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

Good morning, everybody. So I'm [ Ed Oba ] from Morgan Stanley. Today, I have the great pleasure to welcome Marc Winterhoff and CEO of Lucid; and Taoufiq Boussaid, CFO of Lucid. So thank you so much for coming to London to spend some time with us.

Maybe, Marc, if I can start with a relatively broad question, which is kind of where -- how does Lucid position itself within the overall EV segment?

Well, I mean, we started 3 years ago in the luxury segment. We started with the Lucid Air, which is by now the most award-winning EV in the space and actually also the market leader right now in our segment in the United States. That then in this year, throughout this year, we ramped up our first SUV, mainly also in the United States, but also in our markets in Middle East, which is the Gravity in the Lucid Gravity 7-seater. I actually recently saw an article with the headline, the first 7-seater supercar. So that's how we like also to talk about it. And it will also come very soon to Europe. We already opened the orders. And by the end of this year and beginning of next year, those vehicles will then come as well. And we are working right now on our next-generation midsized platform that will then allow us to go into a segment which is more around USD 50,000 and therefore, also attracting bigger markets and bigger volumes at that point. It's not only 1 vehicle, it's actually 3 vehicles that are based on one common platform. Beyond that, we want to still stay in the premium/luxury space. So we don't have plans to go down to, let's say, $35,000 or something like this. We will remain in that area. And beyond that, this year, we started to open another addressable market for us with the whole robotaxi segment, where we did a -- we started out with a cooperation with Uber and Nuro and we will expand on that. And besides that, we also did a larger cooperation with NVIDIA.

Okay. Wonderful. Would it be fair to say that Lucid is no longer a start-up, but really properly a scale-up now? And I guess kind of related to that, kind of what's the strategic advantage does the majority ownership of PIF gives Lucid.

Yes. Yes, you're right. I mean we're in the scale-up phase, absolutely. And I mean, now living for many, many years in the U.S., I always use U.S. examples. Not everybody knows about baseball, but for those who know, it's a very long game, and it has -- it's counted in innings. And I think we are in the -- maybe still in the second inning maybe of a baseball game. Typically, it has 9, 10 or more. So we are still in the beginning. What we've done so far is we invested. We developed great cars. We started to launch them. We invested in our footprints in our plants. We are right now in the midst of creating a second plant, which is in Saudi Arabia, which also leads me then to the topic around our majority shareholder, the PIF. The PIF, and I should also say Saudi Arabia, they are a long-term partner supporting us. And they also know that automotive is a very investment-heavy business. You need to do in the beginning investments until you can then really reap the benefits later on. We are very thankful for this long-term perspective. And they have been a great partner, and I anticipate them to be good partners in the future.

Great. Talking about your model. So Gravity was the first SUV you launched. It was, I guess, basically same time last year, November '24, if I'm not mistaken. Could you give us a bit of an update in terms of the ramp-up you had over the past kind of 12 months? I think you had some production and suppliers issue initially. But to what extent you overcome these issues and things are running smoothly and also kind of in terms of the -- again, the production, the volume in the second half of the year and next year?

Yes. Well, I mean, we have -- this year 2025, I think in the whole industry, but also in particular for us, there was no shortage of challenges. We all know that particularly for us, where all of our vehicles so far at this point are being built in the United States. In March, first of all, then we got the tariffs, and we had to then rethink, okay, what does that mean for our supply chain. Then later in Q2, we had based on the trade war evolving further, the whole topic around unavailability of magnets out of China, which also caused us at least to make changes in our build plans, which we were actually able to still build the vehicles, but not to sell them when we want them because we had to change to vehicles that go to the Kingdom, which then are obviously a couple of weeks or months actually longer on the boat. Then on top of that, all of a sudden, our largest aluminum provider had a fire in one of their biggest plants where they do the aluminum for us. And last but not least, then an Experia topic that probably everybody knows here as well that shook the automotive industry. So there's no shortage of challenges. Nevertheless, we are on track right now to get to our guidance, we basically in the last earnings call, we guided between 18,000 and 20,000. And we also said it's going to be given the situation more on the lower end, and we do everything right now to make sure that, that happens. And as an information, we have now weeks where we are producing 1,000 vehicles in a week.

