Q1 2023 Lucid Group Inc Earnings Call

May 8, 2023

Okay.

Operator: Hello, and thank you for standing by, and welcome to Lucid Group's Q1 2023 Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask the question during this time, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. I would now like to hand the conference over to Maynard Um. You may begin.

Hello, and thank you for standing by and welcome to Lucid group's first quarter 'twenty three earnings conference call.

At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this time you will need to press star one on your telephone.

You did hear automated message advising your hand is raised.

To withdraw your question. Please press star one again.

I would now like to hand, the conference over to Maynard you may begin.

Maynard Um: Thank you, and welcome to Lucid Group's Q1 2023 earnings call. Joining me today are Peter Rawlinson, our CEO and CTO, and Sherry House, our CFO. Before handing the call over to Peter, 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, financial and operating outlook and guidance, macroeconomic and industry trends, company initiatives, and other future events. These statements are based on predictions and expectations as of today, and actual events or results may differ due to a number of risks and uncertainties.

Thank you and welcome to lucid group's first quarter 2023 earnings call.

Joining me today are Peter Robinson, our CEO , and CTO and Sherry House, our CFO before handing the call over to Peter Let me, let me remind you that some of the statements on this call include forward looking statements under Federal Securities Law. These include without limitation statements regarding the future financial performance of the company production and delivery volumes financial and.

Our outlook and guidance.

<unk> economic and industry trends company initiatives and other future events. These statements are based on predictions and expectations as of today and actual events or 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 and the forward looking statements on page two of our investor deck.

Maynard Um: We refer you to the cautionary language and the risk factors in our most recent filings with the SEC and the forward-looking statements on page two of our investor deck, available on the Investor Relations section of our website at ir.lucidmotors.com. 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, as well as in the investor deck. With that, I'd like to turn the call over to Lucid's CEO and CTO, Peter Rawlinson. Peter, please go ahead.

Available on the Investor Relations section of our website at IR at IR Dot Lucid Motors Dot Com. 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 as well as in the investor deck with that I'd like to turn the call over to lucid CEO and CTO Peter Robinson Peter Please go ahead.

Peter Rawlinson: Thank you, Maynard, and thank you everyone for joining us for our Q1 earnings call. In Q1, we produced 2,314 vehicles, and delivered 1,406. Now, Sherry will go into more detail on our financials, but I would like to first thank all our employees. We have the best EV on the market and really, I believe, the best car on the market, and it would not have been possible without the collective efforts of our entire team, which is a direct result of tremendous perseverance, resourcefulness, and teamwork. I want to express my deep personal gratitude to everyone who has contributed to, and the teams that will help advance our mission going forward. I'm very excited about our future and the opportunities that lie ahead of us.

Thank you Mike and thank you everyone for joining us for our first quarter earnings call.

In quarter, one we produce.

314 vehicles and delivered 1406.

Sheri will go into more detail on our financials, but I would like to thank you all.

All our employees, we have the best EV on the market and really I believe the best car on the market and it would not have been possible without the collective efforts of our entire team, which is a direct result of tremendous perseverance with thoughtfulness and teamwork.

I want to express my deep personal gratitude to everyone, who has contributed to and the teams that will help advance our mission going forward.

I'm very excited about our future and the opportunities that lie ahead of US we have the best EV on the market and really unbelievable come on the market.

Peter Rawlinson: We have the best EV on the market, and really, I believe, the best car on the market, and it would not have been possible without the collective efforts of the entire team. I would like to welcome three new members of the board, Sherif Marakby, Chabi Nouri, and Ori Winitzer. Together, they bring significant global experience in the areas of marketing, finance, and operations across automotive, technology, and luxury consumer goods. Now, these additions are a reflection of the company's evolution as we mature to the growth and brand awareness stage of our life cycle. I'd also like to congratulate Turqi Alnowaiser on his appointment as Lucid's Chairman of the Board, and also thank Andrew Liveris for his guidance during his service as chairman.

Would not have been possible without the collective efforts of the entire team.

I would like to welcome three new members of the board Sherry's right.

