Lucid Motors revealed it’s cutting its estimated full-year production number in half, down to 6,000 to 7,000 units after supply chain issues and, more importantly, production and logistics problems cropped up as production sped up.
Welcome to “production hell,” as Elon Musk, CEO of rival Tesla Inc., described the early stages of ramping production several years ago.
The company delivered a little more than 300 vehicles in the first quarter, and 679 in the second, according to Lucid CEO Peter Rawlinson. However, as the company attempted to accelerate production speed, it began to run into a variety of issues.
The company initially predicted production numbers between 12,000 and 14,000 for 2022, but the “revised outlook guidance reflects the logistic challenges I described as we began scaling up, which exposed the immaturity of our logistics processes.”
Rawlinson said the company experienced sporadic shutdowns of its production line due to supply chain problems, but also faced problems accelerating its production line to build more vehicles. He cited the company initially couldn’t feed the correct parts to the line at the correct time and cadence. This affected build quality, he said.
Tackling the problem
The issues forced the company to rethink its approach, Rawlinson said, adding it’s bringing its logistics operations in-house, starting with two new hires: Steven David, who was named senior vice president of operations, and Walter Ludwig as vice president of global logistics.
He said the pair, who come from Stellantis and Mercedes-Benz respectively, will oversee all of the company’s operations and logistics globally. Additionally, Rawlinson is actively participating in the resolutions of bottlenecks as well, he noted.
“I’m right here on the front here. I’ve been spending the vast majority of my time right here, on the shop floor,” he said, adding. “I feel particularly at home on and around the production line, where I am personally and directly engaged in helping solve problems.”
He noted the company’s built more than 1,400 vehicles but held several of them back because they didn’t meet the company’s quality metrics. Knowing quality problems have plagued other EV startups, Rawlinson said the company would work to ensure quality is truly the company’s top priority.
“The quality of the cars that we’re factory gating is now excellent. And we’re working to make sure that excellence and quality is consistent of scale off the line,” he said. “Again quality is a priority over volume as we establish our brand reputation.”
By the numbers
Ensuring the company’s quality is a clear priority as these issues can plague automakers, especially new ones. It’s particularly important as Lucid now has more than 37,000 reservations for its vehicles — not counting the 100,000 ordered by Saudi government, the company’s top investor.
Filling those reservations represents $3.5 billion in revenue — and the potential for much more. The company’s Arizona production facility is currently set to produce 34,000 vehicles annually once at full speed. However, a second phase is under construction that will expand that number to 90,000 once completed, officials noted.
Not only will it build the existing Lucid Air variants, it’s also slated to handle the company’s next vehicle, the Gravity sport-utility vehicle. Rawlinson again confirmed the new ute is expected to begin production in early 2024.
As for actual numbers, Lucid lost money again, which was expected, posting a net loss of $220.4 million on revenue of $97.3 million. Most of the revenue is from the 679 EVs sold and delivered during the quarter, officials noted.
The company said it has nearly $5 billion in cash and assets on hand, which will be enough to carry it through into 2023 when it expects to see a large influx of revenue from larger sales numbers as it begins to fill the 37,000-plus reservations.