Lucid Group, Inc. Price & Performance (LCID)

Thank you, and welcome to Lucid Group's fourth quarter twenty twenty four earnings call. Joining me today are Mark Winterhoff, our Interim CEO Gogain Dhingra, Senior Vice President of Finance and Principal Accounting Officer and Tofig Basaid, CFO. Before handing the call over to Mark, let me remind you that some of the statements on this call include forward looking statements under federal securities laws. These include, without limitation, statements regarding the future financial performance of the company, production and delivery volumes, vehicle and products, studios and service networks, financial and operating outlook and guidance, macroeconomic policy and industry trends company initiatives and other future events. These statements are based on the predictions and expectations as of today and actual events of results may differ due to a number of risks and uncertainties. We refer you to the cautionary language and the risk factors in our most recent filings with the SEC. The forward looking statements on Page two of our investor deck, available on the InvestorRelationssectionofourwebsite,@ir.lucidmotors.com Lucid. In addition, management will make reference to non GAAP financial measures during this call. A discussion of why we use non GAAP financial measures and information regarding reconciliation of our GAAP versus non GAAP results is available in our earnings press release issued earlier this afternoon well as in the investor deck.

With that, I'd like to turn the call over to Lucid's Interim CEO, Mark Winteroff. Mark, Please go ahead. Thank you, Menod. And thank you, everyone, for joining us in our 2024 and fourth quarter earnings call. I'm honored the Board has named me to this role at a pivotal and exciting time in the company's journey. It's a true pleasure to be here and share our vision, progress and the remarkable strides Nucynt had made in 2024. Before I get to my prepared remarks, I'd like to first thank Peter Ronnett, Peter founded Luizet as you know it today. Helping to bring the world the most advanced EV technology to Luizit Air the world's best sedan, and the Lucid Gravity in SUV with truly no compromise. Under his leadership, the team built the most advanced greenfield EV manufacturing plant in The U. S. Built the first car plant in Saudi Arabia, signed the company's first technology supply agreement with an OEM, and put us on a determined path to further advance the state of the electrical cars with our next generation Atlas powertrain in the midsize platform. I could probably spend entire hour speaking to his accomplishments. But above all, Peter put together an incredible team to advance the company's mission I'm honored to lead this team into the next phase of its journey. [indiscernible] [indiscernible] into my delight to introduce today Lucid CFO, [indiscernible] Tafik brings very strong financial experience as a CFO that aligns very well with our long term strategy.

He has decades of experience in strategic finance, and operational transformation with a proven ability to align financial strategy with business objectives as we scale our operations efficiently. He joined us a few weeks ago, but is already getting into the thick of it. To think.

Thanks, Mark, and hello, everyone.

I couldn't be more excited to be here at UC that's such a pivotal moment, not just for the company, but for the entire EV industry. We are in the middle of a once in a generation shift towards electrification This is a secular shift and Lucid is at the leading edge of that transformation. What immediately struck me about Lucid is that this isn't just another car company. It's a company built on engineering excellence, board innovation and a clear vision to redefine the future of sustainable mobility. And that's exactly what I'm here.

Throughout my career, I've helped companies navigate through complex transformation, growth expansions and large scale operational turnarounds. I have worked in industries where disruption, competition and rapid change were constant realities and I've seen first hand what it takes for a company to go from a visionary ID to a financially strong globally scaled business. The key to the success is about smart capital allocation operational efficiency and making sure we set up for long term profitable growth.

At Lucid, we have world class technology industry leading efficiency and a brand that stands for performance and luxury. Scaling production, optimizing operations, and accelerating growth, bringing financial discipline will be more critical than ever. What really excites me is the opportunity ahead.

The EV market is still in its early days.

And as demand continues to grow, the real challenge is scaling. Scaling efficiently, operating smartly and driving sustained financial performance. That's where my focus will be. Ensuring we scale efficiently balancing growth with operational excellence, driving financial discipline and smart capital allocation, while making sure we invest in the right areas to maximize long term value and strengthening our financial strategy so that we're not just building great cars, but also building a sustainable profitable company that delivers for our investors and stakeholders.

I've had the chance to drive the Lucid Air and its experience the Lucid Gravity. And I can confidently say that these are game changing vehicles. But great products alone don't make a great company. It takes strong execution, a clear financial roadmap and the right leadership to turn potential into sustained success.

That's why I'm here and that's why I'm committed to delivering.

Over the coming weeks and months, I look forward to engaging with our investors analysts and key stakeholders, sharing more about our strategy and working with this incredible team to make Lucid a true powerhouse in the industry.

I'm honored to be here and I can't wait to get started. Thank you, Tufic. I also want to take a moment to give a special thank you to Gagarin Dhingra, for his great work as our Interim CFO.