In a week. Okay. Impressive. So I think one of your next projects you've talked about is you going -- the launch of the midsize. So you have advanced sedan in terms of EV, one of the most advanced in the market in the SUV, you talked about it. Kind of what's the next step with the midsized vehicle? It's a more competitive segment of the market? Why is it an opportunity for you?

Well, I mean, it's -- the main reason is it is a much bigger segment. The Air segment with the luxury sedan, it is actually not a big segment in the market. And it's also in the last 5 years, it has not been growing. It actually has been shrinking. More and more people moved from that area to crossovers or also to SUVs. Now with our Gravity, the SUV, we have the first, let's say, foot in the SUV segment, but still on a relatively high price level. And so with the midsize, we're kind of like when I use U.S. as an example, in the middle of the market, 2 weeks ago or so it was when for the first time, the average selling price of a car, not only EV but all cars in the United States crossed $50,000. And that's not the area where we want to be with our midsize. It will again have the same amazing technology performance combination of that drive handling, driving comfort, space, all the things that people know from our Air and our Gravity, we also will pack again into our midsized vehicles.

And in the midsized segment, will competition be tougher with the Chinese competitors or with the local domestic players.

Well, it depends where you play, right? We have no plans to go to China. I want to make that very clear. And when you think about where the Chinese competition is most fierce, it is clearly in China. I mean the price points, price levels in China are not even sustainable for the local players. There are 2 automotive players that are, one, allegedly, are not really believing that are profitable right now. Everybody else makes no money. So that's nothing for us what we want to entertain and work in. And obviously, they also then try because there is so tough competition in their own market, they try to get into other markets. But most of the volume that we see right now would be in lower segments than what we want to play when it comes to a price point. And when I see the current uptake of, let's say, more luxurious vehicles, Chinese vehicles outside of the -- of China, it's not that high. They are not very high sales numbers. So I'm confident that there is a good position for us. And so we see ourselves competing more against the established players. And obviously, there, we see also many of the established players currently retracting and not really investing into EVs, which, in our opinion, is, a, a big mistake and, b, opens an opportunity for us because we think that EV is the technology of the future. And if you take the foot off the pedal, it will bite you in 5 years from now.

Got it. Moving on to autonomy, which is a very exciting development, obviously, for the industry. So I guess one of the interesting development is the robotaxi. So you signed an agreement with Uber. I think they are going to deploy, if I'm not mistaken, 20,000 Lucid Gravity vehicles equipped with the Nuro drivers over the next 6 years. I think they are starting in the Bay Area, area next year. If you could talk a little bit about why the deal, the economics to start with on the robotaxi, that would be helpful.

Yes. I mean, in general, I would like to explain a little bit our strategy around autonomous driving and advanced driving system levels. In the past, we have focused very much on creating the best driving vehicles. That established us on the map in the industry as the EV technology leader. But going forward, particularly when you look at the segments that we want to play in, we had to start to invest and advance what we already have. It's not that we have nothing. We actually have a good, we call it DreamDrive Pro Level 2 system that works on highways even in the Air with hands off. You don't actually have to put your hands on the steering wheel. But we realized that we need to double down on that and accelerate. And then when it comes -- that's one element when you look at the vehicles that we are building ourselves for right now. But then when you look at robotaxis, we didn't even think about that segment as something for us. And that came about Uber actually reaching out to us and say, okay, can we do something together here because they realized when they looked into the market that we are a great fit for them from a technology point of view and also from a speed to market, how fast we would implement things. So that's why we are focusing right now on partnerships. It's basically to enable speed to market. We have done already things in the past, but we really have high ambitions. We want to have a very, very competitive solution by the end of next year. And we basically looked internally, okay, what will it take to do this internally? Is this even possible in that short period of time? Or should we partner for now? And the decision was to partner for the sake for our customers because we want to offer something that works great. And then also from an economics perspective, it was actually almost like a no-brainer for us to do that. So that's why we went in that area. When it comes to robotaxis, for us, this is a starting point because when you just look at the numbers, I mean, 20,000 over 6 years is compared to what we want to produce by in not-so-distant future is a little bit of a drop in the bucket. So for us, we have bigger plans, and there's things obviously in discussions going on that will come. And we think it is actually a very important market. We are on the verge that this really becomes viable. And we've been talking about this now since 10 years. It's coming, it's coming, it's coming. Now I'm also convinced it will in the not-so-distant future. And I think with our technology and with our partners, we are in a good spot.

