All right. Mark Winterhoff, Interim CEO of Lucid Group. He just came back from the Frankfurt Auto Show, the IAA Auto Show. I was saying in a former life, I spent many, many nights in Frankfurt. I'm actually a fan of Frankfurt. I don't go to car shows as often as I used to. I don't test drive cars as often as I used to, but I did have the opportunity to drive the Gravity.
Mm-hmm.
Yesterday, with some colleagues that are in the room. You know, Mark, I've been covering autos for three decades. I've driven just about everything, just about everything. I, this, it might be the best car I've ever driven.
Wow, wow.
It really might be. I was seriously impressed. Look, is it cheap? It depends what you mean by that. I actually think if what I drove was anywhere near $100,000, for that level of performance, 828 horsepower and 800 and whatever newton-meters of torque, and those materials and that comfort level and that suspension. I drive Teslas. I've been driving Teslas for five years. This thing is just, it's insane. Put your order in. If someone were to order one now, how long would it take to get it?
It depends on the configuration, but we will try to deliver everything that we ordered and have in the auto bank right now this year. If you put in an order right now, it should come this year, absolutely.
Okay.
Thank you very much for that. I think our team would be super proud to hear that. We need to work on the fact that you're driving Tesla. Maybe we can talk about this afterwards.
It's at my budget. Yeah, my boss is in the room, so we're going to talk.
Yeah. As you said, the car that you were driving yesterday is north of $100,000, but that's simply because we packed it with everything that we have. It starts below $100,000. We also have a version that will start around $80,000. It will come down. As you said, our motto is compromise nothing.
I said the same thing. I'm like, there are no compromises.
Right. I think that's what we achieved first with the Air. I think we did it even a little bit better with the Gravity as well. We are very proud of it. The demand is actually very good, despite, obviously, that we're only open right now, the higher priced models. I think this year is going to be a strong year. The end of the year, we're ramping up quite a bit on the Gravity. We had a little bit of some supplier issues in the beginning of the year, but now we are ramping up in Q3. There will be a big increase also in Q4. As you said, I just came back last night, late last night. When I'm a little bit, you know, slow over, that's because of that. From Munich, you know, the IAA now is in Munich.
It was actually a great show because in the last couple of years, in all these auto shows, they became a little bit, I would say, boring. The IAA is a difference. It was really buzzing. Also, our stand there, we launched the Gravity now also for Europe last Monday. It was very well received. We're very bullish about our next step, and growing in Europe is one of the key next steps.
What are some of the messages from Munich that you'd share with the audience here, in terms of just either your market or the kind of this transition of Europe to electrification?
Mm-hmm.
You're just kind of scratching the surface there now. The Chinese presence, which is obviously very consequential in the market, you're maybe not at the price, at the luxury level you are right now, but in many of the technologies that you delve in. What are your key messages in terms of what's relevant for the equity story over the next six to 12 months?
I think what I took away from the IAA, obviously, the big elephant, the big topic was about the Chinese onslaught. That really was a big topic. I have to say what I saw from us, but also from the other Western automotive manufacturers, my fellow countrymen. I'm born and raised in Germany. I think they got it now and they focus on the right things. I think that from a technology point of view, they show things that are definitely competitive. I don't think they have to be afraid and we have to be afraid of the Chinese, not only when it comes to the products. Yes, they are, first of all, they definitely came of age. There's no doubt about it. The technology is good, but it's not leading edge. That's what we are focusing on, innovation, differentiation by innovating, being best- in- class.
Not only in one area, but really package this in one, in the car so that you can get everything that you want, really on the leading edge. I think that still has absolutely a future. I'm not really concerned about the Chinese. Obviously, that's very different in different price segments. We are not planning to go down into, let's say, $25,000, $30,000 price range. Even our next platform that we will bring and then start end of next year will start around the $50,000. I'm very confident that we are competitive in that area.
Okay. Just going back to the Gravity, you had some production supplier issues initially, but it sounds like you're moving past that.
Mm-hmm.
You had targeted a kind of a significant increase in production, or you said you saw a significant increase in production in your outlook for the second half. Just confirming, is that, how's that progressing? Is it in line with your expectations?