Gagan is an incredible example of Louis'S experienced internal talent that we can utilize to maintain seamless continuity. I'd also like to congratulate him on his promotion and expanded role as Senior Vice President of Finance and Accounting in addition to his role as Principal Accounting Officer.

We look forward to your continued contributions to Lucid.

I believe to fix position [indiscernible] set the finance organization up for continued success in accelerating our strategic priorities at Lucid Lucid. Now turning to the business. 2024 was an incredible year for Lucid. We established ourselves as the preeminent leader in EV technology. Producing the longest range fastest charging most efficient sedans on the market achieving a market leading five miles per kilowatt hour. We saw four consecutive quarters of record delivery Significant year over year improvements in gross margin in our working capital, delivered our first Lucid Gravity SUVs, and strengthened our balance sheet.

I think it's fair to say that our say do ratio was very good. These accomplishments are a testament to the hard work and the support of the Lucid team, our supply chain partners, and our strategic partner, the BIF. We are grateful for all their continued support. Now to the numbers. In 2024, we produced 9,029 vehicles, with deliveries of 10,241. A record year. Well, let me put this in context for you. [indiscernible] In 2024, the Lucid Air was the third best selling EV in its segment in The U. S. According to Motor Intelligence.

That doesn't reflect the momentum we gained because we were [indiscernible] the number one best selling EV in the back half of 2024 Ford segment And the third best selling vehicle when including all gas powered vehicles in the segment. I think this is worth repeating. The Lucid Air was the number one best selling EV in the second half of twenty twenty four for its segment, and the third best selling vehicle among all vehicle in its class. Including gas powered vehicles. Think about that for a second. We outsold many of the most storied and well known brands the automotive industry. In both the EV and the gas market. This is a testament to how much customers love the Lucid Air. We love how it drives performance its driveability, the design, the charging speed, the interior space, and the range, of course. Now I'll tell you why this is so important as we enter twenty twenty five. Because everything that customers love about the air we brought Lucid Lucid Gravity. This Is Why We Are Tremendously Optimistic About The Elusive Gravity In The SUV Segment. In The Coming Weeks, We Expect Virtually All Of Our Studios To Have Showroom And Test Drive Cars So Buyers Can See And Feel Just How Great It Is For Themselves.

We We Opened U. S. Orders for the Lucid Gravity Grand Touring, a new vendor of last year, and orders have exceeded my expectations.

We've opened the orders for the Grand Tour in The U. S. And the order for the Gravity Grand Touring are exceeding the Air Grand Touring by far the same And this is with an intentionally very limited market which you can expect us to significantly ramp up throughout 2025. Mark, late Q1 in your calendars.

We are working on something truly special. And we expect to open orders for the Turing trim rate this year. So we feel very optimistic about the large market opportunity ahead. I'd also highlight that well more than three quarters of the Lucid Gravity orders our new customers to Lucid. Lucid gravity is attracting new people to the brand. Again, despite very limited marketing, As we ramp up the number of Lucid gravities on the road, and our marketing campaigns, we anticipate seeing a strong growth trajectory like we saw with the Lucid Air but in a much larger market opportunity. I'd like to add that thus far, while we priced the Duluth Gravity Grand Touring attractively starting at $94,900 we are seeing customers ordering highly optioned equipped configurations. A significant portion of the orders have a configured price of above $120,000 and more than two thirds opting for the seven seater.

We would expect this trend to go down over time as we mix in less liquid configurations for inventory. Others are moving away from larger three row SUVs. Because it's challenging to create an SUV with lots of space without sacrificing range or having a large battery pack that makes it less financially attractive to make. But we solved that problem. With our technology, I think customers will be really happy with the Lucid Gravity. Believe it's very unique in the industry. Customers have been telling me that it has every feature they want in an SUV. And it's underpinned by our industry leading technology that customers can only In December, we launched Compromise Nothing as our brand promise, a hero video and a campaign. I have to say, I'm impressed by the response and the positive feedback. I think we found the perfect way of expressing what Lucid is all about and what the customers can expect from joining the Lucid family.

We once again achieved the highest level of brand awareness awareness among customers intending to purchase EVs. We are just getting started. We have a long list of exciting and creative concepts we are working on. Stay tuned In 2025, we will take a much bolder approach on marketing than ever before at Lucid, starting with the Lucid Gravity and then just a few weeks time in New York City. Now we're going to put a lot of focus on quality and ensure customers get what they expect from the Lucid brand. As mentioned last quarter, this means we will have more gradual delivery ramp in the first quarter We'll prioritize Lucid Gravity for showrooms in Test Life which I think is the right strategy and one of the key learnings from the Lucid Air launch. We want our customers to be able to experience the [indiscernible] Are also working with our suppliers to ensure they can ramp with high quality parts and support our We also opened orders in Saudi Arabia in early February and we expect to start producing a number of Lucid gravities for customers there. These vehicles will be in transit in the first quarter for final production at our M2 factory the second quarter.

