Lucid Group, Inc. (LCID) Earnings Call Transcript & Summary

All right. Welcome back, everyone. We're going to continue on with our presentations here today on the AutoTrak at the UBS Industrials Conference. Very pleased to have with us Lucid. We've got the CFO, Taoufiq Boussaid, with us. And I do want to just make a little bit of a PSA for those of you here. We do have a couple of Lucid vehicles, including the Air and the new Gravity. So you'll be able to go test drive them. I encourage you to do so. I just got out of one myself. Really, really great ride, great vehicle. So thanks for that opportunity and experience at bringing that to clients here at the conference.

I'm very glad you enjoyed it. Thank you for having me today.

Great. So I guess we want to -- just to get started here. It's a rapidly changing world, especially from a policy perspective, but also from an economic perspective. So at a high level, right, what we're seeing is affordability becoming a little bit more of a concern. The vehicles you do sell today are more on -- in the expensive side. You have the pullback of some tax credits, at least in the U.S. So just level set for everyone sort of how you sort of see that impacting not just the near-term demand, but sort of how you sort of see demand for your vehicles playing out over the short term to sort of bridge that gap to some of the future products that we'll talk about in a little bit.

So maybe starting with the short term. So now with the cars that we're currently selling, with the Gravity and the Air, I mean, we're positioned in a premium segment. And the premium segment turned out to be much more resilient than some of the older EV segments. So -- and on top of that, I mean, we've been seeing a constant and very pleasing improvement in terms of market share. So some of the impacts that the industry are referring to, I mean, let's knock on wood, for us, I mean, we don't see the impact for the time being.

What percent of your vehicles in the U.S. are leased roughly?

So it's around 70% -- 70% is leasing. So again, I mean, the momentum seems to be there for us. So obviously, I mean, the whole industry is impacted. As I said, I mean, we're seeing very encouraging signs. I mean the test drives are increasing. The traffic as well, as I mentioned, the market share is moving in the right direction. So I mean, Q4 might be a good quarter for us. So it's something that we're looking forward to close the year. But for the moment, the indicators are great.

And is that in part driven by luxury also tends to sort of have a better fourth quarter performance? Like are you sort of seeing seasonality in the business? Or what is sort of driving some of that?

There is definitely some seasonality. There is some seasonality. So we tend to compare versus last year, obviously, versus previous quarter. So as it trends now, I mean, we will see quarter-over-quarter growth.

Yes. And I just mentioned I was in the Gravity and the other vehicle has been out for a little bit now, but can you sort of talk about any sort of reception in the marketplace and orders?

Well, yes, absolutely. So first of all, I think just referring to the way the cars have been received, I mean, you see the many accolades that we have received, it's an absolutely gorgeous product, I mean, in terms of comfort, in terms of finishing, in terms of performance. So -- and I think that the public recognizes that. So the orders are trending the way we expected them to trend. So we are not disappointed. So I mean, one of the things that we needed to do is to satisfy all the demand that we've been building since we announced the launch. And this is what we're doing in Q4. So Q4 will be primarily the Gravity quarter. It will represent the majority of our production and our sales. And again, as I said, this is as per our initial expectation and plan.

And can you shed a little bit of light on the economics of the vehicle from a profitability or sort of loss perspective and how you sort of see that trending over time? Like can -- where can this vehicle actually go? And I think even more importantly, like what lessons were learned from Air to Gravity that you could sort of take on from Gravity to a new mass market vehicle?

Well, I think that it always come -- it all comes back to simplification. So simplification does derisk the program. It does allow us to maximize the economics of the program because you simplify, you reduce the part counts in the car, you make the operations and the manufacturing of the car faster and more easy. So this is the learning journey that we've been through. So we started with the Gravity where the motto was compromise nothing. And what we really wanted to do is to bring the demonstration that we can build the best car out there. And that's what we did. But we needed to iterate on a constant basis. We know that as we're growing into scale and that we're going into mass premium market, that's something that we cannot be able to afford anymore. So we needed to get it right the first time. And that's what our engineering organization has been doing relentlessly, how to learn or to combine all the learnings from all those years, making the best product right the first time without this need to constantly iterate. And obviously, this has a direct impact on the cost and the economics of the program by simplification, you reduce risk, you reduce the bill of material, you reduce the time needed and you ensure that you can maximize the production output at the very first stages of the production.

