Thank you so much for joining us for this session with Lucid as part of Deutsche Bank's Global Automotive Conference. My name is Emmanuel Rosner, and I'm the lead U.S. auto analyst here at Deutsche Bank. I'm incredibly pleased to be joined today by Peter Rawlinson, who is the CEO and CTO of the company. As you probably all know, Lucid is a vehicle manufacturer specializing in luxury electric vehicles as well as electric technology, where the company is targeting production of 9,000 units for this year. I think you have delivered similar amounts last year, and you also recently raised $1 billion in financing via a private placement. So the format for today's session will be a presentation by you, Peter, and then after that, we'll jump into a few of our questions. So with all that, thanks for being with us.
Thank you.
Over to you.
Thank you, Emmanuel. Thank you, ladies and gentlemen. With that, I'll dive straight in because I think there's probably a lack of awareness about what Lucid's about, why we exist, what our mission is, what our ambitions and goals are. So maybe it would be helpful for me to cover a few of these issues to put our discussion today into an appropriate context. First of all, there's some forward-looking statements, legal stuff, so I'll run through that in milliseconds and get to the meat of my presentation. So we founded Lucid in 2016 and with a clear vision to advance the state of the art of electric vehicles and electric propulsion systems to a whole new level in order to truly accelerate that transition to sustainable mobility.
And to that aim, we actually engaged in the Formula E World Championship, supplying all the batteries to that World Championship Motorsports Series in 2018. And then in 2019, with the funding from the Public Investment Fund for Saudi Arabia, we actually started building our factory, the first purpose-built electric vehicle factory in North America. And during COVID, in record time, by summer of 2020, we were already building prototypes. And by late 2021, we got the Lucid Air into production, the MotorTrend Car of the Year, our very first shot. This is two and a half years from securing our funding. This is world record-breaking time. Then we revealed the most incredible performance car on the planet, the Sapphire. We put that into production last year, together with announcing an aftermarket supplier deal, getting our pure base level version of Air at $69,900 into production.
This year, we're preparing for the launch of the Lucid Gravity, which is scheduled for production late this year, really going to be a landmark seminal product, best SUV on the planet. With various variations of Lucid Air behind us, we look forward to the big steps, which are going to really multiply our market total addressable market six times with the Gravity SUV program late this year and scheduled for production late 2026, the big one. This is going to be our Tesla Model 3, Model Y competitor. This is going to be the platform that we're designing to make 1 million units a year of. This is a mid-size program scheduled for late 2026. Key to this, central to this, as a technology company, we make all the technology in-house, and it's truly world-class.
The battery pack, the motor and transmission, the inverter, the Wunderbox charging system, and central to all this is our software. It's not enough just to make it in-house, design it in-house. We actually make it in-house in a vertically integrated factory in Arizona. Even that's not enough. There's no point in doing any of that if it isn't truly differentiating. It's got to be differentiated from anything you can buy off the shelf. It's that technological leadership that we've created by redesigning all this from scratch, making it in-house, taking it to another level that really sets us apart. I think if you really want to distill what differentiates one EV company from another, it really is efficiency. What do I mean by that? It means how far can I go with how little battery? Can I go further with less batteries?
Because it's not range. Anyone can achieve range. Achieving dumb range is easy. You just stuff zillions of batteries in. And you're seeing that from our competitors now. Massive battery packs, that's not smart. Anyone can do that. It's how far can you go with how little. That's what really differentiates. And why? Because that gives us a profound commercial strategic advantage in the future. With our technology, and this is a chart of the runners and riders of the EV space, and the green bars are the Lucid products, you can see we're not in a position of near leadership. There's a step change before our products. There's one exception. This is the Sapphire. This is a hypercar. To have a hypercar at this end of the spectrum is extraordinary. We can with this because we can go further with less battery.
We can endow an electric vehicle with range. How much does it cost to endow a mile of range on an EV? And using Bloomberg's figures, it's very conservative, $128 per kWh. I think the real number is more like $150. Even at that rate, we're operating at $0.27 per mile of range. And some of these bad boys this end, it's $0.58 per mile, $58 per mile, sorry. And what does this mean and why is this so significant? Well, the reason is we're addressing the fundamental obstacle to widespread EV adoption. And that is really the cost of entry. And why is an EV so expensive to make? Because of the contribution of the battery cost to its manufacture.