So you'll see those in our Q2 production numbers. Now turning to Europe. It's still early, but we continue to see traction and that's despite the very tough market for EVs in Europe these days, especially in our segment. And we have our eyes set on accelerating our progress. We have added additional sales studios and service centers, for example, in Germany, and we are accelerating the growth of our retail footprint in market coverage in Europe by introducing additional distribution channels like importers, [indiscernible] for select countries in addition to our existing direct to consumer model. We are very excited about 2025. And expect another big year We expect to produce approximately 20,000 vehicles with continued growth in 2026 as we get a full year of Lucid Gravity, further brand awareness growth, and more maturity in the business and markets. This will take us to midsize. With scheduled start of production in late twenty twenty six. I was just down in the design studio and I can tell you the vehicles look amazing. I think customers are going to love them and I can't wait to show them to you. I don't want to reveal too much, but we are currently planning to unveil them late this year or early next year.

In closing, I'd like to highlight the four strategic priorities I'm focused on. First, I continue to be laser focused on driving our growth of customer deliveries of our high quality and technology leading vehicles. As mentioned before, this includes doubling down on marketing across regions we are active. Expanding our retail footprint, and distribution channels, and most importantly, ramping production of the Lucer Lucid.

Second, continue to advance our technology leader [indiscernible] equally important, further advancing our advanced driver assistance system functionality. For example, by introducing hands free driving which we expect to roll out later this year. Third, bringing our three midsize vehicles to market with the first vehicle scheduled for start of production in late twenty twenty six. In fact, we signed off on the advanced engineering phase of two of the midsize variants. Which will now move to the development and industrialization phase. This includes the Atlas powertrain, which is well under development and is all about a lower cost version of our Zeus powertrain in the air. Fourth, expanding our technology license [indiscernible] drive forward other new technology monetization options. This will be a core focus in terms of the discussions that are already well underway as well as examining new opportunities And of course, underpinning all of this will be a laser focus on cost and efficiency, which will be enhanced with the partnership with Tophik. With that, I'd like to turn over to Gagan Dhingra, to provide an update on our financials.

Thank you, Mark. And thank you to those are taking the time to join us today. Before I get to my prepared remarks, I wanted to take a moment to express my gratitude for Peter's leadership [indiscernible] contributions and for his continued vision to drive the company's success. I'm grateful for the opportunity to learn and grow under his leadership I would also like to take this opportunity to thank the leadership team the Board of Directors, and the entire Lucid team for their unwavering support. It was an honor and a privilege to serve as the company's interim CFO It was also a pleasure and getting to know so many of you in the analyst and investor community.

I truly appreciate the thoughtful discussions and insights you have shared I remain deeply appreciative of the relationships we have built the journey we have taken together over the last several earnings calls.

As I turn my focus I would like to take this opportunity to officially welcome Tophik, to the Lucid team Turning to our 2024 and fourth quarter results.

As Mark mentioned, 2024 was a transformational year for Lucid We delivered four consecutive quarters of record deliveries we made significant improvement in gross margins nearly having them on a year over year basis and we expect significant improvement in 2025 We successfully managed operating expenses Despite strategic growth investments, delivering on our guidance for operating margin improvement year over year. We strengthened our balance sheet with continued strong support from our strategic partner, the PIF, as well as new investors in our last transaction.

And we also significantly improved working capital behind strategic improvement inventory management and despite mix headwinds.

We have a lot to be proud of in light of the challenges we and the industry face but we recognize that we still have a lot more to do. The team is invigorated with the Lucid gravity ramp still ahead of us, and as we get closer to the launch of our high volume midsize platform. Turning to production and deliveries. In 2024, we produced 9,029 vehicles up 7% year over year and in line with our guidance of approximately 9,000 vehicles.

While delivering 10,241 vehicles 71% year over year. During the fourth quarter, we produced 3,386 vehicles 42% year over year and up 88% sequentially.