Yes. And it should go -- well, it went unsaid, but obviously sort of implied in my comments to -- or question to you earlier about some of the change in dynamics. I was -- that's a very sort of U.S.-centric focused sort of comment, which is true. But I'm curious sort of what you're seeing for both the Air and Gravity in some of the international markets, whether Europe, Middle East or Asia.

Yes. So Gravity is starting now. So we're seeing a very positive momentum in Europe and in the Middle East as well. So we will need to see how this builds up in the next coming quarters. I think that the Air is a good selling car overall. So I mean, it's -- when you combine for the premium segments and the very wide segment and the car composing the premium segment. We are the third best-selling car overall for the Air. So it's a very good performance. So for the moment, again, we do see the momentum. The car is very well received, a lot of engagement from existing customers and new customers for the Gravity. So again, we're building our brand equity. We're building the brand awareness, and we're getting ready for the midsized platform.

Do you have any insight you could share as to sort of where the Gravity customer is coming from? What car are they coming out of?

Well, I mean, if we look at the profiles of our customers, and that's probably mainly the U.S. It's really a mix. We have former Lucid owners who want to move to a bigger car and they go, but we also have a lot of customers who used to own SUVs in the past and who are looking for upgrades.

Electric or ICE SUVs?

It's a combination of the 2. And I think it's a very important question because, I mean, the way we want to position the Gravity, it's not an EV SUV only. It's an alternative within SUV. It brings different value type of value propositions. And I think that people now with the charging networks becoming more and more widespread. I think that the TCO equation becomes more visible. And I think that we're able to attract new SUV customers probably coming from ICE on the back of the value proposition of the car itself, putting aside maybe just the UBS aspect of it.

Now obviously, the TCO or total cost of ownership equation, value equation you sort of just talked about is even more relevant in the mass market than on the luxury side. And so that's a good sort of transition to sort of talking about the next-gen vehicle. Maybe just for the benefit of the audience, remind everyone what the plans are for the new platform in terms of what the vehicle is aiming to be, what the timing is and then we could sort of get into some of the production.

Absolutely. So our next iteration as it stands now is called the midsized platform. So it's a platform. So it's aimed at being translated into 3 different cars with 3 different top hats. So it will be the first time that we will be building on the back of a platform with all the benefits that it has in terms of unit economics, ability to leverage the bill of material, the parts and so forth. So we will be moving from what we have been doing so far, targeting a different type of market. It will still remain a premium product because that's the DNA of the company, but it will be positioned at a price tag, which is where we currently sit at the heart of the market, which is around the 50,000, which makes it much more accessible.

That's the starting point?

But that will be the starting point, absolutely. So it will be more accessible than the offering that we currently have. It will be targeting the heart of where we see the midsized type of cars currently at the 50,000, as I said. But we will keep and we will be very, very focused on keeping what makes Lucid DNA, the design, the quality, the equipment. So -- and that will be the value proposition, how to bring something equivalent in terms of touch and feel to the Air and Gravity within a segment, which is more in the mid-market.

And I think an important characteristic of the midsized platform, right, is where you plan to at least initially produce it in Saudi Arabia. So -- and look, we've seen EVs and really particularly the Chinese started to do very well in the Middle East broadly. So there's definitely an opportunity there. Can you talk about the decision in some of the pros, but also the -- I don't want to say cons, but maybe some of the challenges that sort of might emerge from at least starting production there?

Yes. Well, I mean, if you look at the pros, they're mainly triggered by the macro. So -- and I mean, we didn't obviously looked at it that way before we find out about all the implication that the shifting policy had in terms of impact, in terms of tariffs and so forth. But we found ourselves in a fortunate space having the option to manufacture a car in KSA. And what it does is that it allows us basically to import from China part of the bill of material without having to incur the significant duty. So again, it will be a transition. Things will be shifting. I mean, OEMs and Tier 1s, Tier 2s, Tier 3s are looking at options and relocating their supply chains in North America. It's not something that can happen overnight. It will take some time. But for the time being and given the time frame that we have to get this car ready, we find ourselves in a very comfortable spot being able to import this bill of material out of that.