If I look at a relatively high-end EV, we see that a battery cost can represent as much as 37% of the total bill of materials manufacturing that EV. And actually, for a more affordable EV, that battery cost can be over 40%. It's that significant. So when others are looking for saving maybe $130 on a car through a Gigacasting, I am going for the jugular. I'm going for thousands of dollars advantage. And let's put that into perspective. We've got a Lucid Air with our technology compared apples to apples with two competitors.
We see that if those competitors adopted Lucid's technology, the tech that we have in production today, not something pie in the sky 10 years from now, but what we have today, normalized, those competitors would enjoy a cost saving of over $2,000 or up to over $4,000 per car manufactured for the same range. This is getting the same range for significantly less battery cost by using Lucid's technology. That means that we are uniquely positioned in the future to take advantage of that. That's what makes us, positions us in a very differentiated position financially. Our finances right now are dominated by long-term investments for the future. Do not let that fool you. This will come to bear in the future. This fundamental profound advantage we've got, whatever the range of the electric car, we can make it with less battery than the competition.
And the battery represents a vast proportion of the cost of making that car. So to wrap up, I'd like to make what I think is a real seminal announcement in the history of sustainable transportation. We've been founded and formed as a company, Lucid, to really advance the state of the art, to chase down how many miles per kWh we can achieve. And today, ladies and gentlemen, I'd like to announce that we have finally achieved a major objective. We've managed to achieve a certified 5 miles per kWh with one of our products. We're going to give an announcement of that very soon. But the EPA have validated our technology with a product that we have, which is going to achieve this landmark.
When others are at 3 miles/kWh or 4 miles/kWh at very best, we've managed to crack the 5 miles/kWh. This is a landmark. And I've said many times, our objective as a company is to get to 6 miles/kWh because nothing less than that is going to save the planet. Thank you.
Thanks so much for this overview, Peter. So if we start with the technology side, so one of Lucid's key differentiators is that much of the technology is designed and manufactured in-house. How much of a competitive advantage is it versus other players? But just as importantly, how do you preserve this moat?
It's very significant. It means that whatever journey one takes, even with the Lucid Air Pure that we have today, which achieves 4.74 miles/kWh, for the user, any journey you take A to B, if it's from the home to the shops, to your commute to work on your vacation, you actually use less electricity than the competition. And because there's a need to use less energy, battery size is smaller. So there's less impact upon minerals and the world's resources. So you're driving the most sustainable car on the planet. And this is quite significant. We have an advantage over some competitors, which is over 50%. And one of those benchmarks I just showed, we can actually go 50% further than the competition with the same battery size. Or you could have two-thirds of the battery size to go the same distance.
Now, in terms of the gap we have, as you see with the 5 miles per kWh, the gap is growing. It's not shrunken. The gap between us and the nearest competition is growing. There's a reason for that because we've committed as a company, we structured the whole company as an engineering and science-led company. I've got the most brilliant engineers in the world, and we're on a mission to grow this gap. This is very important for the environment and for the planet and also gives us a commercial advantage. Now, nothing that even a patent has a life expectancy. But this is a case of how far can we run, how fast we can run. This is a tech race. No one is staying still. I believe we're running faster than anyone else.
I think in the past, you've indicated openness to monetizing Lucid's technology also through partnerships with other OEMs, licensing or supply agreements. Can you talk about your efforts there and initial indications of interest?
Yeah. Well, we announced a landmark deal with Aston Martin last year worth then at least $450 million to really provide world-class electric powertrain, their next generation hypercars for the next decade. And I think it was appropriate that that Sapphire technology, our top flight technology, powers a top flight supercar brand like Aston. If you look at the tech that we have today in mass production, that would suit a typical luxury car. But it gets really exciting in the future because the tech that we're developing for our midsize plant really would suit a family car of the future. And so it's a little wonder that we've attracted attention from other automakers. And we are in discussion with a number at the moment.
Now, I guess one of Lucid's large challenges is the lack of volume scale so far, which is impacting unit economics. How much of your current losses per vehicle is due to lack of scale versus your bill of materials?
It's dominated by volume, actually. If we look at the amortization of the depreciation of our factory, we have a factory which we're currently expanding in Arizona. We'll have a 90,000 production capacity at the end of this year ready for Gravity. But we've announced that we will make, we plan to make 9,000 vehicles. So this amortization of depreciation is quite a factor. It's all about scale. But let me tell you, in Q1, we grew our sales 40% year-over-year with Q1 of 2023. In 2023, we grew our production 37% over 2022. The word is spreading, and far more people are adopting Lucid. The word is growing just how wonderful this product is.