It's still progressing. We are moving up in Q3. We recently put out a range when it comes to this year's production numbers, $18,000 - $20,000. All of our internal plan actually still shoots for $20,000.
Mm-hmm.
I just said, okay, let's put in a range because it's very hard to hit exactly one number. That's one thing. Given all of it, let's say the surprises that we had in this year, I said, okay, let's put in a range. I mean, it's still in that range. Internally, we're shooting for $20,000, and the team is giving everything to make that happen.
We were just on a panel on the stage right before you arrived here. We're talking about all sorts of issues in the relationship with China and the U.S. and policy and onshoring. The topic of rare earths came up as well. I didn't know what lessons you've taken away or your comments on how significant the rare earth issue is for things like permanent magnet electric motors. I know you've mentioned using different suppliers and other metals and other ways, but can you elaborate on kind of where we are there, how serious that is?
Yeah. I mean, obviously, in the middle of the year, end of, actually around Q2, it was a big issue. Absolutely. We managed to round it. We did some internal switches of, you know, what kind of vehicles we produced to be able to use magnets that we had and not the ones that were not getting out of China. We were okay there. First of all, we are developing a couple of new generations of our drive units, which are the biggest user of those magnets, but not the only one.
Mm-hmm.
We first go away from only Chinese suppliers. As mentioned before, we are opening different suppliers, for instance, in Australia, that we have now agreements with. On top of that, we are moving away from heavy rare earths to light rare earths because they're actually easier to get outside of China. The next step is going away completely from rare earths. That's what we're working on right now as well. Our next generation drive unit will be available with permanent magnets, but also with induction.
I'd like to move to autonomy. There's a lot of interesting things. I like to tell clients here, cars, particularly electric cars with software-defined vehicle architecture, electric architecture, are basically just car-shaped robots. I know in the first, well, the Air was, oh, your first halo vehicle to get the brand out there and uncompromising luxury and kind of a lot of learnings, right? Particularly on cost. One area your team felt you could do better in was, like, the autonomy side.
Correct.
Particularly given, you know, the software-defined and OTA update ability of the car. I don't think it's, it's when you see the Gravity, you don't really see the massive changes underneath the skin in terms of, you know, simplification and advancement of that architecture.
Yeah.
It opens up a whole new area for you to engage with partners like Nuro and Uber, where you struck some partnerships there. When you announced the Uber-Nuro partnership for basically robotaxi and fully autonomous vehicles, you said it was only the first step for Lucid into robotaxis.
Yeah.
What sort of vision do you have when you think out three to five years on this? Are you in discussion with other potential partners, and how's that going?
Absolutely. I mean, you're totally right. I think our first focus was on the car to make it the best driving car in the world.
Mm-hmm.
Yeah, I think that has a little bit to do on how we were founded and priorities there. When I took over, I said, "Okay, we need to move further because we already now established us as the EV technology leader at, you know, the best driving car. We had a lot of quotes from, you know, famous influencers that it's the best driving car ever. Now we.
Most efficient in terms of miles per kilowatt hour.
Exactly. We have the EV technology we have down, but now we need to move on into the autonomy space. It is our first step at the, that announcement was with Uber and Nuro, on the robotaxi side to open a completely new addressable market where we haven't played before. Now you can ask, okay, why the Gravity? Yeah. It's not necessarily, I would say, the prime choice. It actually is when you want to have a great experience, but from a, let's say, cost perspective, you got very often the question, hey, why would you take such an expensive vehicle in a robotaxi? It is the start because the vehicle is already prepared for that. When we discussed this with Uber and with Nuro, there was a deadline when we want to be ready, or so Uber wants to be ready. That's how this came about.
Let's take the Gravity because we can together make that work. From there on, the Gravity will be the start, but there will be other platforms we are going to use as robotaxi platforms, for instance, and also, you know, with our current partnerships, but also beyond. I also would like to really focus, it's not only robotaxis. It's also for the personally owned vehicles where we just announced a couple of weeks ago, hands-free driving. Still, we have, when you look in the market, you know, that's clear we have to catch up. That's what we're working on a lot. You will see much more even on the B2C side, not only on the robotaxi side.