And delivered 3,099 vehicles up 79% year over year and up 11% sequentially. This was the primary driver of the $234,500,000 in revenue for the quarter. GAAP gross margin for 2024 was negative 114% a significant improvement from the negative to 25% in 2023. The fourth quarter, GAAP gross margin was negative 89% This included a favorable impact related to a net supply recovery which we were able to successfully negotiate. Excluding this benefit, gross margin of negative 108% was similar to the third quarter and in line with the guidance we provided. In 2025, We expect another year of significant gross margin improvement similar to the trend in 2024. We expect this improvement to be driven by a combination of production scale, and continued focus on cost reductions. Gross margin for the first half of twenty twenty five is expected to be near the levels of Q4 'twenty four excluding the one time favorable recovery benefit this is due to one time incremental cost associated with the Lucid gravity ramp up and then significantly improved with scale in the second half of the year. We expect Q1 to be more impacted by seasonality and then improve in Q2 with the ramping of the Lucid Gravity.

Turning to OpEx. R and D in 2024 was approximately 26% year over year, driven largely by gravity investments. R and D in the fourth quarter of $280,000,000 was down from $324,000,000 in the prior quarter As costs related to gravity diminished with the start of production In 2025, we expect R and D to steadily increase throughout the year as we ramp up mid size and Atlas investments. SG and A in 2024 was $9.00 $1,000,000 up 13% year over year and $243,900,000 in the fourth quarter up 4.4% sequentially The Lucid Gravity is an opportunity for Lucid to accelerate its brand around a compelling new product in a much more desirable SV market segment we expect to put more muscle behind the elusive gravity to drive sales and brand awareness. We expect to be able to leverage the brand awareness growth into the midsize market with the midsize vehicles we expect to start producing in late twenty twenty six. We expect operating expenses in 2025 a percentage of revenue to improve by more than 100 percentage points.

Turning to other income, In Q4, we recorded a gain of $292,600,000 in other income from a change in fair value of derivative liability and a corresponding total acquisition of $239,700,000 associated with our redeemable convertible preferred stock under a line item below net loss.

This was mainly due to the decrease in our share price at the end of the fourth quarter compared to the prior quarter. Adjusted EBITDA in Q4 'twenty four was approximately negative $577,000,000 an improvement of 6% from Q3 twenty twenty four. Moving to the balance sheet. We ended the quarter with approximately $5,080,000,000 in cash cash equivalents Investments and equity securities with total liquidity of approximately $6,130,000,000 This does not include the Visa grants or the FIDF loans. Additionally, we also renewed an upsized the GIB credit facility increasing the commitment amount from Ps. 1,000,000,000 to R1.9 billion further improving our liquidity profile by approximately $240,000,000 in U. S. Dollars and demonstrating strong support from our global banking network. Turning to inventory, Inventory was $407,800,000 in Q4 'twenty four, down from $506,800,000 in Q3 twenty twenty four, due to continuous improvement in inventory management. Capital expenditure for 2024 was $883,800,000 slightly below the $1,000,000,000 we guided to on our third quarter earnings conference call. The lower CapEx was primarily related to the deferral of projects into 2025, Before moving to the outlook for 2025, let me touch on some external factors. The industry faces a number of uncertainties with regard to potential policy and regulation changes in The U. S. We have been working tirelessly to find ways mitigate some of these impacts for example, we have been taking steps to localize supply We have also actioned certain supply chain optimized efforts that we think could help mitigate some of the tariff impacts as we understand them today.

And we expect some of these actions should also benefit us from a cost perspective. Of course, we don't expect to be immune from potential policy changes Understanding precise impacts has a number of dependencies. We are closely monitoring the situation will continue to work with our government partners.

Our production outlook [indiscernible] our best understanding of the possible impacts as we comprehend it today. We forecast production of approximately 20,000 vehicles in 2025. With regard to our liquidity position, we ended the quarter with total liquidity of approximately $6,130,000,000 due to our cost transformation efforts and cash management, we expect our current liquidity will now give us runway into the second half of twenty twenty six in addition to the recent upsizing of the GIB facility, I would also highlight that this does not include future FIDF loan or MISA grants.

Moving to CapEx.

Our focus is increasing investments in our future growth initiatives and we expect capital expenditures for 2025 to be approximately $1,400,000,000 reflecting AM2 expansion for our completely built up unit [indiscernible] certain deferrals in our capital outlook from 2024 and our continued investments in retail infrastructure. From a product perspective, we are scheduled for startup production of our high volume mid sized platform in late twenty twenty six. As we close-up 2024, and look ahead to 2025, I couldn't be more excited about the opportunities that lie ahead for our company. We built a strong financial foundation established ourselves EV technology leader, and positioned ourselves for significant growth In the coming year, we will continue to focus on driving efficiency [indiscernible] strategically creating value for our stakeholders. We thank you for your continued trust and support With that, let me turn you back to Menard to get to your questions.