What are the key milestones or as well as challenges that you expect to face in basically reducing production costs and achieving scale and positive gross margin?
Well, it's all about scale. It's all about scale. But we're assiduously chasing costs. We're taking appropriate measures with inventory control and the impairment as a consequence of that. We're nicely bringing down our inventory numbers. We saw that through Q1. We're making steady progress in our inbound logistics. But it is all about scale. And we have three steps to achieving scale. Our first step is relentlessly grow our Lucid Air set. We're working assiduously on that. The second step is to introduce our Gravity SUV with a 6x addressable market. And that is scheduled for production start later this year. And then the third step, the really big one, going for 30x TAM with our midsize product late 2026. And that's a product we're targeting about $48,000-$50,000.
On step two, which is the Gravity SUV scheduled for later this year, have you shared any volume goals there?
Well, I'd like to sell as many as I possibly can. We'll have a factory which has got 90,000 capacity. I think we've got a product that really resonates with the American psyche. Everyone I'm speaking to, very interesting. A lot of people really loved the Lucid Air when they saw it. The constant rhythm I'm getting from people who review the Gravity is, "When can I buy it? I want to buy." The sky's the limit. I want to sell as many as I can.
More broadly, can you provide an update on the demand environment for EVs and for your EVs? Are you seeing the environment strengthen, weaken, stabilize since, I guess, in the last few months?
Well, it's very interesting, the narrative, because we're experiencing the polar opposite. In Q1, we saw a growth of our deliveries, our sales by 40% year-over-year. We're outselling Porsche Taycan, Mercedes EQS in North America. We're outselling BMW i7. We're outselling the Audi e-tron GT. We're seeing a growing steady demand for our product as the word spreads. So I think there is a narrative here, which may be boring, of too many people getting bad experiences from EVs, which are subpar. And I think people should take a serious look at a Lucid Air, which is an outstanding product and far superior to gasoline counterparts and far superior to hybrids, which really compound the worst of both worlds.
Can you share more details on your midsize vehicle, which is scheduled to start production in late 2026? You talked a little bit about it during the presentation. But what would be the overall competitive landscape in that segment? What volume do you ultimately envision for that product?
So this is the huge project for us. This is the big one. And this is really what's going to propel us into a volume player. And we need to be that to have a meaningful impact upon the environment. That is central to our sense of purpose and sense of mission. That's why I'm here. That's why the whole team's here. And central to that, as you saw, that although a relatively high-end EV, the battery can represent 37% of the BOM cost. When you go down market, then that percentage becomes even more significant. So we have a profound and inherent advantage as a company. This is where we will define our technological advantage for financial effect because we will be able to make that car with a very competitive range with a significantly smaller battery pack than anyone else.
That gives us a cost advantage on the bill of materials of a midsize. And remember, midsize is a world platform. We can have more than one type of vehicle off that platform. In fact, we're planning there will be at least two variants, different models based upon that common platform, which is being architected as a flexible platform, state-of-the-art, with absolutely embodying all our learnings for cost down, everything that we've accrued from air and gravity. The target price is about $48,000-$50,000 at today's prices. We've currently started construction of our AMP-2 factory in Saudi Arabia. The foundations have been poured for that. That will have a capacity of 150,000 units per annum. And we're also going to bring a model of midsize into our factory in Arizona. So this is very exciting. It really is the big project for us.
It's well underway. My advanced engineering team and design studio teams should be working on it as we speak.
Do you need the volume from this midsize vehicle to get to the scale that enables you to be profitable?
Certainly, it's a profit enabler. I think that I'm very optimistic with Gravity because I think Gravity is going to give us sufficient product definition to mitigate risk of cannibalization across from air to air. You've got something which is a true SUV, which is truly differentiated from a Lucid Air. It's much more different than, say, a Tesla Model X is from a Model S. Those are more similar car-like products. So I think Gravity is a unique product. In its own right, can it give us that profitability? That is yet to be seen because that will become volume dependent on that product. But certainly, the midsize is the key enabler for scale. And also, that works in a favorable manner with our purchasing power as well. Because remember, you shouldn't think of the BOM cost as a fixed.
BOM cost is itself a variable, which is a function of volume as well because the suppliers, in turn, have to amortize their fixed cost against the volume of parts they supply you. So in short, very confident that midsize will give us that and hopefully we'll get very close with Gravity.
