Lucid Group, Inc. ($LCID)

The next leg of our corporate series here. We're really excited to have Lucid here with us today. Lucid is an auto tech company that IPOed in 2021 and is focused on the design, development, customer experience, sale and service of premium electric vehicles, primarily, at least currently targeting the luxury consumer market. Its flagship consumer vehicles include the Lucid Air Sedan, Lucid Gravity three-row SUV and currently actively developing its Midsized platform, which I think we're going to talk a lot about. So really, really excited to have Lucid here with us today. Today, we have Marc Winterhoff, Lucid's Interim Chief Executive Officer; as well as Taoufiq Boussaid, Chief Financial Officer. So thank you both for being here. We appreciate it.

So I guess maybe just to start, you just hosted your Investor Day. So I think timing is really good here. And you shared a number of updates. For investors who may have not been able to see the full presentation, can you maybe just walk us through what the most important takeaways you want sort of investors to focus on, on the back of your Investor Day that you hosted?

Yes. I think that there are a couple of key messages. The first one and probably in my mind, the most important one is that we are at a pivotal time, a pivotal time where we're transitioning from a period of heavy investment because we needed to establish our manufacturing system. We have 2026 being the last year of this heavy investment cycle and then we're moving to a phase in the history of the company, where we will start actually using this manufacturing system and leveraging the scale that we will get through our products. So with that, we were able to position a timing around the margin positive, around the cash flow. So we communicated that we're aiming at gross margin positive in the midterm and the free cash flow breakeven by the late decade. So that's the highlight of the guidance that we have provided.

Maybe I can add to that because what we also talked about is basically how we evolved our strategy because, I mean, as you rightfully said, in the past, we were basically a luxury company with one product, the Lucid Air sedan that won for those of you that have watched the Investor Day, won a lot of awards more than many other OEMs actually together, but was and still is in a relatively small segment, luxury sedan segment is not a big segment. Now we added the Lucid Gravity, which is an SUV, three-row SUV in the luxury segment. If you combine the addressable markets of the two, you're talking about something around $40 billion. But now with the Midsized platform, which actually we already have plans for three top heads on top of that platform, that enlarges our addressable market from about $40 billion to north of $350 billion. So a much bigger pool we are now in also at a lower price point. And so that's step number one. Step number two is last year, we really laid out our strategy when it comes to autonomy. And before that, we were basically focusing on best driving vehicles and most efficient vehicles out there, and we still are because this is our DNA. But more and more autonomy, be it on the robotaxi side or be it for personal use, it becomes important. So therefore, last year, we defined our strategy on that and we're doubling down on this. We have -- last year, the first agreement with Uber developing a -- based on the Gravity, a robotaxi together with Nuro together and we somehow announced that we're finalizing another agreement, which is not fully finalized that will happen over the next couple of days and weeks in the same way now on the Midsized platform, so we're going down from a price point. And last but not least, really providing autonomy to our -- higher level of autonomy to our consumer vehicles and also starting with subscription services to monetize software revenue as a recurring revenue beyond what we've done in the past. So we're really opening the aperture going into new revenue streams and also in markets that are currently developing and growing.

Really helpful. I guess maybe just to step back, Marc, if you just sort of think about the broader environment, how are you thinking about EV demand trends in 2026, I guess, particularly in the premium segment? And how do you position the company sort of in that backdrop?

Yes. I guess number one is there's a lot of discussion about a K-shaped economy right now, so I think that's one element that you have to keep in mind where the demand is going to be. At the same time, those situations that we have since end of Q3 last year, you discontinue tax credits and all of a sudden, the world is kind of tumbling down for everybody. Everybody is talking, "Oh my gosh, now it's an EV winter, okay?" So -- and then all media talks about it and then customers think, "Oh, my gosh, maybe there's something to it," and it typically takes between 6 and 9 months until this is blown over because it has happened in other markets as well. The same happened in Norway two, three years ago when they discontinued the incentives. It happened also in Canada. After 6 months, it was actually back. And the interesting thing for me, which is actually quite -- I don't really understand why. But if you really look at the facts and you look at the tax credits that were out there and the pricing of a vehicle on a, let's say, monthly basis that you have to pay for a lease, you compare it before it went away to now, it's exactly the same. And still, people now have all of a sudden the second thought. So I think it's a little bit like, okay, people need to realize, "Hey, nothing much has changed." So I'm very confident that in the second half of this year, it will go back to where it was before. And also in the Investor Day, I mean, we showed the traditional hype cycle. New technology adoption always works that way. And I would say that right now, we are in this trough of disillusionment, that's how it's called and we're actually on the way out already, so I'm very confident that in the second half of the year, this will be blown over.