Chevy Norrie and <unk> wins.

Together, they bring significant global experience in the areas of marketing finance and operations across automotive technology and luxury consumer goods.

These additions are a reflection of the company's evolution as we mature to the growth and brand awareness stage of our lifecycle.

I also like to congratulate Turkey, I don't know was that on his appointment as chairman of the board and also thank Andrew Liveris for his guidance during his service as chairman.

Peter Rawlinson: And also, a heartfelt thank you to our outgoing board members, Nancy Gioia, Tony Posawatz, and Frank Lindenberg, for their significant contributions and their dedication to Lucid's mission. Now, last quarter, I laid out two key significant strategic priorities for the company. Number one, growth and brand awareness, and number two, a laser focus upon cost. We have taken immediate action on both. We made the decision to adjust our workforce in Q1, given evolving business needs, productivity improvements, and broader economic uncertainty, which we, like many others, are not immune from. While we believe this positions us to be more agile and puts us in the best position for success moving forward, it was nonetheless a difficult decision. Sherry will speak to our cost focus in greater depth. So let me provide an update on our growth and brand awareness progress.

And also a heartfelt thank you to.

Going board members, Nancy Gioia, Tony Puzzled us.

And Frank Lindenberg.

A mythical contributions and dedication to lose its mission.

Now last quarter I laid out key significant strategic priorities for the company number one growth and brand awareness.

Number two a laser focus upon cost.

We've taken immediate action on drugs.

We made the decision to adjust our workforce in Q1, given evolving business needs productivity improvements and broader economic uncertainty, which we like many others are not immune from.

Whilst we believe this positions us to be more agile and puts us in the best position for success moving forward. It was nonetheless, a difficult decision.

Terry will speak to our cost focusing greater depth. So let me provide an update on our growth and brand awareness progress.

Peter Rawlinson: Now, we continue to make strides in growing our brand awareness, and I'm proud to say that Lucid Air was recently awarded a number of prestigious industry accolades, adding to our existing portfolio of awards, such as the 2022 MotorTrend Car of the Year. At the 2023 New York International Auto Show, Lucid Air was crowned the 2023 World Luxury Car. Lucid Air was also named to be the US News & World Report 2023 Best Hybrid and Electric Cars list for Best Luxury Electric Car. Now, these awards reinforce our belief that the Lucid Air is not just the best EV in the world, but the best car available in the world today. The Lucid Air sets a new industry benchmark for range, and two versions that were the first EVs to achieve an EPA estimated range over 500mi.

Now we continue to make strides in growing our brand awareness and I'm proud to say that lucid.

<unk> was recently awarded a number of prestigious industry accolades, adding to our existing portfolio of awards such as the 2022 motor trend car of the year.

At the 2023, New York International Auto show look today was crowned the 'twenty two 'twenty three will luxury car.

Lucid Air was also named the U S News and World Report 2023, best hybrid and electric cars lists for best luxury electric car.

Now these awards reinforce our belief that the lucid as not just the best TV in the world, but the best call available in the world today.

Diluted as a new industry benchmark for range and two versions that were the first evs to achieve an EPA estimated range over 500 miles.

Peter Rawlinson: We set these new standards, thanks in part to our groundbreaking in-house developed technology, which continues to garner significant industry attention. In fact, Lucid recently received the 2023 Newsweek Powertrain Disruptor of the Year award. I cannot underscore enough how advanced our technology is, making it the best in the world on many metrics. I believe that we are years ahead of our next closest competitor, who, in turn, we believe, is several years ahead of their next closest competitor. I believe that as more companies come to the realization that developing world-class powertrains is not as easy as we make it look, then we will continue to grow more interest in our patented hardware and software technology from other OEMs. In fact, we continue to see interest from multiple parties.

And we set these new standard thanks in part to a groundbreaking enhanced development technology, which continues to garner significant industry attention.

In fact, <unk> recently received the 2023, Newsweek powertrain disruptor of the year Award.

I cannot underscore enough how advanced our technology is making it the best in the world of many metrics I believe we are years ahead of our next closest competitor who in turn we believe is several years ahead of their next closest competitor.