Hi, Tawanda. So before we [indiscernible] the calls on by phone, I'd like to take some retail questions from investors on the Safe Technology platform. Our first question comes from Patrick M. Peter mentioned how Lucid aims to be 80% tech company and 20% Lucid company. Is revenue from TechPlay is expected? What categories of products do you see making up that 80% of revenue?

Yes, Mehta, let me take this.

Well, thanks for the question, Patrick. I think this statement by Peter was a bit taken out of context. I want to stress that it doesn't mean that we are deprioritizing our automotive Quite the opposite is the fact. We are very excited about the growth potential that we have with the particular with the gravity coming to market. 80% tech company and 20% car company. Basically means that we see ample opportunity to leverage our technology and with external customers beyond our car business. But it doesn't mean like one of the articles that I read in the headline Lucid wants to become a supplier and do cars on the site. This is not what they're planning to do. And I wanted to make this very clear. [indiscernible] We are in constant discussions with that additional partners to for deals and we're expecting deals to close soon, but I cannot go into further details. Types of products and revenues Right now, it's step on the vehicle technology related. Other means of monetization and other technologies going forward.

Thanks. Mark, we'll go to our second question from Paul C. It's been mentioned that discussions are ongoing regarding potential tech deals. Since 2021 with one deal made Are the recently mentioned discussions the same with different manufacturers? Do you see a deal being made before the Atlas motor is ready?

We had recently mentioned discussions are not with the same as we potential partners that we talked to in 2021. A matter of fact, the list is getting longer and longer. Just this week, we had additional very large OEMs reaching out to us in order to have As a matter of fact, regarding the second question regarding the Atlas Motor, it is not needed to have the Atlas Motor ready. As a matter of fact, some of the current discussions are about the Zeus powertrain and not about the Atlas, but future discussions definitely [indiscernible] are around the Atlas motor. But we don't have to wait until the motor is ready. By now we are established as the technology leader. So we don't have to show it for a study. Thanks. And our last question is from Paul Cie.

With gravity deliveries being low while your manufacturing ramp up quality mindset constraint, are you concerned that you will lose a lot of customers who have pre ordered due to the long wait times? Similar to what happened with Air?

Well, let's put long wait times into perspective. We opened the in November, so that's a few months ago and we are starting to ramp up our deliveries over the next coming weeks. So it's not really in comparison what we've seen at AAV a long wait time. And also let's not make a mistake. Every automotive OEM has a gradual ramp at the beginning when they launch a new product. So it's not abnormal what we're experiencing here. So even beyond that, yes, there might be some customers that change their mind because it doesn't fit their timing. But our order intake right now is healthy, it's actually very healthy. Without any marketing and we said that in the earnings call. And we expect this to become even healthier going forward.

Great. Tawanda, we'd like to now take questions from the phone lines.

Thank you.

As a reminder, ladies and gentlemen, that Our first question comes from the line of John Murphy with of America's Securities, your line is open.

Good evening, everybody.

Just wanted to go kind of right to the heart of, I think, what a lot of people are questioning right now is I mean Peter is not on the call. It's a bit of untraditional to make a change with it like this without sort of the founder involved with the transition call. I'm just curious why Peter isn't present and why you would make an announcement like this without a successor, why you wouldn't stick around until a successor was chosen? I know it's a tough question, but I mean it's the one that everybody's thinking right now.

Yes, I can take that. Obviously, I think we we clearly announced that Peter made the decision that after twelve years, it's now a good time to pass the baton. What Peter did in that time is extraordinary. And he built this this company but he also built a very strong team we felt that it's now a good time after bringing air to life establishing our technology leadership and gravity to pass the baton. And that's why we are sitting here right now to take the call.

Okay. Then just a second question. Wonder if you could kind of give us an idea of the the gravity order book, and how that's developing. I'm not sure be willing to give us the size, but we'd love to hear that. But just kind of the trajectory and how that's developing.

Yes. I mean, I just mentioned that in the earnings call. I mean, we opened the orders last November. And I was actually positively surprised about the demand. Let's not forget, we only opened the orders for the Grand Touring train.

Started $94,900 And the vast majority of orders that we get are north of 120,000. And that limits potentially the numbers, but we see actually very strong take off of orders. [indiscernible] I want to repeat, We haven't done much marketing. I would actually almost say we have no we've done no marketing. So far for the Gravity, which we are planning to increase drastically over the next couple of weeks. For Stage two, you will see some very interesting things coming.

So is it, Marc, is it fair to state that the gravities that you have within the 20,000 guidance [indiscernible] what you think you're going to sell or is it what you're limited for production They're just trying to understand because it sounds like the order book is not still early days. I mean, how are you coming up with that number? And is it capacity constrained?