Maybe as a follow-up to that, can you just talk about how the competitive environment has evolved sort of under the new EV mandate. So I think some of the more legacy OEMs have pulled back a lot in terms of product launches and are pulling out, especially some within that premium sort of EV space, which maybe -- opens the door more for players like yourself. But I would love to just understand how you see sort of the competitive dynamic evolving sort of under this new regulatory complex?

Yes. Well, I mean, you said it. I mean there's a lot of people that had pulled out, which is completely right, we see it the same way, which would actually create a tailwind for us. I mean there haven't been a lot of tailwinds when it comes to EVs in -- or actually in the automotive industry at large in 2025, but that is definitely one. I mean there are several ones. I mean the incumbents out of the Detroit area have basically come down with a lot of vehicles that they discontinued. And then also Tesla obviously now announced that they discontinued Model S and Model X, which is really not exactly where our Air and our Gravity is positioned. So I would call that a tailwind, and we obviously plan to take advantage of that. And we actually think that we are the rightful successor and key player in that space. The Lucid Air is already the best-selling luxury sedan -- EV luxury sedan and so for that reason, I think we have -- when it comes to that, we have some positives. And I personally also believe that in the mid and longer term, the flip-flopping that has now happened will really, really be bad for incumbent OEMs in the long run because, I mean, they will even fall further behind, and that's an opportunity for us.

Just wanted to talk a little bit more about the upcoming Midsized launch. So you had some big updates on the launch, including the profiles and names of the first two top hats. I think you have Cosmos and Earth at under $50,000. With production on Cosmos starting this year, what does the Midsize mean to Lucid? And what gives you confidence that you can take market share? And then I guess what the investment community is really interested in is what will the volume scale to over time?

Maybe I talk about the cars and then maybe you can talk about the volumes.

Yes.

So I mean, the one big question that we actually got very often is, well, you create this great cars. They're awesome. They drive perfectly and then they're really great, but they're expensive. And then the question is, "Hey, if you now bring this down to starting at under $50,000, can you keep the same DNA and still deliver the Lucid experience in those cars." And I think we have succeeded. We really spend a lot of effort on how can we simplify things, how can we make things cheaper while at the same time, really not losing what Lucid stands for, which is awesome driving vehicles. And so I'm pretty confident about this. And every time when we show those vehicles to customers, actually several of the analysts, we had -- I don't know whether that's widely known, but we had in a certain area. We actually had our Cosmos in the back hidden from, let's say, the general public. And everybody we talked to was really super impressed about, "Hey, how the vehicle looks," and it will also be when it comes to how the vehicle drives, it will be fantastic. The other thing that we are now paying a little bit more attention to than what we have done in the past is the whole, let's say, infotainment, the digital experience in the car. We were very much focused on how the car drives. And with autonomy, but also with the digital experience, we are doubling down on that. And we actually think we are one of the few, if not the only OEM who can combine both of those, let's say, old world attributes being great to drive, very efficient, those kind of things. And then the new more digital experience in the car. We announced an AI assistant, which didn't work in the moment when we needed to in the presentation. But we had a lot of people that afterwards were in the Gravity and then realize, "Oh, it works." I don't know why this can happen just as 1 second, and it doesn't work. But anyway, so we're launching a lot of those things and I'm very confident that our Midsize really achieves two things. First of all, it's amazing cars and at the same time, from a cost point perspective, we are in a very good spot. Maybe you can talk about BOM cost and Gravity.

Probably just starting from something you mentioned earlier, so this is a car which is positioned in a TAM, which is valued at north of $300 billion, so it's a massive market, but it's also very busy. So what we have tried to do is really to make sure that we segment the positioning within the Midsized category as accurately as possible for at least the two first variant -- the three variants that we have, but we have a short-term visibility in terms of timing. So as far as the volumes are concerned, so we are going to do it in a very prudent and measured way. So we are not going to build overcapacity for the time being. So what we're aiming at is to use fully the capacity that we are currently installing, that we have in Arizona and that we're adding in KSA as well. So if you combine the two plants, this will lead us to roughly 240,000 units a year. If we see that the volume expand beyond that, we will obviously add in a very flexible way, additional production line, but 240,000 units, that's the total capacity, including Air, Gravity and Midsize. Midsize will be first manufactured and produced out of KSA, where we're building 150,000 units capacity, start of production -- end of 2026, a relatively slow ramp in '27 and then moving towards full capacity in 2028.