I believe that as more companies come to the realization that developing world class powertrain is not as easy as we make it look then we will continue to grow more interest and our patented hardware and software technology from other Oems.

And in fact, we continue to see interest from multiple parties as I have said in the past whilst this is not an area, where we've put a tremendous amount of proactive attention I am pleased with the growing levels of interest and progress that we are receiving with these Oems.

Peter Rawlinson: As I've said in the past, while this is not an area where we put a tremendous amount of proactive attention, I'm pleased with the growing levels of interest and progress that we're receiving with these OEMs. So our technology and know-how is what enables us to have game-changing range, supercar levels of performance, super fast charging, a luxurious and spacious interior, and exceptional aerodynamics. But I also want to stress that the best technology does not mean most complex nor most expensive. In fact, it's quite the opposite.... I believe that our vehicles are fundamentally easier to manufacture in many ways than our competitors, and this is done through brilliant in-house engineering, a design for manufacture, and very high degrees of innovation. And we're not resting on our laurels. We're using advanced technology to drive down the costs for EVs.

So our technology and Knowhow is what enables us to have game changing range Super current levels of performance Super fast charging.

Heres, some spacious interior and exceptional aerodynamics.

But I also want to stress that the best technology does not mean, most complex nor most expensive in fact, it's quite the opposite I believe.

'cause it fundamentally easier to manufacture in many ways than our competitors unless it is done through brilliant enhanced engineering design for manufacture and very high degrees of innovation.

And we're not resting on the algorithms, we're using advanced technology to drive down the costs for Evs, we're moving towards a more efficient Tvs in order to decrease the battery pack sizes, which will enable lower cost vehicles, and we have much more to come with an exceptional technology roadmap.

Peter Rawlinson: We're moving towards more efficient EVs in order to decrease the battery pack sizes, which will enable lower-cost vehicles. We have much more to come with an exceptional technology roadmap and further enhancements and innovations, pushing the envelope on what's possible, including for our mid-size platform. Now, looking more near-term, Sapphire is on track for start of production later this summer in mid-September. The Lucid Air Sapphire will feature 3 motors, carbon ceramic brakes, an aerodynamic package, new sports seats, and track-tuned suspension for a sublime, driver-focused sporting experience. It's expected to boast a sub-2 seconds 0 to 60 mph and a sub-4 seconds 0 to 100 mph, with a sub-9 seconds quarter mile at a top speed exceeding 200 mph.

And further enhancements and innovations pushing the envelope on what.

<unk>, including for a mid sized platform.

Now looking more near term Sunpower is on track for startup production later this summer in mid September .

The lucid as Sapphire will feature three motors carbon ceramic brakes, and aerodynamic package, new sports seats and tracking suspension for the blind growing Eva focused boating experience.

It is expected to post <unk>.

Sub two seconds north of 60 miles an hour at a sub four seconds not to 100 miles an hour with the sub nine second quarter mile at a top speed exceeding 200 miles an hour I think test driving sapphire.

Peter Rawlinson: I've been test driving Sapphire, very recently, and I'm finding it extremely satisfactory in terms of its performance. I'm also excited to announce that the Gravity SUV entered a new phase of development, with road testing having started a couple of weeks ago. Just as the Lucid Air redefined the sedan category, I believe that the Gravity SUV is positioned to do exactly the same for its corresponding SUV category. Indeed, we're taking all the best elements of Air and putting them into an SUV: game-changing range and efficiency, amazing interior space, fast-charging performance, and luxury. And just last week, I was out in a Gravity on a test drive, and I'm delighted with the progress that has been made. Make no mistake, the Gravity SUV will be a true landmark.

Very recently and on funding it extremely satisfactory in terms of its performance.

<unk> excited to announce the gravity SUV entered a new phase of development with road testing having started a couple of weeks ago, just as the lucid are redefined the sedan category I believe the gravity SUV is positioned to do exactly the same.

Its corresponding SUV category.

We're taking all the best elements of that and putting them into an SUV game changing range and efficient see amazing interior space challenging performance and luxury and just last week I was out in a gravity on a test drive and Im delighted with the progress that has been made.