And sorry, before we sort of move on to some of the other pros and challenges. But when you say parts, are you mainly talking batteries?

Well, batteries are part of it, but I mean, there are many other equipments which would be sourced.

But the motors you currently make where?

Well, the motors are Lucid motors. So we manufacture them in the U.S. for the time being.

And then for the next-generation platform, those motors will be?

They will be manufactured and mounted in KSA.

Manufactured in KSA. So you have to build a motor there. Okay. And sorry, so go ahead...

So I mean, again, just to elaborate a little bit on the pros. So I mean, we will be operating within a purpose-built ecosystem in KSA. So we will not be alone there. So I mean, the authorities in KSA are very adamant about their plans to develop a fully dedicated ecosystem. So over time, we will have access to Tier 1s and Tier 2s just next door. It will take some time, but the plan is there. In terms of unit economics, I think that for the time being, this is the best option that it gives us the flexibility, at least things might change over time. So in terms of challenges, so I mean between the brand new plants, it would be full automated. So I mean it will take some time to maximum the capacity usage and the ramp up, so the plan is sort of adoption as per our initial guidance towards the end of 2026, '27, '28, we will ramp up '29 full capacity.

So you mentioned fully automated. And maybe that's what I'd like to sort of spend a minute on before we move on to some other topics here. But it's not too long ago, right, where you opened your facility here in the U.S. for the first vehicles. And granted that was the first time Lucid as an organization made cars. So I'm sure there were lessons along the way. But what can you tell us about some of those lessons? Maybe a couple of anecdotes of sort of what's done differently that you learned can sort of be improved as you sort of get a fresh start here at sort of how to most ideally sort of lay out and sort of build a factory?

Yes. Well, I think that the biggest learning that will serve us immediately is how to drive quality when you manufacture a car. I think that because we didn't want to compromise on quality, it turned out very complicated to get the car right when we first started here in the U.S. So I wasn't there, but I mean, I hear stories from my colleagues where a car at the end of the chain needed to go back several times back to the start of the chain to be reworked, readjusted, repeated, all those things. So these are things that now we have learned that we know. I mean, we have our own processes. We have the people who are trained and who know how to manage all those things. And these were things which are part of every maturity cycle, I would say. We were learning how to do our job. And I think that we have reached the right maturity. And now we're able to duplicate all these learnings into a new environment.

So when you say fully automated, certainly more and maybe is it possible sort of if you could put on the scale of 1 to 10, 1 being no automation, 10 being completely dark factory, where would you put your sort of current U.S. facility? And then where would you put the -- where the...

Well, they will be comparable in many aspects in terms of level of automation. So you cannot look at automation from the same standpoint throughout the process of manufacturing a car. I mean manufacturing car comes in different steps. Some steps are more automated than others. So if you take what we refer to as the body-in-white part of the process, this is a fully automated process. But then you have the amount, the fit and finishing, which is also relying heavily on manual workload and this thing will remain as such. So it's really how you maximize the parts of the process, which can be...

So it's a similar level of automation to what you have now? Or there's -- that's what I'm trying to understand. Are there elements of the production system that you said, we could do this a little bit better as we sort of rebuild ourself.

Well, I mean, we can definitely do things better. So I don't know if you've heard about the second part of the partnership that we're doing with NVIDIA. I mean we will be in-sourcing a lot of the NVIDIA solutions in our plants to help us, for example, with the digital twins and back to the issue that I was referring to with the quality, I mean, having the possibility to develop -- to manufacture a car while operating in a digital twin does allow us to gain a lot of efficiency in terms of automation and optimization of the automation.

Yes. Well, you sort of did -- helped with my transition here to the next topic, which is the autonomy and some of the autonomy announcements and partnerships you had. And so I guess the first one is, I know you sort of mentioned NVIDIA, but I first sort of want to talk about the Nuro partnership and Uber. So how did that come about? How did you sort of decide that Nuro was sort of the right partner for what you want to accomplish? And then I guess the third element of this is Uber, right, and sort of why were they looking for the Lucid vehicle on their network?

