Tesla rival Lucid announces new factory
Shares in Lucid are set to open sharply lower on Tuesday after the luxury EV manufacturer blamed a lack of parts for disappointing financial results, production setbacks and launch delays.
Only this time it is not the missing semiconductor chips often cited by the auto industry that is at the root of the problem. Rather Lucid is suffering from a much more fundamental issue not affecting other peers like Mercedes-Benz: getting its hands on the kind of high-quality materials that are seen, felt and prized by affluent customers.
“Paradoxically we’ve been mainly impacted in commodity supply parts, for example finish parts, trim parts for the exterior, even glass and carpets,” chief executive Peter Rawlinson told investors after the close of markets on Monday.
As a result, the former head of Tesla’s Model S program slashed his forecast for the ultra-long range Lucid Air EV sedan to a range of 12,000-14,000 cars built this year, down from 20,000 vehicles previously.
“We’ve chosen quality over volume,” he said. “We don’t want to get sucked into myopic view of short term numbers — we’re building a brand with a 10-year plan.”
In the here and now, however, growth has stalled. The company fell well short of expectations on key financial metrics, only delivered 300 cars to customers since the Air debuted last year and pushed back the Gravity SUV’s launch to the first half of 2024.
The potential six-month delay would help it avoid the ramp-up mistakes ensnaring the Lucid Air and make it a “better product”, according to Rawlinson.
Lucid shares were set to open 14% lower when trading begins on Tuesday.
Dreams of being a carmaker
In a diversion from the bad news, Rawlinson said he picked the King Abdullah Economic City (KAEC) in Saudi Arabia to be the site of Lucid’s second manufacturing plant.
The factory, scheduled to come online in 2025, will be able to build a further 150,000 vehicles annually, bringing total capacity—when combined with Lucid’s Arizona facility—eventually to some half a million.
The choice fulfills a long-held aspiration of Saudi Arabia’s state-owned Public Investment Fund, which controls 63% of Lucid’s stock. When PIF first invested in Lucid back in 2018, the agreement stipulated that the two parties would “negotiate in good faith” plans for a full automotive production site in the Gulf monarchy—its first ever.
Saudi Arabia, managed by Crown Prince Mohammed bin Salman, is attempting to diversify away from fossil fuels, and plans to creating a sustainable city called NEOM powered by renewable energy and green hydrogen.
At the time, Tesla was burning cash and still posting constant losses. The Saudis balked at the valuation and backed Lucid instead, going on to dump their 5% stake in Tesla before the epic rally that saw Musk’s company breach the $100 billion market cap mark on its way to $1 trillion.
‘Laser focused’
This is the second time an EV upstart and wannabe Tesla announced further investment in new capacity while simultaneously airing its dirty laundry. Amazon-backed Rivian revealed its intention to invest $5 billion in a plant in Georgia just as it revealed deeper problems in its operations.
Shareholders have generally looked positively upon loss-making EV manufacturers that expand their footprint, based on the investment thesis that the growth of such brands is only limited by how many vehicles they can produce.
The treatment that combustion engine automakers get from equity markets is, by comparison, diametrically opposite, as their cars are seen to lack the pricing power and word-of-mouth buzz of their EV counterparts, forcing their parent companies to spend heavily on advertising costs.
As a result, news out of Germany that Tesla’s third vehicle assembly plant should finally move forward following repeated regulatory delays prompted shares to jump 7.5% on Monday.
Rawlinson sought to assuage investors that Lucid’s stalling output growth was nothing but a temporary hiccup.
“Right now we’re focused on ramping up production and achieving delivery targets,” he said. “The whole company is laser focused on that as we seek to fulfill what is now over 25,000 reservations placed by customers for the Lucid Air.”