Lucid has some very bad news.
The young electric vehicle maker, often seen as a serious rival to Tesla in the luxury segment, confirms that it has a demand problem for its luxury electric sedans.
The Newark, Calif.-based carmaker has just announced its production and delivery figures, and these are not good at all. During the first quarter, Lucid (LCID) manufactured a total of 2,314 vehicles and delivered 1,406 over the same period. These data are disappointing both in terms of production and deliveries.
In the fourth quarter of 2022, Lucid, whose largest shareholder is the sovereign wealth fund of Saudi Arabia or Public Investment Fund (PIF), with an almost 61% stake as of December 30, 2022, produced 3,493 vehicles in its only factory based in Arizona and delivered 1,932 vehicles during the same period. In three months, production was down almost 34%, while Lucid delivered 27.2% fewer cars quarter over quarter.
A Demand Problem
Delivery figures are particularly scrutinized on Wall Street as they are an indicator of revenue. Analysts were anticipating deliveries of around 2,000 units. Lucid, which produces the Lucid Air sedan sold in several variants, delivered about 600 vehicles less than expected. This large gap suggests that the upstart has a demand problem.
The company, which did not comment in its press release, is due to publish its quarterly results on May 8, and should undoubtedly give investors some color on this decrease. But in recent weeks, Lucid had gave a clue about the status of its operation. The group cut 1,300 jobs last month, or 18% of its workforce, as part of a major restructuring plan that should result in a one-time charge of $24 million to $30 million in its first quarter earnings.
CEO Peter Rawlinson said, at the time, that the job cuts will hit "nearly every organization and level, including executives."
"Given evolving business needs and productivity improvements, we are reducing the size of our organization by approximately 18%, which will affect Lucid employees and contractors. This action is aligned with the cost discipline announcement we made in late February when we reported earnings. We are also taking continued steps to manage our costs by reviewing all non-critical spending at this time," Rawlinson told employees in an email.
The production figures are alarming. Lucid says it produced 2,314 cars in the first three months of the year. By extrapolating from this figure, we can estimate that the carmaker will manufacture 9,256 vehicles this year. This estimate is below the production target of 10,000 to 14,000 vehicles for 2023, announced in February by Lucid. Surprisingly, Lucid said it had "over 28,000" reservations for Lucid Air as of Feb. 21. The low production numbers suggest that customers may be canceling their reservations, or that Lucid is struggling to convince customers with a reservation to proceed with the purchase of the vehicle.
The Price War
The Lucid plant in Arizona has a production capacity of 34,000 vehicles per year.
"As we produce vehicles at low volumes on production lines designed for higher volumes, we have and we will continue to experience negative gross profit related to labor and overhead costs,” CFO Sherry House said during Lucid’s fourth quarter earnings call on Feb. 22.
The problem is that the company continues to burn cash very quickly. House told CNBC that Lucid ended 2022 with about $4.4 billion in cash on hand, enough to last until the first quarter of 2024.
The group believes that its big problem is that the public does not really know the brand. Lucid has therefore just announced a tour of more than 40 U.S. cities to give "consumers right across the United States the opportunity to experience and get to drive a Lucid Air, which was recently named the World Luxury Car of the Year by the jurors of the prestigious World Car Awards."
Lucid also seems affected by the price war launched by Tesla (TSLA). The Model S sedan from Elon Musk's group and the Model X SUV, Tesla's two flagship vehicles, are in direct competition with the Lucid Air variants in the luxury electric vehicle segment. Both of these models have seen their price drop between $20,000 and $34,000 this year. The regular Model S is now $84,990, down $20,000 this year, while the Model S Plaid has now a base price of $104,990, down $31,000.
The base Model X costs $94,990, which represents a price drop of $26,000 or 21%, compared to Jan. 12. Finally, the Model X Plaid now costs $104,990, down $34,000 or 25% this year.
The Lucid Air comes in three variants -- Pure, Touring and Grand Touring. The base price of the Lucid Air Pure is $87,000, $107,400 for the Touring, and $138,000 for the Grand Touring, according to Lucid. The group plans to start production of its very first SUV, Gravity, in 2024.