And then maybe just let's talk about costs in the BOM and some of the structural cost improvements built into the midsized architecture. What enables you to make those cost reductions versus the current vehicles? Is it higher embedded volumes, cost negotiation with suppliers? What's -- maybe just walk us through sort of the cost profile and how the economics of that vehicle compare to some of your other models?

Well, it actually starts with engineering. A lot of cost is due to engineering, how you engineer vehicles. And so when we started the Midsized program, we basically started with a blank sheet of paper because with the Air and also with the Gravity, the ambition was to build really great vehicles. Actually, we think the best vehicles out there might be a little bit biased. And so cost was a consideration, but not the focus. With the Midsize, given that we needed to or want to come down significantly with the price point, it was a completely different story. We started with simplification and cost as the paramount while maintaining our Lucid DNA and provide something that customers actually want. So engineering is a big, big driver. And simply -- yes, simplifying the -- not only the amount of parts. And we have shown in the investor presentation that if you even compare it to our direct competitors, for every 100 parts that we need right now, not to be named EV leader in the -- in the U.S. needs 110 parts. And even one of those -- the Chinese competitors, everybody is talking about right now, needs 165 parts, I believe, 195 parts for the same. So it's really -- we really try to minimize parts count, complexity and all that, which then also influences the supply chain. You have -- obviously, we have a lot of commonization as well and then how easy it is to manufacture. So it really starts with engineering and then you have downstream effects on how you can further reduce the cost.

So wanted to shift and talk about robotaxi and sort of the autonomy road map. I think the Uber President joined you to discuss the robotaxi opportunity and mentioned that you're finalizing expansion of the partnership from the Gravity to the Midsize. Can you talk a little bit about your strategy with robotaxi and sort of what this market means for the evolution of Lucid?

Yes. I mean, I would call it kind of like a second leg. If you look at the consumer market, that's one area where we want to stick, let's say, either in the premium segment. We obviously want to increase our volume, but we're not going into mass market territory like down to $35,000. At the same time, on the robotaxi side, that's basically our second leg. We really think that's a strategic market that is now developing. And given how well prepared our vehicles are for that market, we are planning to take a good share of that market. As you just mentioned, the Uber partnership that we had last year, we're just working through the final rounds of the next tranche of that, which is, as you said, based on the Midsize. We also showed last week that we're already thinking beyond this, what comes after the Midsize, which will still be a vehicle where you would have this TRO on top of the roof. But then after that, we're already working on a concept, which is a two-seater robotaxi, which is really purpose-built for robotaxi applications. There will not be any TRO on top. It will have very high efficiency because that's an important topic because of the operations costs that are going down and it's really from the design and from the use of the space, very much focused on what's the best way of doing it for that application. You might ask why two-seater, it's not because Tesla did it. But there's actually over 80% -- way over 80% of the rides either with one person or with two people when you look at the Uber network. So in general, that is a much bigger market where you can -- and if you purpose-built a vehicle, you can make it smaller, lighter, therefore, more efficient, increase the uptime and all these kind of things. That's why it is a two-seater. That's what we're working on after that. And so yes, I think this is going to be an important driver for our business going forward.

And then maybe talk about sort of the autonomy road map and reaching various levels of autonomy and sort of who you plan to partner with to reach sort of each level. I think your one of the few that have put out sort of timelines in terms of when you want to hit L3, L4. Maybe walk us through sort of the autonomy road map, who you'll be partnering with and what that timeline sort of looks like as we look over the next few years here?