Yes. I think Peter said that in in previous earnings calls that we're expecting to be capacity constrained constrained in the first couple of quarters. And that's the way right now we're projecting this. We have also considered in the 20000 the fact that obviously there's a lot of uncertainty right now with regulatory changes and in other parts.

That's why we wanted to be a little bit more prudent with the numbers.

But yes, we expect to be in the first couple of quarters supply constraint.

Okay. And then just one last one on the midsize. I mean, it sounds like it's getting close to design freeze almost. I'm just curious when that hits, when we get to see it because we'd love to see it, just most of your vehicles or vehicles so far pretty good looking. And who is kind of taking the lead on that now that Peter has stepped aside? Is he still involved with that product? In the final stages or is the rest of the team leading the charge?

No, it's clearly the rest of the team. So really Peter has handed over the day to day responsibilities to the And we have the Head of Product, we have Head of Powertrain, we have Head of Design, all those people that are with the company for many, many years, some north of ten years. Will continue the baton to the finish line.

And when do we get to see it, the prototypes?

Yes. I think I said that earlier, later this year, beginning next year.

Okay, great. Thank you very much.

Thank you. Please standby for our next question. Our next question comes from the line of Tom Narayan with RBC. Your line is open.

Hi. Thanks for taking the question.

I'm Mark Tafik in congrats to Guggen on your new role. I just have follow ups to what John was asking some of these questions. [indiscernible] on Peter's new role, just curious as to what that is exactly. You mentioned not day to day, but as an advisor, what exactly does that mean? It's such a strong presence obviously for all of us. I would just love to hear more on that. [indiscernible] Well, I mean, basically senior technical advisor for the Chairman of the Board. And yes, strategic and technical advisors business, but if there are questions arising and the Chairman thinks it is worthwhile to involve Peter, then he will.

But it's up to the discretion of the Chairman to have that interaction.

Okay.

And then the other follow-up again on on gravity. I guess what it I understand capacity constraint.

On the 20,000 Are you guys still seeing that six times total addressable market for Gravity versus the Stance or is that the lower by any chance? Because you're only doubling the size right now [indiscernible] basically production year to year Yes. As I said, it is more production and supply constrained than it is demand constrained. That's really the reason we're ramping up. We want to make sure that we're ramping up with a high quality and that's the main reason.

So we haven't changed the plan. For Air and Gravity together.

Okay. And my final one on the the IRA credit Could you remind us what portion of your demand came from the the lease portion, the IRA, and that's I think what folks are thinking may go away.

Just seeing what headwind that could be for you guys?

I think right now it's no secret that a good portion or a big portion of the all EV sales in North America are leases. And it also applies to us. What I wanted to point out earlier, I said already that in our production numbers, and obviously linked the delivery numbers, We already anticipated regulatory changes and how that would that potentially impact our demand. Maybe additional information on gravity, as I've mentioned, we will only have opened orders for the Grand Touring.

And the vast majority of that car right now is configured at prices around $120,000 where the price elasticity not as big as when you talk about your $60,000 vehicle or $50,000 vehicle.

So not that we have not considered anything, we actually did. But we don't expect this to be a super mixed way. Okay. Last one on the licensing think you mentioned there's very large OEMs reaching out to have discussions I mean, is there any more detail on that? Is that are they far along or is it just like kind of very introductory level for these large OEMs?

Well, I mean, it changes actually because yes, for the ones that I just mentioned, the two that just just reached our lead introductory, but we have others that are much further along. So and it's not only for upcoming technologies, even for technology, as I mentioned, for the Zoom powertrain that we already have. Yes. So I'm not commenting on how far we are. We hope to surprise everybody.

Okay.

Okay. Thank you.

Thank you. Please standby for our next question.

Our next question comes from the line of Steven Gengaro with Stifel. Your line is open.

Thanks. Good afternoon, everybody. I think two for me. Can you give us a sense when we think about 2025, how the mix gravity mix impacts the progression and in gross margins?

Yes, absolutely.

So if we look at from like year '25 perspective, we said in the prepared remarks We expect a significant improvement in gross margin In line with what we see in 'twenty four compared to 2023. So we are on the right trajectory. During this call, we are not sharing the split between air and gravity, but we it's going to significantly improve Okay. Okay. Thanks. And the other question was I mean, this has kind of come up, but given sort of the demand expectations for gravity and how it unfolds, Could you ballpark for us either what you think like the 4Q production exit rate could be or how we should think about like a 2026 production capability. Without giving maybe specific numbers of what you expect, but what what kind of capacity would you have in 2026 once gravity is kind of rolling at the end of this year?

I'm not prepared to disclose this. I mean, we have variability We can add additional shift, for instance. So that's all things that we are going And also when we then later in the year, as mentioned, open orders So think that has to wait a few quarters until we talk about that. Okay. I appreciate the context. Thank you. Thank you.