That will be really important for feedback. I mean, as I'm driving this incredible car that loved the, what is this, square wheel and the squeal? I don't know what you call it. I like it. You see there's the pupil monitoring, right there. And then there's also, near the mirror as well. You can tell the car is set up for, like, just let it take you. Let it drive you.
Exactly.
I think a lot of your customers that will migrate, not a subset of your conquest, will come from Teslas where many of the people who would, people to afford a Gravity probably had full self-driving as well. Just from my own experience, if you have that, if you have full self-driving, it's really tough to give up.
I know.
How close are we then? What would be that step and what are those milestones so you can kind of get that, the training and/or system to kind of get, because you see the body there. I know the hardware is there.
Yeah.
When do you think you're actually able to have that, commercializable?
Yeah, I mean, I'm fully with you, to be honest, because every time when I go to work, you know, my commute is 45 minutes. When I go to the highway, I turn drive assist on, and I turn it off when I leave the highway. I would love to have the car completely, you know, go to the parking lot, yeah, if possible. We know that. Many of the Tesla people that want to buy a Lucid actually tell us exactly what you just said. That's a very big focus for us, and we're working on this. I would say it will come next year, that we are closing that gap. As a matter of fact, we are working right now on this particular topic also with other partners.
We plan to actually leapfrog what is out there right now and get something out which is even on a higher level.
Going back to the Nuro, the more the robotaxi partnership, can you tell us more about the economics or what investors should expect kind of as you roll that out, either in terms of numbers or commitments from you, that might affect your CapEx and/or R&D outlay? Just things that might be relevant for a 2026 horizon.
Yeah. I mean, on the CapEx side, there's actually marginal impact, because the vehicles will be built on our existing line in Casa Grande. We don't have to do any additional investments there. There's development going on right now because obviously, when you have the Uber, the Nuro driver, that's one thing. You know, building a car that, you know, first of all, building a car in total is already very complex. Making it fully autonomous is even more complex. You need to then make sure that in any given point of time, you know, the actuations work exactly as intended. There's a lot of work to do still to make this work.
Mm-hmm.
I don't know whether that's widely known, but we were able to do our first pilot within just five weeks. Everybody was super excited about that, to do that. We still have to do the full development. Actually, it will look great. That's the other thing. It doesn't look like, you know, many other robotaxis that you see on the street right now. It's much more looking like a normal vehicle, still with a tiara on top, but much, much, much different. We still have to do some work on the development piece. When it comes to CapEx outlay, it's really minimal. When it comes to commercials, as I said, the Gravity is the first step. We're working on, you know, also what is then coming after that, the next generation. Right now, we basically get paid on a per unit basis. Actually, in a normal pricing as well.
I have to say there's not a, you know, mongoose fleet discount or something in there. Going forward, what we're planning to do is to move from a per piece price into more in a way of, you know, getting driven by the mile or definitely have recurring revenue by doing this. We have plans that go way beyond what we have right now announced.
I'm curious. Have you experienced the Xiaomi SU7 or YU7? You have?
Yes.
Can I ask how recently this might have been?
Two days ago.
Okay. That's pretty recent.
Yeah.
You drove it in the United.
I didn't drive it, but I crawled through it.
What do you think?
I mean, again, the Chinese manufacturers came of age. There's no doubt about it. I'm personally, I'm still not overly concerned. It's a great car, but it's, in my opinion, it's not giving this full rounded experience that we will provide. Also with our mid-size, because it will be exactly in the same space.
Mm-hmm.
I can guess what your next question will be.
Yeah.
What is about the cost? What is about the price point exactly?
Yeah. I mean, if it's, if you're still superior to the YU7.
Yeah.
It's priced half of your car, that's going to be.
It will not.
Okay.
It won't.
Talk about it.
Here's the thing. We are not playing in China. I have no intention to go to China. It's a ruinous competition right now. It's also highly, highly subsidized. A lot of overcapacity. That's actually why you can get, even from suppliers, very good prices right now. We are not there. The prices that you see and that are going around in the media, and that are so, you know, so low, they are Chinese prices. When they come out, go to Europe, into other markets, it's not the same prices. It's not so far away. It's actually on a similar level where we are going to be as well. When I look at the costs, our costs right now for the mid-size platform are not even on the same planet for where we are.
