Lucid Group Inc (LCID) 2021 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Lucid Third Quarter 2021 Earnings Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions)

I would now like to turn the conference over to your speaker for today, Lauren Sloane, Investor Relations for Lucid. You may begin.

Welcome to Lucid Group's Third Quarter Fiscal Year 2021 Earnings Call. Thank you for joining us today. On the call, we have Peter Rawlinson, our CEO and CTO; and Sherry House, our CFO. Our quarterly report on Form 10-Q for the second quarter ended September 30, 2021, was filed with the SEC and the related earnings press release was issued after close of market earlier today, both are posted on our website.

Before we get started, we want to emphasize that some of the statements on this call, particularly those regarding the future financial performance of the company, production and delivery volumes, macroeconomic and industry trends, company initiatives and other future events are based on the information that we have as of today, and include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements are subject to numerous risks, uncertainties and other factors that could cause actual results to differ from expectations, and we refer you to the cautionary language included in Risk Factors in our quarterly report on Form 10-Q for the quarter ended September 30, 2021, as well as other documents filed or to be filed with the SEC for a fuller discussion of such risks, uncertainties and other factors.

Forward-looking statements made during today's call speak only as of the time they are made, and we are under no obligation and expressly disclaim any obligation to update, alter or otherwise revise any forward-looking statements, rather as a result of new information, future events or otherwise except as required by law. You are cautioned not to place undue reliance on these forward-looking statements.

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 currently available in our earnings press release issued earlier this afternoon as well as in the investor deck available on the Investor Relations section of our website at ir.lucidmotors.com.

And now I'd like to turn the call over to Lucid's CEO and CTO, Peter Rawlinson. Peter, please go ahead.

Thank you, Lauren. We're very excited to welcome stakeholders to Lucid's inaugural earnings call. We have achieved tremendous amount over the course of 2021, and we're excited to lay out our vision and priorities for the company. We look forward to continuing to work with investors and analysts to build long-term relationships with our stakeholders.

Now for those of you who are new to Lucid story, we were originally founded as Atieva back in 2007. At that time, we were focused on advancing our battery technology, logging over 20 million miles in real-world driving data. And armed with everything we learned as Atieva, we then turn our efforts to creating the best car in the world as Lucid, rethinking from the ground up every single aspect of the vehicle from design to engineering to manufacturing.

The initial result of that effort is Lucid Air, which carries with it the means to accelerate the adoption of electrification while redefining luxury in the automotive market. As we continue to bring Lucid Air to market, it's clear that the opportunity we have in front of us is massive because the market opportunity is not just for electric vehicles, it's the vehicles overall.

Currently, there's only about 2.5% penetration into the U.S. vehicle market through EVs and only about 4% penetration into the global vehicle market. We see the luxury car market expanding at an annual rate of about 5% over the next few years. And ultimately reaching over $700 billion of global sales near the middle of this decade. We believe that the growing customer sentiment for electric vehicles, coupled with the government mandates encouraging their adoption provides significant support for the EV industry overall and for Lucid's position within it.

Lucid is uniquely positioned to capture this opportunity driven by our key differentiators, namely, our technology innovation and the people who work here. Now first off, we believe that our technology is world apart from even the current market leaders. For example, no one expected Lucid to achieve even 400 miles of range. And now we have an EPA certification of 520 miles of range for the Lucid Air, Dream Edition R.

And we've created this technology with an eye towards an ability to manufacture it at scale, which is where true innovation lies.

Furthermore, we have a drive to continue innovating, which is why we've been able to surpass even our early range estimates. As another example, our technology powers every car in Formula E, the world's premier electric motor sports series. And indeed, it changed the sport. Our battery packs have enabled formula e-cars to complete full race distances on a single charge. And what we learn from every race car and every race goes directly into the battery technology powering Lucid Air.