Okay. We'll open it up to the audience in a few minutes. I'm sure you're going to get more questions on that because that's a very exciting development. Just to finish on the autonomy on the consumer autonomy front, so Lucid announced kind of a strategic collaboration with NVIDIA to co-develop the next-gen L4 autonomous driving tech that will integrate NVIDIA DRIVE AF system. So yes, could you again come back on kind of the deal, why the deal and what the opportunities could be generated?

Yes, I need to -- let's take on what I just said. It's really for us, the decision was speed to market and also the second piece was the required investment. It is actually, from our perspective, very affordable. It's -- normally, you would do this all in-house, you would spend billions until you get to where we want to be. And when you compare that, what -- I cannot obviously disclose the numbers, but it's a very -- from an economic point of view, a very attractive decision that we made. I mean, as a comparison, we're spending on developing the seats for our upcoming midsize. We're spending about as much money as what we're investing in that, which tells you a little bit that's actually a quite good deal. And so I'm very, very looking forward to work with NVIDIA on that.

Okay. Wonderful. I don't know if there's a mic or if there are questions from the audience. Any questions?

Just wondering if there's any -- if you could provide some comments on the capabilities that you have regarding the ADAS and kind of autonomous vehicles. What really -- I mean, as an EV player, how did you decide to go after this? And maybe relative to kind of a Google who are Waymo who had a head start, where do you position? And what do you have to do to catch it?

Yes. I mean first of all, what we started with, and as I mentioned, we already have an L2 solution, which is basically highway assist or driver assist, how we're calling it, hands-free for the Lucid Air. So you don't have to have the hands on your -- on the steering wheel and obviously, you need to be able to -- actually, you need to look forward. Otherwise, it will -- so that's what we worked on. The other thing that we worked on extensively is in our vehicles, they are already very much prepared when it comes to the sensor set. We have radar, we have obviously cameras, and we also have LiDAR in our vehicles, both in the Air and in the Gravity. So we have created all of the infrastructure needed in order to do that. So then what I mentioned before, we were focusing actually in the last couple of years on, yes, getting to hands-free L2, but not making enormous additional investments like, for instance, like Google did with Waymo. So -- and therefore, beginning of the year, I looked at the market and said, okay, we need to do -- we need to get closer there. So how do we get there? And that's why we started to have conversations with partners like NVIDIA. And we're already using actually their technology in our cars anyway. So the technology in our vehicles in the Gravity is NVIDIA based. But then on top of that, partner with them from the software side. And we are very confident that we will have something very attractive very soon in our vehicles. And when it comes to the robotaxis, what Google does, what they do with Waymo, we are doing the same right now with Nuro, which is our partner there. And we will get to a solution that we can deploy by the end of next year. That's the plan.

You touch on the liquidity and funding.

I would hand this over to you.

So liquidity, so we already gave some colors around where we stand in terms of funding. So I mean, we finished the Q3 pro forma with $5.5 billion, which takes our funding well into 2027. Recently, we have refinanced a 2026 maturity convertible bond. So we have raised just short of $1 billion to do this refinancing. The PIF continues to show strong support to the company. So we have a deferred draw term loan with them, which was initially just below $1 billion, which has been doubled and which is now standing to $2 billion that we are not planning to draw on. So I mean, in the context of the investment that we still have to do next year, which are mainly related to the plants, the plant in KSA that we're finalizing, we're completely covered in terms of liquidity.