Can you talk to us about Lucid's relationship with the PIF? How much ownership does it have? What is the plan for the new factory in Saudi Arabia?
Yes. Well, the PIF have been wonderful partners. It's really super committed. And we do truly operate in a sense of true partnership. Since we first met and committed to a contract in 2018, right through thick and thin, they've gone pro-rata on every funding round until very recently. They own just over 60% of the company. And I think what is really important to recognize here is that the relationship really transcends a mere financial investment. We are interwoven in our ambitions. There is a vision, a Vision 2030 in Saudi Arabia for their economy to transition away from fossil fuel dependency. It's a bold vision to a sustainable model. And we are undeniably a cornerstone of implementing that vision. So we are bound by this common sense of purpose and mission and real desire.
I mean, we want midsize out in late 2026 as much as the PIF do. We're bound by this desire. They want it as much as I do because it's going to be a cornerstone of their economy. And it's a cornerstone of the future of Lucid.
In terms of the plans for the factory there, will this be the first place where midsize will be produced?
To start with, that's the plan. Absolutely. Yes.
That will be for global markets?
Global markets. It's our world platform, global car. As I say, I would like Lucid to be making over 1 million cars a year in the early 2030s. I know that sounds a tall order because we only delivered 6,000 last year. But we're on an upward trajectory. And we're on a path to make more affordable, more attainable cars available to more people that are superior. If you look at the work that we're doing on midsize right now, all the attributes: advanced aerodynamics, incredible performance, incredible spaciousness, and yet with real affordability, a great practical car for the family and with very advanced software and user experience. That's the key for these future products. And that's what the world wants: fully connected car, computer and wheels.
Just finally for me, can you talk to us about your cash position and runway? I think currently you have $2.2 billion in cash and cash equivalents. And then so how do you see free cash flow over the next few quarters and years? Do you need to raise more capital and when?
We announced with our Q1 earnings that we had around $5 billion of cash or cash equivalents. We have enough financial runway to see us well into 2025. But we are a capital-intensive business. There's no question about that. I take an entrepreneurial view of raising capital when the time is right. We've made profound investments. If you look at our plant in Arizona, how much vertical integration that we've embodied there. I was touring there just two weeks ago. We've put a big chunk of money into our in-house stamping line that will reduce our OpEx. But of course, it all represents more OpEx. Our robotic automated line for assembling the body structures of Gravity is a huge investment. We've invested in what I think is the most advanced power electric powertrain plant in the world.
We have that just up the road, a few miles away from our main plants running at a relatively modest volume. We've now brought that under the same roof as well as logistics. So these are significant investments for the long term that we've made and continue to make because Lucid is a long-term investment play. That's what we're about, not about a short-term quick win. We've only got to tour our plant. And then if you look at what we're doing in Saudi Arabia, that's a very significant thing. So absolutely, we will need to have further rounds of investments in the future in order to realize this very bold long-term vision.
Makes a lot of sense. We have a few minutes left for any questions in the room. If there are any, just raise your hand and we'll bring you back.
Hey, Dan. Can you talk about some of the key steps between here and Gravity launch? Clearly, this is not a simple thing, but you've also been working at it for a while. You've launched the Lucid now. Just talk about what are the key gates that you need to kind of get through between here and then to launch on time? Thank you.
So the question is, what are the key steps to Gravity launch? So I would ask all of you to follow the Road to Gravity set of videos that we're posting on social media on almost a weekly basis and putting on our website where you can follow the course of Gravity's readiness for production. And there are three key pillars to getting Gravity into production. There's getting the product right, getting the factory ready, and getting the supply base right around the world spooled up. We have several hundred suppliers, several thousand parts that we have to have the right quality at the right time. So right now, we've just completed our build of about 80 beta prototypes. And we're in the fifth of the testing of those. We've had some very successful crash tests of betas, but those don't count for homologation.
You have to test pre-production vehicles for that. Right now, we've got the robotic line in the factory fully assembled. The robots are training. They're making the initial movements to rivet sheets of aluminum together. We're feeding some of the initial sheets of aluminum and fine-tuning the positions of those robots. Our paint shop is almost there. The spray booths I visited just two weeks ago, we were spraying Gravity's, albeit prototypes, very successfully. Some of the paths for the sealant are still to be fine-tuned. Our general assembly line is actually pretty well operational in readiness for Gravity. We're going to be building our first Gravity battery packs somewhere around this week for pre-production. The factory is getting ready for pre-production. We plan to build our very first pre-production body shells later this month, the next few weeks, actually.