Please standby for our next question Our next question comes from the line of Chris Pierce with Needham and Company. Line is open.

Hey, good evening everyone. I just want to hear why you want to lean into marketing so aggressively right now when you're demand production constraint, would it be that you're trying to market the Air as the family of cars or is it trying to precede the market for the Touring edition? I just want to get a sense of why leaning to marketing so soon No, it's actually not really linked to the touring or the year.

But I mean, compared to, let's say, established OEMs were still behind with brand awareness. And with the gravity coming to market, we have a very great opportunity to not only introduce a new car, but also introduced the brand to our customers. Much at a much larger stage and scale than we were able before. And let's not forget, what we're working towards is the midsize. John, then we're talking about a much bigger TAM, a much bigger pool of people that we need to that we need to reach. That's what we're paving the way for. And important for that is that we continue to build the brand, not only market vehicles, but continue to build the brand in order to really then see the demand when mid size comes around. Okay.

And then not to put you on the spot, too much, but I guess if you think about Rivian as sort of the quasi closest comp, we see them unable to generate positive gross margins without regulatory credits at 50,000 units like Would you guys do you think you'd be ahead of that pace because of your lower battery input costs or like what's the right way to think about longer term production as we can make production as estimates, but like how should your margins kind of line up over time when we think a little further out? Just in terms of advantages and disadvantages versus peers that to the extent you can speak to it. It? Yes. So I can take that.

So first of all, there are a lot of uncertainties, what's happening.

But there are few things which really don't apply to us. And we are taking efforts even our supply chain to look like that. So let me take one by one. Is basically when we look at on the manufacturing credit side of which is battery and inverter. On that one, the chances of appeal, we believe, is Then we are talking about the 45 W, which is like $7,500 credit which Mark already covered.

And this one And then we are talking about [indiscernible] tariffs related to import from Mexico or Canada or steel, you name it. [indiscernible] In fact, we have we expect if all things apply to us today, like what is like factor the impact could be like in the range of 7% to 12%.

But we are taking efforts to mitigate and I believe we're in much better shape compared to other OEMs.

Okay, perfect. Thank you.

Thank you. Please standby for our next question. Our next question comes from the line of Andrea Shepherd with Canif Gerald?

Hi, everyone. Good afternoon and thanks for taking our questions. I think most of our questions have been asked already, but maybe I just wanted to touch on ASPs and growth margin once more. How should we think about blended ASPs for 2025 now with the mix including gravity. And I guess on margins, you mentioned in your prepared remarks, you expect Q1 and Q2 to be relatively similar to Q4. What does the path to just to build on one of the previous questions, what does the path to profitable gross margins look like from a timeline perspective? Thank you. Yes. And I think I mentioned that in my prepared remarks, When we look at the total year 2025, we [indiscernible] [indiscernible] significant improvement in line with what we had in 2024. And I believe you can do that math. Coming to like the year end gravity, now you look at that, we have guided basically 20,000 production Last year was 9,000 production. So now we have more scale. We first of all, we're taking significant effort in the company about the [indiscernible] we significantly decreased and we're consistently working. Going to 25 is a completely different trajectory We're talking about not 20,000 production, the conversion costs significantly come down because like fixed cost per vehicle doesn't change.

And this also gives an opportunity to have Like how we deal with our suppliers. So altogether, we are in the right trajectory. We are not guiding what will be the the precise the range or the percentage but we're saying is like there's a significant improvement because of the couple of factors that are taking place. Got it. Okay, that's helpful. I guess as a follow-up, regarding your partnership with the government of Saudi Arabia to deliver up to 100,000 vehicles. I think in the past, you had mentioned that the I think majority of this mix will comprise of the gravity and the midsize. So just wondering if you can, A, I guess confirm that and B, if you can maybe quantify a bit further how we should think about those deliveries, I guess, starting in late 'twenty five and throughout 2026? Thank you.

That is correct. That is mainly actually the midsize, but also gravity higher than the year, but we cannot disclose further breakdowns.

Because of our agreement.

Okay, fair enough. I guess one more if I could squeeze it in. Just maybe a bit of a macro question. With the potential or likely implementation of new tariffs in April. Just curious if you can maybe give us your thought as to how exactly you might be impacted and then what can be done to try to mitigate some of that impact? Thank you.

Yes. I think on that one, I mentioned that the impact including tariffs and 45 W-45X everything combined and it will factor in it could range from 7% to 12% on the gross margin impact. But we are taking mitigating factors localizing your supply and we're taking all efforts there. And that also brings us cost down and we look like supply.