Maybe just if we look out to the end of the decade, given your investment plans, how many vehicles do you think will be rolling off your production lines per week? You gave us a stat of 1,000 per week. Obviously, you're bringing in this new mid-market vehicle. I think in the context of a competitor of yours trying to get 1 robotaxi off the line every 10 seconds, which is obviously potentially a pipe dream. Maybe interesting to hear your thoughts on where you might be in the 2030s.

So I have to admit, I haven't made that math or what it will be per second. And we haven't yet disclosed that. I actually have to pump the answer to an Investor Day that we are doing in Q1 next year, where we want to lay out all of that strategy, including also what it means, where do we want to grow into. And by then, I will make that calculation as well how many seconds it's going to be. Maybe if you allow me also because on the -- there were a couple of questions on the autonomy strategy and why are we doing what we're doing? And it's actually 2 things. It's -- for us, it's smart capital allocation. In order to get to high levels of autonomy, we are talking really about billions of investments. And obviously, right now, we don't want to have to raise a couple of billions. At the same time, when you look at even the biggest and most successful companies in the world have once in a while sidestepped and used our partners for their technology. One very simple example is Apple. To this day, when you search on your phone, the search results don't come from Apple. They come actually from Google. That's number one. Number two is, and it was probably like 15 years ago, when they realized that, oh, our investments into the power PC chips were not enough, they went with Intel for a long period of time in order to be competitive. While they were figuring out, is it worth for us to invest into our own silicon level and then they switched. And at the same time, they delivered fantastic products in that meantime, by the way, even they used Qualcomm modems that they also now in-sourced. So they did a lot of changes over time once they realize there is a value of doing it. But we are in a very similar situation. I wanted to make smart investment allocations. And then we monitor and see, is that something that we should actually own in-house. And if you just look at autonomy as a very good example, if we would have made an investment -- started the investment 5 years ago, where would we be right now. We probably would be $5 billion at least poorer than we are. And at the same time, we would have something that somehow works. And with the new AI models, now in a year or 2 from now, things look completely different with less investments. So we think that is a very simply smart way of approaching things to provide something for our customers and at the same time, monitor how things develop and what we should be doing and where should we place our bets in the future.

Other questions? Just maybe related to that and the way you grow by partnering with some other players. In terms of coming back on the robotaxi, as you said, you have big ambitions going forward. Should we -- are you in discussion. Obviously, you're limited in terms of what you can disclose, but are you in discussion with other market participants?

We are, but I'm very limited to disclose anything. And I mean, there are also continuous discussions with Uber. But yes, there are more discussions than that, either here in the U.S., but even internationally. And I really hope that by actually that Investor Day in Q1 that we are able to talk more freely about additional things.

Got it. Sorry, another question.

I guess conceptually, we're now seeing the pace of rollouts across cities, across in the States and also in Europe faster. They seem to have accelerated. So what is the gating factor for your partnership with Uber in San Francisco expanding more broadly? Is it -- is it availability of vehicles? Or is it regulation? Maybe you could just explain how that evolves?

Yes, it's a combination of things. Well, first of all, and I think it's a good thing because now I can explain a little bit more how automotive works. You don't sign a partnership and then you start rolling out things the next day in automotive. There's actually from -- even with our vehicles that are well prepared, we have to add additional technology to the vehicles. So there's a development phase that still has to happen to integrate the Nuro driver into our vehicles. And on top of that, there's a long validation cycle that you can make 100% sure it works every time, everywhere. So the gating factor right now is simply to go through that process, finalizing the development. We have recently handed over the first development vehicles, which we outfitted with everything. And I think by the end of this year, we will have delivered all of the 75 that we are planning to have. And from there, it's training the algorithm based on that new vehicle together with the driver. And then it is about validation and also regulation. There are still 1 or 2 hurdles to overcome on that area. When this is done once, then it's simply compute power and training the vehicles in other locations. That is something that with the new technology, AI-based technology works much faster than it used to in the past.

Okay. Maybe one last question, if any. No? Okay. I think it's noon. So noon, I mean, if delegate could please head upstairs for lunch. I think it's the Danzig suite. Lunch will be served. Thank you so much. Thank you.

Thank you.