Yes. Well, I mean, first of all, we are right now at what we call L2+, which basically means hands-free driving in the air and in a few weeks from now, also in the Gravity. So that's our current starting point. We did this completely in-house without any partners. Then, when mid last year or actually beginning of last year, we started to look into, "Hey, what is the path to L4?" Because quite honestly, getting to something which is more akin to what Tesla has right now with FSD, which is what we call an L2++. It drives in the cities, but you're supposed to look on the road. In case of Tesla, you're actually supposed to put your hand on the steering wheel. That is maybe a little bit convenient, but it doesn't really give you what you want. What you want is you don't have to pay attention. You can read your e-mails, you can do other things while you are in the car. And that only happens with L3 maybe on highways and L4 then in a full spectrum. So when we had conversations last year, we had conversations because we have thought about are we doing it ourselves. I mean, obviously, that costs a lot of money. And therefore, we said, "Hey, we really want to focus on a very capital-efficient approach," so we started to have conversations with many different potential partners. And then with NVIDIA, Jensen himself, he said, I want to skip L2++ and L3. I want to go right to L4. -- [indiscernible] yes, okay. It's not that easy, so maybe -- but we can help you to get there. And mid last year, when we then did the arrangement is very often what we actually heard why NVIDIA? And they were nowhere on the map with already miles on the road. I think by now, it became clear what they were working on in the background and nobody really knew about it. We obviously did. And after Mercedes, we were the second one that said, "Hey, we would do that." And then we also aligned with them about, okay, when can we get to L4 and then communicated that 2029 is the time when we want to do it. And it's in a very close partnership with NVIDIA. And I also want to reiterate, it's really because of our focus on capital efficiency right now. I mean, building cars and investing into plants and everything is already very capital intensive. If you then add billions on top of it to get your own L4 logic, we didn't think that this is the right way of doing it because, quite frankly, we will -- the verdict is still out. Is it a strategic advantage to own it in-house? Or will it become available anyway by different partners, and therefore, it's something that you can basically buy. And the time -- as time progresses, the speed to get there and the cost involved to get there will further decrease. When you compare what happened 10 years ago or even 5 years ago versus today, it's not even on the same planet when it comes to the costs involved. And we think that this goes further down, and we will have time to make that decision. Is it a strategic thing that we need to do or not? So that's high level of our road map.

It seems like the technology to go from L2++ to L4. It seems like having experts just build that technology and then deploying that or selling that or licensing it to your car manufacturers, to me intuitively makes sense because it's really -- it's two different things. You have the ability to build a beautiful car that handles well and then you've got like the software application, the brain of the vehicle that could be designed in a tech manner that could be deployed. Is there any specific issues to a particular car that would inhibit that ability to scale like that? And then also separately, if we were speaking with NVIDIA now, like what was their angle to create this partnership?

Well, I mean, the main angle was they were basically looking for a partner with which they can get to L4 as soon as possible. That was really the main impetus when we talked with them about that. And as you said, I mean, there's always -- that's why I said the verdict is still out. I mean there's a benefit of owning it yourself because you can then -- you're fully vertically integrated and you can obviously optimize it for your own individual vehicle. If it becomes -- if it is in a way that because everybody else is kind of using it as well and then it doesn't fit with your needs anymore, then it might actually slow you down. And that's what we need to figure out is, is it something that even in the future will not slow us down to make it even better and fit it for us? Or is it something that at some point, we might need to in-source. But even then if you think about it, NVIDIA has announced that it's -- their model is actually open source. So even that, the starting point, maybe in a year or two or three from now is on a completely different level than it is today. And so I guess the verdict is still out. I mean what is important though is you shouldn't underestimate how difficult it is to actually from a software to create a car that always works in the right way. That's often underestimated in a sense, yes, the autonomous driver is the software. Well, yes, but the software only can say, "Hey, go this way or don't go, make this curve, but then the car has to listen to it, yes. It is very different [indiscernible] what the car is. And so there is a lot of work involved to actually make that work. And our vehicles are from the get-go, very well equipped. We call them L4 ready because we have full redundancy of the major electronic architecture that if maybe -- I don't know, one ECU doesn't really work, then somebody -- then another ECU can take over, which you need because you need to have a failover redundancy like in an airplane. In an airplane, it's the same thing. You have fully redundant systems, that if something doesn't go right, then something else takes over. And that's the same in our cars already, which also gives us right now a leg up versus others. And this is, by the way, the reason why Uber chose us for the cooperation with Gravity because what they were looking for is, "Hey, who is our partner, who can actually build something within 18 months." And to build an autonomous driving vehicle from not even thinking about it to a commercial application in 18 months is pretty much unheard of in the automotive industry.

What if it's ultimately going to be like -- if you look at car manufacturers around the world, primarily build their own engine, right? So you can see the same thing. If you had like a software package for L4 that everyone would buy the same one, you can say the same thing about an engine that everyone buy the same engine by just an engine manufacturer and each car kind of has its own engine for its own purpose. So I wonder if it would be hard to just have an L4 manufacturer and software package that goes everywhere. I think it would be hard to do. I think individual companies, I think are going to build it themselves for their own application. That's my thought.

Perfect. I guess maybe you laid out a lot of sort of targets. You revealed a lot over the last few days. What are the key milestones investors should watch over the next year that reinforce the trajectory towards stronger economics and growth? Is it scaling of Midsize? Just what are the milestones people should be looking for?