As an example, we just announced another deal on graphite in The United States on top of the other one with that we already have. We're taking actions Wonderful. Thank you very much. I appreciate your time. I'll pass it on.

Please stand by for our next question. Our next question comes from the line Adam Jonas with Morgan Stanley. Your line is open.

Thanks everybody. Good evening gentlemen.

I had a question on your artificial intelligence strategy what is the company's AI strategy?

Specifically with autonomy? Obviously, you have the partnership with NVIDIA and Dream Drives and Hyperion software defined platform, but I don't sure you've commented on whether you've gone to an end to end Gen AI approach the way many the way the industry seems to be moving quite quickly and if you are, what would that mean in terms of your your expenditure and compute needs And then I just have a follow-up. Thanks.

Yes, I can definitely take that. When it comes to our functionality, these are the on higher levels on on the misliding. I mean, I want to point out first, maybe I [indiscernible] already in our current functionality over the last couple of months. You better leverage the sensors that we already have in our vehicles. And we continue to do so. We're actually planning to roll out hand three driving later this year. And hopefully, we can surprise everybody with how early that actually might be. So that's something that we short term working on. When it comes to the to the AD technology, yes, that's what I'm describing. [indiscernible] need to keep in mind that over the last couple of months or maybe a year, the goalpost has shifted. And nowadays, technologies that were mainly AI based are much different from what from what we've done seen in the past, where other players have invested billions and basically have nothing to show for. That is now changing. Having said that, we are considering different routes right now. [indiscernible] extensive discussions with potential partners to partner on this particular topic. And also with what I just said with the goalpost shifting, we're analyzing whether it would be worthwhile for us to completely install that.

But we don't have and we haven't made that decision yet We're right now focusing on the short term implementation and improvement of the technology that we have in our cars in gravity obviously upcoming, but then also in Air. While we are doing this analysis, a lot of things have changed in the last year. If we would have made a decision one year ago, we probably would have been on the wrong track.

Okay. I appreciate that. Just as a follow-up, I didn't know if you'd care to address the messaging from your largest shareholder, obviously with the agreements in place to lower their stake potentially to as low as 45 percent billions of dollars at the current share price I know that was that shelf was kind of previously the prospectus was previously out there, but in identifying that your largest shareholder, it does raise questions in terms of whether you would be a controlled company.

If they were to fall below 50% and we're getting some questions about that and we're just love to hear any messages that you wanted to convey to the extent that you can on that position. Thanks.

Yes. I think, Adam, on the ownership percentage, we believe this is 58.4% based on the number of shares issued.

Right. But there's agreements to to reduce that. Right?

None that I am aware of.

Okay. We'll follow-up Appreciate it.

Thank you. Thank you. Please stand by for our next question. Our next question comes from the line of James Picariello with BNP Paribas. Your line is open.

Hi, everybody.

Just have a question on Saudi Arabia shipments in 2024, by my estimation, would have totaled something close to 2,100 just based on the region's generated revenue of $179,000,000 for your 10 ks. Is that the right ballpark figure in terms of unit volume? And just how should we be thinking about Saudi deliveries for this year? Given the importance of that contribution?

Sure. First, looking at it overall, like the SurVe comment has a commitment of up to like 50,000 vehicles with an option for another 50,000 vehicles. And we said previously and the mode will go towards like the mid size, mid gravity, then air. Now we are going from 9,000 production to 20,000 production We expect like in year 2025, the proportion of Saudi Arabia come down and more go towards Towards the North America.

Okay.

Okay. And then just to a quick two part. One, The 20,000 units production guidance for this year, Given that gravity production is going to be capacity constrained, you can't give us the estimation on what the gravity volumes [indiscernible] that production figure.

And then as we think about the midsize crossover starting in late twenty six Will production solely take place in Saudi Arabia in your AMP2 [indiscernible] for that crossover or when or will it get produced in Arizona as well? Or will it just strictly be dependent on imports into The U. S?

We're not disclosing the mix But I mean, it's clear, obviously, in the beginning of the year, that the gravity is low, while we are ramping up and and then the picture will change over over the year given the fact that the gravity has a has a higher TAM than the year. And when it comes to midsize, we have N1, but we're also outfitting sorry, N2 in Saudi Arabia, but we're also outfitting N1 right to produce vehicles to be locally sold in North America.

Okay. So both plants will produce the crossover?

Correct. Thank you.

Thank you.

Ladies and gentlemen, at this time, I would now like to turn the call back over to Maynard closing remarks.

Thanks. So this concludes Lucid's fourth quarter and year twenty twenty four earnings conference call. Thanks everyone for joining us today and you may now disconnect.

Ladies and gentlemen, the concludes today's conference call. Thank you for your participation. You