my quick follow up.

Well, one, is there any discernible difference in ASP between your general deliveries and those the Saudi government?

And then on the quarterly cash burn rate that's implied where we've got the $4.3 billion in liquidity plus the $1.5 billion that you just raised and announced today, right?

And then that gets you into the fourth quarter as you state, right?

So that implied quarterly cash burn rate still is in that $900 million to $1 billion.

Just curious what goes into that?

Is that just loose math and not necessarily your expectation, which is ultimately of critical importance in terms of the cash burn rate through next year and how that corresponds with your profitability expectation on gross

(multiple speakers)

So couple of things here.

First of all, from a CapEx perspective, we spent around $243 million this quarter, nearly $200 million last quarter.

We guided $1.3 billion for CapEx.

So significant amount of CapEx is going to come remaining part of the year, plus we are working on Gravity as well as midsize where significant investment is going to be there.

Plus we are building a factory in Saudi Arabia.

So our CapEx and the R&D programs where we are going to spend significant amount of capital for us to be ready for the future to take us to the next journey.

I mean, please come and join us.

Please visit us in the factory on September the 10.

We're holding the Technology and Manufacturing day.

I think anyone visiting will realize this the sheer level of investment we've made.

We've got state-of-the-art facility.

This puts us in an incredible position for the future.

We're continuing this.

This is a long term play.

This is where the money is going to new factories in Saudi Arabia, the completing of our state-of-the-art facility in Arizona on the tooling to get the best SUV in the world Gravity into production.

We're spending money now investing in the design of our midsize and on the service network around the world.

So these are long-term strategic investments that's where the money is going.

This is a long-term play, and it will come to power.

Thanks, look forward to September.

Thank you.

Thanks, everyone.

So this concludes Lucid second-quarter 2024 earnings conference call.

I appreciate everyone joining us today.

Thank you.

Thanks, everyone.

Ladies and gentlemen, you may now disconnect.