Yes. Well, I think that you can call them milestones or key catalysts for us. So obviously, I mean, the start of production for Midsize is an important one, so we will need to be ready. I mean, completing the plant in KSA is another important milestone. I think that the progress that we're making and the strategy that we have towards the additional revenue streams, primarily in terms of capturing software revenue or revenue from partnerships in the robotaxi field and how fast we go on that journey. That's also something really important. We have also very ambitious targets in terms of the speed that we will see in terms of reducing the unit cost. So we have laid out some milestones and timing around that. So these are some of really the key things. At the end, it all comes back to our ability to drive scale at the best cost to drive margins and free cash flow.

So we have about 3.5 minutes left. So I wanted to just scan the audience and see if we have anything out there. I think back left. Thank you for the question. At what unit production level would you have gross margin and EBITDA breakeven on the new Midsized models?

We haven't stated an exact figure. So what we refer to is the trajectory of the cost down versus our current Gravity, so we have laid out the expectation and timing to achieve that and we have also communicated the timing of the margin breakeven. So I think that the combination of some of this information that we have shared and data points that we have shared will allow you to extrapolate probably the answer to your question.

Any -- I think we have one alright.

I just had a quick one, maybe a bit of an update on the partnership with Aston Martin after some of the delays to their EV program?

Yes. So the -- well, yes, the program, their EV program is delayed. So I mean they have been going through some difficult financial situation. I mean, they published their results lately. So I mean, we are in close contact. The program is still very much alive. Our teams continue to work together in order to get ready for the launch. So again, it's triggering a different phasing in some of the proceeds that we initially accounted for as part of the initial terms, but there is no -- beyond these delays, I mean, there is no major change to the way we're working together on the EV program.

Maybe I'll ask one final one. So I think you have a production target 25,000 units to 27,000 units this year. I think you have maybe available capacity like around 40,000 units roughly. I think that implies some conservatism in the current backdrop. What are your expectations longer term around some of the new launches and the additional capacity coming online? And then I guess, maybe just quickly, are there any disruptions to the timing of the production ramp at the facility given sort of the conflict in the Middle East and the location of that facility?

I maybe answer the first part. So 25,000 units to 27,000 units, yes, I mean, we're being conservative in our assumptions. We didn't account for some of the tailwinds that we're seeing, so we see that the market -- there are some specific dynamics going on in the market where we see that the potential to capture additional volume, but again, given the start of the year volatility that we see from the macro environment, we want to remain prudent for the time being. So 40,000 units that you referred to is a theoretical capacity. This is the max capacity that you can reach if you don't have a disruption in your supply chain if everything goes well. So I mean, last year, during the fourth quarter, we reached a theoretical production run rate of 2,100 units a month, so you can extrapolate what it means for a year. Having said that, supply chain still remains an area of concern. I think that there are two things that we're closely watching and monitoring. It's the supply chain disruptions, which translate into price increases. That's something that we're dealing currently with the supply of DRAMs, for instance and there are supply chain disruption, where you simply don't have access to the materials that you need. That's what we had to deal with punctually last year with the supply of aluminum or some of the rare earth metals that we need. So it's very difficult in the current environment to say, okay, what we expect in terms of supply chain disruption. We simply don't know what we don't know. Anything can happen. So that's why we still continue working very hard on making sure that we are as agile as possible, making sure that we have backup plans that we know what are the alternatives for us to mitigate these potential disruptions.

The second piece of your question was about disruption because of the current conflict. Well, thankfully, so far, we haven't seen any additional disruptions. And -- but I also want to make clear that can happen on a day's notice. So neither in our plant, which is on the west side of Saudi Arabia nor in other markets when it comes to shipping routes or so, we haven't seen anything. But again, I've seen a lot of things happening last year, which I didn't expect. So we rather want to be prudent and hopefully, nothing is going to happen. But I mean, as Taoufiq just said, I mean, we learned a lot of -- what you need to do to be prepared. And quite frankly, when you just look at our -- what we achieved last year, despite of all of the challenges, I actually think it's quite good. It's like about 10% below what we initially said. If you compare that to others, we're in a pretty good spot. And I think that's -- might be a little bit underappreciated when you say, "Oh, yes, in the beginning of the year, you said 50,000 units and the end it was about 18,000 units." Okay. Well, I've just seen the year. So others had a much bigger impact, obviously. And yes, I hope it's not going to continue that way this year.

Perfect. I think that's all the time we have. I want to thank the Lucid team for a great conversation, and thanks.

Thank you. Thanks, everybody.