As media and early customers have learned, our vehicles are truly the fusion of hardware and software, made possible by one of the best teams in the industry. We have auto industry veterans, including members of my former Tesla Model S team, working with former executives from Apple and learning from their customer electronics experience along with so many other standouts from automotive and tech industries. We plan to leverage our team's abilities to continue to improve vehicle function and features even after customers take delivery via over-the-air updates.

Now before we update you on some of our substantial achievements during the most recent quarter, I would be remiss in not highlighting some of our most recent achievements outside of Q3 and that's because these are quite significant. Now first off, we started delivering vehicles to customers at an event at our Silicon Valley HQ just 2 weeks ago on October 30.

Now this preceded an increasing number of deliveries nationwide slated for this month and next, including more than 2 dozen deliveries to paying customers that occurred just this past weekend. So you may have already witnessed your first sighting of Lucid Air in the wild. We actually have a full report on customer deliveries during our Q4 call. So watch this space for more.

Next, just this morning, Lucid Air was officially announced as MotorTrend's 2022 Car of the Year. Now it is arguably the most prestigious award in the motor industry seeking out true innovation and groundbreaking vehicles. For a new brand and a new company to win, well, to my knowledge, that's only been done once before, and I should know what was there.

Getting back to the matter at hand. In Q3, we secured a number of certifications required to sell the vehicle ahead of those customer deliveries that I've just mentioned. This includes full FMVSS, CARB FCC and FDA safety certifications, all of which further establish our credibility and cleared the way for the ramp-up of Lucid Air deliveries.

But we're most proud of is the official EPA rating of 520 miles range. And because we achieved this landmark through our world-leading in-house technology, not by simply installing an oversight battery pack or off-the-shelf parts. Our Lucid Air Grand Touring has an official EPA rated range of 516 miles and it achieves that with a 112 kilowatt-hour battery pack, giving it an industry-leading efficiency of 4.6 miles per kilowatt hour.

Taking a step further, we have 6 Lucid Air variants in the top 6 positions of the EPA range ratings for EVs. And unlike many other EV companies, we design, develop and build our powertrain and core EV technology components in-house with an emphasis upon efficiency. Now we view this as a strategic competitive advantage for Lucid as we look ahead.

Next, after securing the EPA rating, we officially commissioned our factory in Casa Grande, Arizona, and started production of Lucid Air. At a factory event on September 27, we hosted customers, media and guests. All of them had the opportunity to drive the Lucid Air. The reactions and feedback from this experience could not have been better, including a broad validation from important media, I rather like when reporters call Lucid Air jaw-dropping and the future of cars.

Now the fantastic experience this customers and media has had with the Lucid Air to date have only increased interest in the brand. The result is an accelerated pace of new reservations. Currently at 17,000 and climbing quickly, which has also spurred us to increase the total production quantity of the Dream edition to 520, both to accommodate demand and also to recognize the Landmark EPA 500 miles achievement.

Lastly, I'll highlight that the customer journey has also been an area of focus for us this past quarter. We now have 16 Lucid studios and service centers across North America. But this is only the beginning, and I'll talk more about our plans for expansion shortly.

Now, I wanted to look ahead to our near-term strategic priorities, which will see a continued focus on achieving progress against our existing activities. As I mentioned earlier, last month, we started delivering Lucid Air Dream editions models to our reservation holders and we're currently ramping up customer deliveries. We will soon start to deliver Lucid Air Grand Touring models followed by touring and AMP Pure next year.

With such demand across the Lucid Air lineup. We felt it critical to accelerate the expansion of our advanced manufacturing plant or our AMP-1 factory in Arizona, essentially investing in our capabilities to mitigate future business risks. This process started in Q3, with progress well underway on the addition of 2.85 million square feet of manufacturing space to our Arizona factory. This expansion will allow for a significant increase in production capacity for Lucid Air and enable production of the Gravity SUV in 2023.

And speaking of expansion, our retail footprint grew significantly this year, including our first location outside of the U.S. in Vancouver, Canada, which we opened last month. And we plan to have 20 studios and service centers opened by the end of this year. So you can see acceleration as a theme in the second half of 2021.