Well, let's start maybe with Uber. I think that Uber, because of the scale of Uber, because of the fact that they own the biggest rideshare platform, made it somehow obvious in terms of decision process. So it was a joint decision to work together. But then the question is also why did Uber pick Lucid -- and they picked us because, I mean, we have a fit-for-purpose car with a redundant architecture with all the safety, which is required for this type of application. So we had an available solution, which required minimal changes, minimal fitting to operate as a robotaxi as opposed to some of the existing solutions right now where you have to add a lot of sensors, LiDAR and so forth. I mean, I guess that we have some rendering of what the robotaxi looks like. It's a gravity with a very slick on top of it, and that makes it work. So it was really the ability to have a car which is fit for purpose very soon, which can adjust to all the software requirement coming with the Nuro platform and which can be operationalized as fast as possible. And again, the Gravity is the first start. I mean it's a big car. It's an expensive car. It might not be the obvious choice for a robotaxi service. But the next step of the program will be with the midsized as that will be even more advanced in terms of its ability to serve this type of application.

So I guess maybe a little bit more curious just on a final part of this point, which is like how it came together? Like I understand the need or the imperative for Uber to sort of say, like we want to get more robotaxis on our network, and we also want some diversity of supply, maybe we could use a Lucid for sort of a very upscale type of product. And just like now you have Uber Black, UberX, UberXL, right, different sort of tiers. How did it get arranged? Were you talking to Uber and then looking for an autonomy partner? Were you talking to Nuro first and then sort of decided to go to Uber? Like how did the sort of marriage come together?

Well, I think that it was really Uber who brought us together. Obviously, I mean, we know each other. We have been discussing for quite some time. And I think that knowing each other and having the same perspective about what should be the next stage of this type of industry and market, this is how we brought it together.

Okay. And can you just remind us plans to deploy like timing, location, sort of initial number of vehicles?

Yes. So I mean the contract as it stands now is for 20,000 cars over 6 years. But again, I wouldn't like to caveat this figure because, I mean, 20,000 cars over 6 years is not really relevant in the grand scheme of things for us. So it's just an indication that this is the first step. So we will have other iterations coming up probably with other type of constructs. But for the time being, for the contract that we have announced, it's 20,000 cars over a period of 6 years. The first city where the robotaxis will be deployed will be in the San Francisco area. We have successfully completed the first milestone, which is the delivery of the first so-called engineering vehicles to Nuro so that they can do the additional fitting. So we're progressing as per initial time frame and the project is going in the right direction. So what is interesting is what's next. And I mean, there will be more. I think that we need to look at the first 20,000 as a trial test in a specific environment of the San Francisco area before it expands to other metropolitan areas.

So now how do we move from sort of the Nuro partnership over to the NVIDIA announcement and sort of the sort of autonomy path going forward for Lucid?

Yes. So what we have been very adamant in doing is making sure that we cover the broad spectrum of the robotaxis or so-called autonomous driving in general. So the Uber Nuro Lucid partnership is serving the B2B business. What we will be doing with NVIDIA we will be primarily aiming at the B2C. So -- and the purpose of the partnership with NVIDIA is to bring the Level 4 autonomous driving, minds off, eyes off, hands off and point-to-point driving. So that's the end game with intermediary steps. So with Nuro, we will be also developing the L2++ and the L3 as an intermediary step before moving.

Yes, that's why I was going to ask you sort of preempted the question a little bit. It's like -- is there something sort of preventing a -- either scaled-down version of the Nuro stack or even a version of the Nuro stack that is sort of more for sort of personally owned Level 4 autonomy?

Yes. Well, there's nothing really preventing it. I think, as I said -- I mean, it's in the test phase right now. So I think that the philosophy of the architecture has been developed to serve the specific needs of a robotaxi services. I think that as a consumer, the needs might be different. And that's why we have this partnership with NVIDIA, really aiming at having a full coverage of the spectrum of the different [indiscernible].