Easy, easy comp.
Yeah.
Yes.
Yeah. We have, we basically started with a blank sheet of paper.
Mm-hmm.
We reduced the parts drastically. Right now, we're even coming in, and I hope, knock on wood, it stays that way until we finish all the sourcing. We are coming in below our should costs. We calculate the should cost, and what we get right now is below. Why are we able to do this? Maybe that's another point. We have two plants. We have a plant, obviously, in Casa Grande where we build all of our cars right now. We will build the mid-size also in Saudi Arabia. There we have more levels of freedom, you know, how we source. We're exploiting this right now.
Okay. Let me just be a little devil's advocate there.
Mm-hmm.
Because obviously, in your first iteration or two, like, profitability is not sustainable.
Mm-hmm.
You can't lose tens of thousands of dollars of vehicles on a car and have a business long term.
Correct.
You know that. We know that. Elon, at Tesla, he sells 1.7 million, 1.8 million vehicles. Probably a little bit less than that this year, but it's better part 2 million vehicles. In terms of scale, outside of China, no one can really touch this guy. Right?
Mm-hmm.
His gross margins are, like, low to mid-teens.
Mm-hmm.
His operating margin is basically 0%, particularly when you strip out some of the downstream servicing and stuff.
Mm-hmm.
If Elon is unable to make profits at an operating level, selling hundreds and hundreds of thousands or a couple million of these things at a $50,000 price point.
Mm-hmm.
What makes, what gives you the confidence that you can be like, Elon, we got it from here, and we could sell a $50,000, $60,000 car and make a profit.
Yeah. I mean, I fully get that.
Yeah.
I think there are a couple of other reasons. I mean, I would say when you look at what the investments were from Tesla, what they were thinking, what they were selling, it's on a different level than where they are right now. I would say many of the decisions that have been made in the last couple of years didn't turn out in the way that they were anticipated. That hurts now.
Mm-hmm.
There are some other.
I would agree.
Other reasons why all of a sudden the demand tanks, which also then leaves capacity unused. Our current plan right now allows us to be profitable with the car business itself. The other things that we're now adding on top of it, like software revenue or revenue with robotaxis and recurring revenue later on, will come on top. We also don't, we will not plan to go down in the rapid race of $25,000 cars.
Mm-hmm.
Because we don't think we can do that. That only goes at very, very high scale. I honestly think it's not, it's not the Lucid brand. We want to compromise nothing. We want to target segments that are actually willing to pay for good quality.
Mm-hmm.
That's what we are focusing on. We fully know that this is a challenge. Based on our plans, they're not like, okay, by 2030, we are selling $1 million , a million vehicles or so. That's actually not our plan.
You're not throwing a target out.
Yeah. We basically have, you know, aligned our capacity development and all of the investments in with a way that we think we can achieve, and it pans out.
Mark, do you think is the base case for Lucid that you do it alone? That you are capitalizing and running the company and recruiting and kind of strategizing that Lucid will commercialize a mid-size vehicle. At that price point, you would need to be in several hundred thousand units.
Mm-hmm.
To match that level of price point with the supply and demand.
Correct.
Is the plan, we are good. We are going to capitalize this and be on our own, or, you know, where does then the openness to partner with either technology partners?
Yeah.
On the autonomy side or even production partners, on the manufacturing side, how do you think about that?
Yeah, I mean.
I'm watching your facial expressions really closely.
I know. It is an ongoing discussion. You hear that Lucid has discussions about technology partnerships now over a year, after the Aston Martin thing.
Yeah.
I get the question always, okay, when? What's happening? What I personally pivoted to a little bit is not only focusing on the components, but also what we just did with Uber and Nuro, where the whole platform is used in a partnership. Maybe to paint a broader picture, we will go with partners. On the autonomy side, we will go with partners. We have started with Nuro. Together, there will be others.
Mm-hmm.