We also continue to increase our service footprint across the U.S., not just with physical service centers, but also with the rollout of our mobile service program. We expect service centers to continue opening in North America, and we anticipate hiring a significant number of additional service technicians as we expand our capabilities. We're optimistic about these goals.

Even in a challenging environment as COVID-19 continues to present numerous obstacles for the auto industry and supply chain. Lucid is no stranger to this, but we have continued to deliver against our time line and with the highest standard of quality. And I would like to commend the company's employees who worked relentlessly and tirelessly to help Lucid's progress and grow during these recent periods of uncertainty.

Lastly, I would like to spend some time providing an overview of our longer-term strategic focus areas as well as upcoming major milestones. Lucid continues to grow its operations in the U.S., but as part of our growth strategy and more specifically, our international strategy, we intend to expand our sales, maintenance, repair services and manufacturing activities outside of the U.S., again with the goal of mitigating business risk and charging future growth.

On the retail service front, we're looking to expand our footprint in Europe and the Middle East, and we expect to enter these markets in 2022. There has been continued expansion of the team in both regions with key additions to leadership and the employee base, and we're excited by the prospects of these key regions. We believe this will help establish Lucid as a global brand and address untapped market demand in these regions on an entirely new level while also taking action to address climate change through sustainable mobility.

Moving to our Air line up. The longer view will see production expanding to include Touring and Pure models as well as its future variants. With our in-house technology establishing Lucid Air as the new bank benchmark for EV efficiency. We will be quick to maximize this potential because if we can achieve 516 miles with just a 112 kilowatt-hour battery pack, it's easy to imagine a smaller pack and the weight and cost savings afforded by it, which would allow for a much more attainable EV that can still achieve 300-plus or 400-plus miles of range.

And finally, we're excited to launch additional vehicles over the coming decade including Project Gravity, a luxury SUV that leverages the Air's platform and that we expect will elevate the SUV to a new level with extraordinary performance and category defining interior space. And we look forward to sharing more details about the Gravity next year ahead of expected production in 2023.

So with that, I would like now to hand the call over to our CFO, Sherry House, who has been a tremendous addition to the Lucid team. Her experience and background have been truly invaluable. I could not have asked for a better partner to work with me on the next phase of this very exciting journey. Sherry?

Thank you very much, Peter. I'd like to start by expressing how pleased I am to be speaking to all of you today for Lucid's inaugural earnings call covering the third quarter of 2021. Just 6 months ago, I joined this fantastic team, which Peter has assembled. And I've witnessed first hand what is possible when you put a passionate and persevering team on task to set a new standard in vehicle electrification.

This has been a very active quarter for the company, highlighted by external validation of Lucid's many technological and design feats and even marked by a number of industry first such as first EV to reach and exceed 500 miles of range on a single charge.

On the finance front, on July 23, we completed our reverse merger, de-SPAC transaction with Churchill Capital Corp IV and our PIPE investors to form Lucid Group, Inc. This transaction brought approximately $4.4 billion of net cash under Lucid's balance sheet.

On July 26, we further raised our public profile and access to capital through our public listing on the NASDAQ as LCID. These events significantly bolster Lucid's balance sheet and derisk the near-term execution of Lucid's forward plan. This capital will increase the production capacity and vertical integration at our production facilities in Costa Grande, Arizona, and support the readiness of our global supply chain.

Second, this capital will enable our commercialization and globalization efforts by expanding our studio and service center footprint and planning for the future localization of manufacturing.

And finally, this investment will fund R&D efforts to enhance and grow the technological moat that Lucid has established. Specifically, the dollars will advance the development and launch of new variants of the Lucid Air and the Gravity SUV as well as future vehicle programs and other technologies.

I'd now like to turn your attention to our third quarter results. To put the quarter in context, it will serve 2 primary themes throughout our financials. First will be the strengthening of our financial position, which we just discussed. And second will be the transformation of our company as we ready ourselves for large-scale vehicle production.