So obviously, NVIDIA is providing the compute and probably some reference design. But then is there a Lucid team who's sort of working to sort of build on top of the [indiscernible] and is that in conjunction with the team from NVIDIA? Or there -- is it really sort of more of the hardware provider?

No, no, it's a joint collaboration, it's a joint collaboration. So I mean, we will be working with the common teams to develop the solution.

I'm not sure if you get asked this a lot, but it is sort of like a dual path strategy, which has -- it could seem sort of duplicative, but then also is sort of somewhat maybe hedging bets, right, if you think. So like how do you view that sort of dual strategy?

Well, it's a way to derisk the strategy and to control the capital allocation associated with this type of investments. So when you want to do that, it's very heavy investments. I mean you need to invest in compute capabilities, in data storage, you name it. And following a route where you partner and you learn along the way. It's really a way of achieving the same end results without having to engage since day 1 significant amount of cash as an investment.

So yes. Is there a world where, for instance, you may decide that the -- some Nuro version for the consumer product works and you go down that route or vice versa or how do you...

No, no. I mean, again, the approach of the company has been, okay, what do we want to achieve? What we want to achieve is to have an L4 and to have a fit-for-purpose working solution for robotaxi. Mixing partnership and things like that or adding new partnership is something that we will be looking at. I mean, we're very opportunistic in the way we want to approach our development into this segment. I mean the key driver for us is to make the best use of the cash of the company, making sure that we maximize the ROI. If we have to split revenues or things like that, that's something that we're open to. But it's really about derisking the capital allocation.

And is there any regional strategy with autonomy? I mean, like we spoke, I think, implicit in our conversation today was that this is for the U.S. market. You mentioned the Uber partnership in San Francisco. As you move more into personally owned Level 2, Level 3, Level 4 autonomy, that's expected to be in the portfolio on a global basis.

Yes, absolutely. So I mean, again, we will always be constrained by the regulatory environment. So even here in the U.S., I mean, some states, even cities will be moving faster than others. So it's something that we will be closely monitoring, obviously. But that would be actually the main constraint for us.

How do you -- one of the considerations you mentioned for the midsized platform was greater affordability, right? It opens up the addressable market. I'm curious how you sort of think about that in relation to on the sort of new midsized platform offering the hardware that enables this autonomy similar to what sort of a Tesla has done where they just put on everything, bear that cost and then you could have customers subscribe or not. Is that the approach you'd like to take, which does sort of raise your bill of materials a little bit, but then you sort of get the potential revenue? Or is it sort of more an option package?

For the midsize, that would be exactly the approach. As you said, it does marginally increase the bill of material, but it creates the revenue for the customers to go for additional features within the car. And I think that the more we will see them on the road, the more you will see the first consumers or customers buying these cars wanting to have the same solution. So we want to keep this as an opportunity for us, absolutely.

Yes. Any meaningful changes to sort of the architecture or sort of the zonal approach of the vehicle as you move from the Air and then Gravity platform to the sort of midsized [indiscernible].

Well, it will be the next generation when it comes to, obviously, all the sensor, but I think that the key difference will be the compute power within the cars because we will have an NVIDIA platform with very heavy real-time compute with richer data analysis on real time, and this will be the main differentiator.

And sorry, I know we spoke briefly about the motors before, but is it the same generation motor? Or is it...

It will be the next generation.

So how much more efficient? You already have the most efficient motor out there, right?

Yes, we already have the most efficient motor out there, and we have gone through the challenge of making it even more efficient.

And so it's like a good challenge, right?

Absolutely. So -- and I think that we showed some rendering actually of what this motor looks like, and it's much more compact, smaller than the existing [indiscernible] generation. So with all the benefits it brings in terms of weight, part counts, ability to manufacture them at the right cost and so forth.

Okay. I think -- by the way, I should mention to people in the audience, if you do have a question, you could use the QR code, and it will pop up here, and I'm happy to ask on your behalf. The QR codes are on your tables. The liquidity and cash flow, obviously, over the years, again, even sort of before your time, this has sort of been a topic of discussion with investors. Can you just, again, remind us sort of what you're seeing in terms of free cash flow, cash runway, capital needs? And is there sort of an updated time frame for when we think cash flow breakeven is possible?