We have those discussions already. Even on the manufacturing side, there are discussions going on right now. Also, last but not least, we continue the discussions on our technology. That is a topic that I personally think is actually, right now, it's a good time because some of the big OEMs are pulling back on electrification. Therefore, they don't want to invest. They say, okay, maybe for the next generation, we go with that. Automotive manufacturers are very proud about their technology, and making them or their technology departments accept that is very hard. I'd rather go with a full platform with people that only look at it as a business case and don't go, oh, we need to convince all of the CTOs out there.
As I was driving around Laguna area in the Gravity, experiencing the massage seat on deep tissue mode, it's deep. It's deep.
Mm-hmm.
I was thinking, this is a really, this is like a tour de force. I wanna have, like, a meeting. I would stay in here for 12 h ours and just, like, meet with CEOs of other companies and say, what can we do?
Yeah.
What do you think? I really did get the sense that you designed the vehicle not just to create a wonderful consumer experience, but also to kind of show what you're capable of doing.
That's correct.
The fact that it's done in Arizona is pretty sick.
Yeah.
It's absolutely incredible. Let's talk about your largest shareholder, the Kingdom of Saudi Arabia, you know, through various entities.
Mm-hmm.
Your controlled company, just from my perspective, when I talk to clients, they're like, yeah, at least they have the Saudis to give them money. I'm like, yeah, the money, that was nice. That does, you don't win with the money. To me, and I'd like your reaction to this, I think it's the strategic value that your largest shareholder, your controlling shareholder, can provide to you. You mentioned the example of Aston Martin and others, and then maybe possibly being helpful with Uber where they're on the cap table. They're on the page one as well. Am I overestimating that? Am I going too far with that potential further strategic value of your largest shareholder and how that could help shape the future for Lucid or kind of how are you, what's your spin on that?
Yeah. First of all, I have to say I'm very thankful about this partnership because they are very strategic, long term, long, long term, looking and investors, which is very good for us because, I mean, automotive and building great cars at scale is an extremely capital expensive business. Having a partner that doesn't look at the watch every quarter and say, hey, you know, where are you? Actually, that's what they do that. They know it's going to be further out, which is extremely valuable. We are very grateful for that. It is not like an ATM machine where you go and every time when you need money, you just, you know, withdraw a lot. We obviously have to hit our milestones. We need to show progress. On top of that, I mean, I want to be blunt.
I've been working with Lucid already back in the day after the first investment of the PIF. We were working on a long-term plan at that time with a team before I then joined the company. At that time, we basically worked on, okay, how can we be part of the Vision 2030 in Saudi Arabia to become the first automotive manufacturer and build an automotive cluster in Saudi Arabia? I can assure you at that time, that was a tough discussion.
Mm-hmm.
Now, in hindsight, I actually think it's of a big value for us because it is in an area you could almost call it, like, you know, the new Switzerland that can do business with everybody.
Right.
Yeah. Whereas, you know, many other areas in the world, you have issues. Right now, that actually works to our advantage. I mentioned it earlier that we're very well underway with our bomb costs for the midsize and particularly for our plant in Saudi Arabia.
Mm-hmm.
We're leveraging all of the supplier sources to put it that way. Not only the ones in North America for that plant. That helps us. That's something that is now actually of strategic value.
We got about five minutes or so left with some questions here. Can we get a mic up here? Microphone? No? Thank you. No? Thanks.
I wanted to ask a little bit more on the AV side. I'm super excited about talking about the L2+ stuff that is going to come out next year and hopefully leapfrog. I was a little surprised seeing the robotaxi stuff partnering with Nuro. I wanted to understand how you guys see the pathway for you guys alone as Lucid to go from L2+ to L4. Is there an ambition to have L4 yourself over time and just kind of rip it a little bit there?
Yeah, maybe going back to what I said, what, you know, Jonas asked me about, partnerships or going alone. Actually, the answer is both. We're going with partners for the sake of smart capital investment because it's an extremely expensive endeavor, and at the same time, speed. At the same time, we're also investing ourselves. We have partnerships, actually coming back to our partners in Saudi Arabia with universities and access to supercomputer computing down there that we're using to also do a path in parallel ourselves. It is both. I have to say, and particularly, I can tell you there will be soon more information, which is not ready now. Our path to L4 is not only in the direction of robotaxis. We are thinking, we are working on a plan to also bring this to our end customers. I think that is as much as I can say.