In our Q3 results, you'll see cost associated with our start of production in September. However, you will not see vehicle revenues until Q4, given that customer deliveries began on October 30.

In Q3, Lucid recognized revenue of $232,000, predominantly related to the use of our battery packs in the Formula E Ray series. There is seasonality of this revenue stream. And similar to 2020, we expect to see the lion's share of battery pack revenue in Q4. The cost of revenue was $3.3 million and includes cost of goods sold related to the start of production at AMP 1 get occurred in September. Engineering, research and development expenses have grown by about 72% year-to-date compared with the same period in 2020, predominantly driven by the investment in talent, prototype expenses related to the testing and certification processes that Peter referenced earlier, as well as the production quality validation fleet that we produced at AMP-1.

On the SG&A side, expenses increased by approximately $400 million for the 9 months ending September 30, versus the same period in 2020. A key driver of SG&A expenses is headcount growth related to the build-out of the sales and service network as we prepare for additional deliveries in the fourth quarter.

We also invested in people, processes and systems on the G&A side of the house in order to not only support Lucid as a publicly-traded company, but also to support the globalization of our business.

Lastly, there was an increase quarter-over-quarter in stock-based compensation across both R&D and SG&A. This increase is attributed to a cumulative catch-up on employee grants. Accounting treatment requires the merger to close before 2021 grants could be recorded as stock-based compensation.

Transitioning to our balance sheet and cash flows. At the end of the third quarter, Lucid had a cash position of approximately $4.8 billion, reflecting the $4.4 billion from the SPAC and PIPE plus the cash on balance sheet at the time of the close. We also added $173 million from the exercise of public warrants prior to the notice of cashless redemption, which occurred on September 8. The cashless redemption provided investors who had purchased the LCIBW warrants with access to the stock without the burden of making an upfront cash investment.

As for the close of our public warrant program, that decision resulted in the exercise of nearly all of our outstanding public warrants. The cashless exercise also reduced dilution by enabling a 0.4458:1 ratio on the issuance of shares to public warrants exercised.

We observed a significant amount of goodwill with our retail investor base due to this cashless provision and our decision to extend the warrant redemption window through October 29, which allows some who missed the initial redemption window to still exercise for shares. We want to reiterate how much we appreciate everyone who exercised their warrants and are so pleased to have such a diverse and supportive investor base.

And lastly, I'd like to comment on CapEx to close out our balance sheet highlights. We increased our net, property, plant and equipment by over $250 million from the prior year. As I mentioned, this PP&E growth is related to the build-out of AMP-1, investments in machinery, tooling and equipment, and the expansion of our retail studio and service center footprint throughout the United States and internationally.

Looking onward to the fourth quarter, we are incredibly excited about the road ahead. We expect to ramp up production and continue to increase customer deliveries of the Lucid Air. We're seeing increasing interest in the Lucid Air with over 17,000 current reservations. Heading into 2022, we remain committed to our plan to achieve 20,000 units in the calendar year. However, this plan is not without risk, given the extraordinary supply chain and logistics challenges that the automotive industry has been facing.

Financially, we're proud to have strengthened Lucid's balance sheet as we commence production of customer vehicles heading into the fourth quarter, and we believe that we are well positioned to fund the exceptional growth opportunities in front of us as we move through 2022.

In closing, I'd like to thank all of you for joining our third quarter earnings call, a recording of which will be posted on our Investor Relations website. I'd also like to thank our talented employees for their hard work and dedication across our headquarters and facilities, retail stores and manufacturing plants.

It's because of your collective effort and the effort of our partners that Lucid can create value for our investor base and drive our ultimate mission to bring sustainable energy technologies to the world. I'm personally optimistic about the future of Lucid and the value that we will deliver to all stakeholders, customers, suppliers, partners and investors.

Before we transition to analyst questions, I'd like to note that we are exploring additional methods to ensure that our broad and growing investor base can participate in the Q&A, and we hope to have that implemented in early 2022. With that, we'd like to open the call to questions. Operator?