Well, that's something that we will be discussing during our upcoming Investor Day, so...

Could give me a chance to go plug that event?

Absolutely. So we will be organizing an Investor Day during the first half of 2026. The plan is to explain our road map and how we will be getting there and when. But having said that, I think that what we have been doing so far is investing a lot in building the capacity and developing the programs. Now the programs have reached maturity. So the midsize will start production in 4 quarters from now. Gravity and Air are already there. So the CapEx, I mean, we have completed our plant in Arizona. We have built the plant in KSA. And next year, we will be installing the equipment. So just organically, I mean, the expectation is that the cash usage or the cash need will dramatically reduce. So we will have new areas where we will need to invest with all the activities and the opportunities that we see around autonomous driving and robotaxis. But as far as the assets which are needed to produce these cars, these platforms are concerned, I mean, most of it is done. We still have 1 year of additional investment in 2026 and then we will be -- we will have this story behind us. So the narrative will become, okay, how do we maximize, what we're doing to maximize the cash extraction from what we're selling. And that would be really the focus of the company. And we are already implementing a lot of changes. So with the help of the management team, we're putting a very strong focus on working capital. We're tightening inventories. We're maximizing the returns from all the investments that we're doing, selecting really what is needed. So it's a change of culture, which takes time. So moving from a start-up many years ago where you have to spend to build capacity to a business where you need to generate cash and return value. It's a journey, and we're doing good progress on that.

Should we -- at the time of this Analyst Day, sort of first half, will investors and the public also be able to get a look at the car by then? Or is that a separate event?

I'm negotiating that. But I mean, we have a tentative official reveal date. So somewhere mid next year.

So similar timing potentially?

Well, I'm trying to have an exclusivity for analysts and investors, so...

But when it's open to the general -- when you reveal it to the general public, it will open up for orders right there and then.

Well, yes, that's something to -- we don't want to do reservations. We will go straight for orders. So yes, timing should be more or less in line.

So -- and like roughly like 4 to 6 months ahead of start of production is when you think is okay. Perfect. I guess just to go back to the KSA factory. How -- and correct me if I'm wrong, but I don't think there has sort of been historically very much sort of vehicle production there. I think there's been some sort of knockdown in assembly, right, more historically in. So -- now there are suppliers in and around the Middle East and Northern Africa, so not too far. But what parts are sort of most critical for you in the value chain for those suppliers to sort of get up in speed such that like it doesn't cause a headache for you as you begin to ramp production?

Well, it's very interesting because when we think of it from the angle of the headache to use your terms, I mean, the parts which have generated the biggest headache in the Gravity and the Air are probably some -- of the one we did least think of. To give you an example, we struggled with the seats. So the headache doesn't always come with the level of complexity.

I see.

It's very often really.

It could take any part to sort of slow production.

Absolutely. Absolutely. So when you're dealing with cars, which has several thousands of parts, just one part missing and then the whole chain has to stop. So that's why it's a very complex business.

Yes. And then I guess just final question. I know the KSA also has plans to sort of for there to eventually be battery factories and maybe potentially semi fabs and everything like -- do over time eventually believe you will sort of source batteries more locally as well in the region?

Well, yes, I mean, if we have the right solution at the right price, we will definitely consider it. I mean, again, we need to look at it from the perspective of a complex geopolitical environment. And when you are a car manufacturer, the key target is to derisk the supply chain. So if this contributes to derisking the supply chain, absolutely, yes.

And the midsize initially, again, you plan for that to be a global vehicle. With time, do you also expect to make that vehicle in the United States?

Yes, absolutely. Great.

Well, I think that's about it. We're about time, so I really appreciate you coming to the conference. Pleasure for having you, and thanks again for bringing the cars. And again, to everyone who hasn't had an opportunity, if you still have -- I think they're here for a little bit longer. If you still have some time in your schedule, I urge you to take a ride. So thanks so much.

Thank you for having me. Thank you.