The pre-production phase will take us through the summer. Those cars will be used for crash testing for homologation and for EPA testing to get the range and also for training of all the associates, our brilliant associates, the team in Arizona who are going to build the cars with a huge dose of Arizona pride, I must say, so that they can dial in their quality and the fit and finish of these vehicles. It's scheduled to roll off the production line late this year. I'm really excited because I think it's going to be a seminal product. There's nothing close to it. We're targeting around 440 miles range, seven-seat, three-row SUV. It drives like a sports car. You can drive this thing really fast. It's a real Lamborghini Urus killer. I exaggerate not.
Thank you. Congrats on the 5 miles per kWh achievement. The question is on your ability to continue to improve miles per kWh and decrease battery size. What's it going to take for you to get to your goal of 6? Do you think is it going to be a mix of weight saving from smaller and smaller batteries or battery chemistry improvements or powertrain efficiency? How do you get to that 6?
Yeah. It's a combination of all those things. We've got some new motor control switching technology, which we're going to over the air to the whole fleet very soon. So we've got a software OTA-able advance in motor control. We've got some very exciting advancements in electromagnetism in the motor because what you're chasing is minimizing heat, minimizing the number of electrons that from the battery are wasted in generating heat. You want all the electrons to turn the wheels. That's what it's all about. So it's every step in that journey. We've gone to ultra-high voltage with the highest voltage car in the world, 924 volts. I'd like to go more like 1,000 volts because each of these tiny incremental steps takes its place. I think advances in tire technology are key. Even wheel bearing type and wheel bearing choice has a huge impact upon getting to that six.
But there are trades there in terms of the steering feedback with the different wheel bearing types. So all of these attributes combined. But remember, we're achieving 5 with a relatively large luxurious car, a Lucid Air. Imagine if I said to you, "I've just broken a world record for gas mileage." Oh, by the way, it's with an S-Class Mercedes because that's what I've just done. If I can get 5 today with a Lucid Air, maybe we're really close to 6 with something like a Volkswagen Golf-type vehicle today. And my science team, we've commissioned and I've just approved the program to get us to 6. And I'm going to be releasing information on the mission, that vision, later this summer.
Thank you, Peter, for very insightful explanations, including the technology. Two questions. How will you ensure to maintain the innovation advantage as your competitors and you show two of them in a sanitized manner? Are two of the autos in a catch-up mode? They're working on the same issues, whether it's the battery pack density, next generation of power electronics, inverters, etc. And then number two, consumers buy not only on the classic electric vehicle features. There are other aspects by consumers in the luxury domain indeed deciding for a vehicle of one competitor versus the other. So brand, design, and congrats. The Lucid Air is a fantastic vehicle. So no question. Thank you.
So I think there was a historical analogy to your first question about catching up. When I joined Tesla in 2009, and it was February 2009, as chief engineer on Model S, the company just wasn't taken seriously at all. When I left in January 2012, the narrative had switched to the advantage at Tesla was temporary. Just wait till the Germans come. The advantage will be wiped out. And that hasn't been the case. We're 12 years on now. And the Germans haven't. There's been singular failure in catching Tesla. And why is that? And how did Lucid get into this position? How were we able to leapfrog not just everybody else, the Germans? And we're about 3 or 4 years ahead of Tesla right now on this. If you extrapolate where Tesla is, Tesla's not even close to us. And believe you me, they're trying like crazy.
I know they're trying like crazy to do this. We are significantly ahead. It's all about handpicking the most brilliant team, motivating them, getting them totally geared up that this is the mission, the sense of mission from the very top of the company. And Lucid is not distracted. I think Tesla's distracted right now. And I think this is the difference. I think there are many distractions there with social media and the likes. And Lucid has laser focus. We've taken the mantle, and we're leading the technology. This is something no one else has done. And while I'm in this position, we'll keep driving ahead. We'll get to six before everyone else. I'm very confident. And then brand, I think the product defines brand. We outsell the mighty Porsche in this Q1. Why is it the mighty Porsche?
Because they built their brand on technical innovation and excellence. You go back to Le Mans wins with the 917 in the Piëch era. What drove that? Piëch was an engineer who drove that company and that brand. We're going to do the same.
Right. I think we're right out of time. So Peter, thank you so much for your time and insights today.
Thank you.