(Operator Instructions) Our first question comes from the line of John Murphy with Bank of America.

Congrats on your first quarter as a public company. That's an achievement onto its own, in addition to everything else you're getting done here. First question for you, Peter, and maybe Sherry, you can chime in on the second part of this. As you think about what you're doing here and the success of the Air and what theoretically will come here with the Gravity, 90,000 units capacity by 2023 seems a little bit pedestrian, right, meaning that your demand may far exceed that.

I'm just curious, Peter, as you think about what your volume goals or aspirations are over time, if you could elucidate those or just tell us where you're headed.

And then also just thinking about what's going on with the stock and the availability of low-cost capital, Sherry, would you consider or you Peter as well, obviously, doing a greater issuance sooner rather than later, to raise capital to maybe accelerate this 90,000 units capacity in 2023 and hopefully maybe grow even faster than what you've been talking about?

Well, it's an interesting point, John. Right now, we're laser focused as a company and the whole management team under my direction in scaling what we've got. Laser-focused on growing the scale towards 20,000 units next year, then 50,000. But we're planning on 500,000 units by the end of the decade. We have a plan in place to expand Casa Grande to that level.

And we've also got localization of manufacturing. We've got incredible high value in our manufacturing as well because we manufacture the entire technology suite. The battery, the motor, the inverter, the whole electric powertrain in-house. So we're not just buying in parts here and just adding value that way. There's a whole lot of in-built value add to the cars that we've got. We've got a Casa Grande capacity planned out to 365,000 units.

But of course, we also plan plants in other parts of the world, the Middle East and in China. And so this is going to be part of our global expansion plan. I think we're very ambitious in terms of the scope. And make no mistake, this is a technology play, and this is a technology race. And as a tech company, it's our technology, which we are confident will put us in this preeminent position. But as you know, we designed this technology to be truly mass manufacturable. So I think scaling our volume is well within our sights.

And then John, well, great to have you with us first. And I can take the second part of your question where you're talking about just balance sheet and also just deployment of capital. So we're sitting in a terrific place today with the $4.8 billion as of September 30, that's going to get us well through 2022. You're going to see a large CapEx increase happening next year. Actually, multiples of CapEx are going to be deployed next year versus this year. So we're already doing that acceleration.

And in June, we announced that we were going to be bringing forward $350 million of planned CapEx investment from future periods into the 2021 to 2023 period and also increasing overall between 2021 and 2026, by 6% to 7%. So we are going to be as a company accelerating our ability to deploy CapEx.

And if the opportunity presents themselves, you might recall that our prior versions of our model has suggested that kind of 2024 and beyond that we might start to step down our CapEx. But if that opportunity is there for continued expansion, and we are ready for it, we will certainly go after it.

We do think that there is increasing availability of capital to us today from a lot of different sources. You'll note that we still haven't even taken debt on. So we have the opportunity to provide terrific loan to value there if we chose to take on debt. And then with the stock price increasing, it gives us a lot of other opportunities as well. So we're feeling really good about what we could do, and we feel like we are increasing the company's ability to deploy capital efficiently and quickly.

Okay. And then just a second question, Peter. I mean, obviously, with Air, you have a knockout products with best-in-class range, arguably one of the best, if not the best, EV on the planet. When you think about Gravity, that's tough act to follow. So Gravity is following that. How do you view Gravity's differentiation in the market? I mean presumably, just given the form factor, it's not going to have quite as good a range as Air. But I mean, what's the real, no pun intended, pull for the Gravity to the consumer in the market?

I'm so glad you asked me that. We've made a whole bunch of advances with Gravity Project. It's very close to my heart. We're getting it ready for production in late '23. And I think it's going to be equally as disruptive in the SUV space as Air is in its sedan space. We're going to deploy the space concept, the miniaturization of the electric powertrain, incredible range for its class, and it's going to have 1 or 2 really [big dialing] unique features as well. I am super excited about Gravity.