You can't leave us there. You said the level four platform is something that's not just robotaxis.
That's.
Okay.
That is what we're looking for.
For example, for example?
You and me. Making your dream possible t hat you can in our Gravity. Actually, maybe not the first thing with our Gravity because we need to make some changes on the sensors and all that.
Mm-hmm.
For future platforms, we're working on not doing this only for robotaxis, but also for end customers.
For personally owned vehicles.
Personally owned.
Okay, I thought you were talking about aviation or something like that.
No, no.
Okay. Forget me.
Not yet.
I got excited.
Not yet.
Okay. All right. I thought you were about to announce a humanoid effort here. All right. There's a question back here.
Thank you, Mark. I just wanted to understand your, you know, partnership with Uber and Nuro a little bit more.
Mm-hmm.
Could you maybe talk to how your engineers are working with Nuro on the robotaxi platform there? Just wanted to understand your level of engagement and how that could inform your L4 strategy too.
Yeah, I mean, it's a very close one. Nuro is actually very close by to our headquarters in the Bay Area. It has to be a very close collaboration. I mean, the team's actually sitting pretty much next to each other in order to make this work because it is a very tight integration of software, sensors, and then the actual car. I mean, when it, when you, how does it inform our L4 capabilities? We get data from this, from this engagement. We get, you know, and actually, in addition, we have vehicles driving around gathering data in order to also support our own initiatives and obviously for Nuro. Obviously, we learn, you know, what are the issues when it comes to integrating those kind of drivers into our vehicles. It's a very tight collaboration right now. Yeah, so far, I would say well on track.
Any other questions? Just to kind of wrap up, for me, I'd like to take us to, you know, mentally to Casa Grande.
Mm-hmm.
Arizona. What's your, given your automotive experience, I'd be curious through your lens of what, how you feel the manufacturing is going there. The quality, the rate of change of productivity, because we have Chris Schneider here who runs our cap goods team. Onshoring, reshoring is a big.
Mm-hmm.
Is a really big theme. I don't think it's appreciated by enough investors how unstoppable it is. You're on that kind of the bleeding edge of this, of making a high-tech robotic product in Arizona.
Mm-hmm.
Not ex, with probably workers that many of them have never made products like that. In terms of talent acquisition and training and vocational training and productivity and labor, kind of how, what are some things if you were presenting to, like, a committee on U.S. onshoring for advanced manufacturing and technology with, you know, Elon and others, what would be your kind of contribution to that discussion from your learnings?
Yeah. I mean, you have a very good point because we obviously have in that region another big pool of people that are used to build cars.
There's some aerospace, you know.
Yeah, that's right.
Legacy there. Yeah.
There's not a lot. We have to train those people. We also need to make it easy for them.
Mm-hmm.
In order to do it, we are actually enhancing right now our automation. When that initially was designed, it was automated, but I wouldn't say to the level where it needs to be. We are actually making a lot of changes as we speak on further automating things. Also, you know, thinking about future robotic use, we haven't done a test on humanoid robots yet, but I'm absolutely, the team's actually looking into it because many of those tasks are, I mean, they're so repetitive. You actually don't need a human for that. When it comes to hiring and training, I can only say it is actually possible. The issues that we had, let's say, with the ramp up of the Gravity, were not necessarily on not being able to manufacture because of lack of people. It was really driven by suppliers and other issues.
We are hitting the JPH when the suppliers provide what we need in order to grow. I mean, it is absolutely possible to do that kind of complex manufacturing in Casa Grande.
Mm-hmm.
Despite not having this background of a big pool of people, with more automation, that's where it goes. I think we still need to find the best combination between automation and what you should still be doing with humans. More and more, it will become automated.
Great. Mark and Lucid team, thanks for coming in from Munich to spend some time with us this morning. Best of luck.
Thanks for having me.
Got it. Thanks.
Thanks.