Okay. And then lastly, sorry, just a housekeeping question, Sherry. How much stock comp was in SG&A and R&D, specifically in each line item, if you could just give us that if you have it?

I can tell you across the 2 was $235 million, and that's roughly double what it might have otherwise been, but you have this cumulative effect that I mentioned. And that it's really just related to -- it has like a double trigger and you have to actually have the merger happen before you can put it up on your accounting statements.

Plus the stock is performing very well. So that's always a good high-class problem to have. I appreciate it.

Yes, of course. And it was more that it's a cumulative effect than it was the stock price, but itself, right?

(Operator Instructions) Our next question comes from the line of Adam Jonas with Morgan Stanley.

Congrats on the MotorTrend Car of the Year award. That's incredible, especially considering it's your first car. So well done. I had a question on the delta of reservations from the 13 at the end of the quarter to the over 17 now. Can you give us a little -- my understanding is you opened up reservations to international. So I'd be curious what the like-for-like is of North American reservations within that delta? And then maybe within international, how much it was Saudi versus non-Saudi. Or any color there would be helpful.

We'd opened up international reservations before we announced the 13,000. Also, I mean, the bulk of reservations is a home market U.S. and we haven't even opened up the big market in the future, which is China. But absolutely, Saudi is great because it's our second biggest market by number of reservations. And that's really heartening that the country, which has gained its wealth based upon its carbon economy is so forward-looking and sees the Air as such an attractive product.

Okay, Peter. And I'll leave it to you whether you want to disclose that or not. But just for my second question, on your distribution strategy, can you remind us why the advantages of going direct to consumer and why you are not using a franchise model, and I don't believe you're considering using a franchise model. I just wanted to confirm that.

That's correct, Adam. Well, I think the important thing here is that we are creating a new brand. It's not just about the product, the product designed to the brand, but there's more here than just Lucid Air and a luxury brand. And the consumer experience and the consumer journey is too precious to delegate the third party. We need to choreograph the consumer's journey through discovery, through increase, through purchase and ownership. And how that will then to do it directly.

It's not just drive consistency in messaging as well. You're not working with independent franchises and dealerships. And it just really allows a lot more control, controlling pricing there's a lot of benefits that we see in this direct relationship.

Our next question comes from the line of Itay Michaeli with Citi.

Just a first question first, going back to reservation growth up to 17,000. With the momentum you're seeing in reservations, how are you thinking about when to, I guess, more formally unveil Gravity and even open up the reservation book there?

Well, I guess that will all things in good time. I'd like to have Gravity to a level of greater substance that we can actually show a car possibly later next year, I would say. But right now, I've got such laser focus on Air. The reservations are growing, increasing. And I'll tell you something else. I'm really particularly happy about the split in those reservations.

We've got a really nice blend. I mean, we're sold out of our Dream edition, as you know, we've expanded that to 520 units to reflect our 520 EPA rating and the growing demand, but we've got a really nice blend of reservations for Grand Touring and Touring and Pure, very much reflecting the sort of split that we will manufacture over the next 15 months or so.

In fact, when you look at September 30 numbers, we had talked about the 13,000 reservations, and we also had talked about that, that reflects an order book and revenues of about $1.3 billion. So you can do the MSRP math from there and it gives you a good sense, to where that mix lies.

And so you can see we're not over-indexed on Pure. It's just really a nice balance. So we're happy with where it is, and we'll keep watching it as we go forward. And we're also going to be enjoying decreasing costs over time and improving margins. And so we feel like we'll be in a really good position as some of these other products pick up.

That's very helpful. And then just maybe secondly, hoping you can update us on your latest thoughts on the Dream Drive software strategy in terms of partners versus what you might look to do in-house?

Yes. Well, our strategy here to date has been, of course, a key focus on creating the very best electric vehicle in the world with the most advanced electric powertrain and endowing that car with the core foundations of hardware suite, 32 sensor suite, 14 cameras with solid-state 120-degree LiDAR and a whole host of long-range radar and closely knit radar. So that's been the step 1 of the plan, creates the most advanced foundations for the house in terms of the hardware and have software, which is broadly competitive in the marketplace.

Now we've achieved that. The next step will be to advance that software. Now we're planning as a default to do that in-house, and we're building the team. But as you know, I'm very open here in Silicon Valley to potential partnerships in terms of the software. But I see that as a potential bonus, I think the default position is going to be develop that software now and take that to world-class standard based upon the hardware suite we've got and to develop that in-house.

(Operator Instructions) Our next question comes from the line of Stan Shpetner with Pickering Energy.

Congratulations on the new vehicle launch. Can you speak to a little bit of what degree of gross margin variability you have across the different versions of the Air. And how over time, if you take a point of view that to drive volumes over time, you'll have a greater proportion of Pure sales. What are the implications for that in terms of trend of gross margin as that mix shifts over time?

Yes. Thanks so much for your question. So we're expecting to have competitive gross margins by the time we reach mid-decade. And you're going to see that our gross margins are not going to be there initially because we're activating depreciation expense, we're training new employees, we're going to be driving efficiency within the manufacturing arena over the next year, especially 1.5 years. And then you're going to see as the volume increases just gross margins improving overall as that absorption improves.

With respect to your question about how are we thinking about the higher-priced models versus the Pure, we're just in such a unique advantaged position because of our technology, that it's going to enable us to go from tremendous machine of our Dream edition and still be able to produce with the Pure over 400 range -- 400-mile range as well as of our 500 horsepower, and we can do that while reducing cost, by reducing one of our motors. We also can reduce the battery pack, and we have a lot of trim features that can be activated or deactivated. Basically, make a bespoke product exactly to what the customer is seeking. So those are the enablers that we have.

That's absolutely right. So right now, we're using our extraordinary efficiency to achieve range to create a technological tool to force to define the brand as a range king. But in the future, we use that technological advance as a commercial enabler. It means that we will be able to provide a car, which is competitive with range, we'd be at 300 miles, 400 miles, whatever.

But with a commensurately smaller -- proportionately smaller battery pack than the competition because our technology is inherently more efficient. And because of that, because the battery pack is the single most expensive item in electric car, this will affect the margin. And therefore, it has a direct bearing upon our viability, our commercial viability as a company.

And the other thing I would just say there, too, is just we have an amazing team. We've got a terrific supply chain team. We have a terrific manufacturing team. They've done it before. They've done it at Audi, they've done it at Tesla. And they've not just gotten the plants up and running and efficient, they brought the cost down, and all of that experience is coming to bear on our product and our factory. And so that's another important point that I wanted to make sure I left you with.

Yes. And we designed the battery in a modular manner with costs down in mind for the future. So the car is designed that way.

And just a follow-up. Earlier, you mentioned that you have a fairly balanced order book between the different 4 versions of the Lucid Air. Can you give us a little bit of a sense of when next year that we could expect to see shipments of the pure to begin?

I think it's in the latter part of next year when Pure comes out. But my passion is Pure. I want to get the cost down. I want to fulfill our mission, which is the mass adoption of electric vehicles.

Thank you. Ladies and gentlemen, this concludes our question-and-answer session. I would now like to turn the call back over to Peter for closing remarks.

Thank you so much. As you can see by what we have achieved in Q3 and by future plans, there is a tremendous amount of exciting activity here at Lucid. Supported by our industry-leading technology, our ongoing investments in cutting-edge manufacturing and the outstanding team we have assembled, we believe there are sizable opportunities for shareholder value creation ahead of us.

I would again like to thank our employees for getting us here. We have a truly unrivaled team. I am proud of what we've accomplished and I'm optimistic about the opportunity ahead of us. We look forward to speaking with you regularly and keeping you updated on the progress we are making. We aim to be transparent in our approach and look forward to engaging with you. Thank you so much for joining us here today.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.