And make no mistake, the gravity SUV will be a true landmark.

Peter Rawlinson: And we can't wait for you to experience the Gravity SUV at an unveil later this year, at which time you'll be able to place a reservation. We think you're gonna absolutely love it. Now, in software, we continue to make big strides. We had five over-the-air updates in Q1, with a number of features that customers have been requesting, including CarPlay and scheduled charging. And indeed, we're working on many more exciting updates. We're listening intently to what our customers want, while simultaneously providing more in-house design features to provide our customers with whatever best-in-class experience they prefer. Now, what's more important is to emphasize that we've designed our cars to be over-the-air updatable from the very start, and I believe that there are very few that have the over-the-air capability to the same degree. It's a platform on which we can do so much more.

And we can't wait future experienced the gravity SUV.

Unveil later this year at which time, you'll be able to place a reservation, we think you're going to absolutely love it.

Now in software, we continue to make big strides we have five over the air updates in Q1 with a number of features that customers have been requesting including car play and schedule charging and indeed, we are working on many more exciting updates.

We're listening intently to what our customers want.

Simultaneously provide a more in house design features to provide our customers with what as a best in class experience they prefer.

What's more important is to emphasize that we've designed our cost to be over the.

Updates of all from the very start and I believe that there are very few that have the over the air capability to the same degree.

The platform on which we can do so much more.

Peter Rawlinson: At our last earnings call in February, I spoke about customer awareness of the Lucid brand. We see brand growth happening in stages, starting with the innovators, then early adopters, and moving to early majority and beyond. We believe we are still early on in our customer growth stage of innovators and early adopters, and as we achieve a tipping point in brand visibility, once enough cars are on the road, we believe we will see a higher velocity of growth. We've continued to take serious action and a holistic, data-driven approach to our marketing programs, focused on qualified awareness, digital conversion, test drive experiences, and conversion to orders and deliveries. We're seeing some early wins. The number of test drives has nearly doubled in Q1 from Q4 of last year.

On our last earnings call in February I spoke about customer awareness of the lucid brand.

We see brand growth happening in stages, starting with the innovators than early adopters and moving too early majority and beyond we.

We believe we are still early on in our customer growth stage of innovators and early adopters and as we achieve a tipping point in brand visibility once enough cars on the road. We will believe we will see a higher velocity of growth.

And we've continued to take serious action and holistic data driven approach to our marketing programs focused on qualified awareness digital conversion test drive experiences and conversion to orders and deliveries.

And we're seeing some early wins.

Number of test drives has nearly doubled in the first quarter from the fourth quarter of last year I believe that seeing is believing and once you experienced the handling the quality the performance and the interior space of Lucid Airport yourself, you will understand the award winning nature of our vehicles, we see test.

Peter Rawlinson: I believe that seeing is believing, and once you experience the handling, the quality, the performance, and the interior space of Lucid Air for yourself, you'll understand the award-winning nature of our vehicles. We see test drives as the key stepping stone for customers considering the purchase of a Lucid Air. We launched our Dream Ahead Tour last month, which is designed to showcase the Lucid Air's game-changing electric vehicle performance and technology. Consumers will have the opportunity to experience and drive our three Lucid Air models, the Lucid Air Pure, the Lucid Air Touring, and Grand Touring, and they will do that in 42 key cities right across the USA. Now, in fact, the White House promoted our Dream Ahead Tour as part of President Biden's EV Acceleration Challenges, highlighting actions to encourage EV deployment.

Drives as the key steppingstone for customers considering the purchase of a lucid.

We launched our agreement had lot tool last month, which is designed to showcase the lucid as game changing electric vehicle performance and technology consumers will have the opportunity to experience and drive our free lucid our models the lucid a pure elicit a touring.

And Grand touring and they will do that in 42 key cities what across the USA.

In fact, the Whitehouse promoted dream ahead, so as part of President of Spiking EV acceleration challenges challenge.

Highlighting actions to encourage EV deployment.

Peter Rawlinson: I'm also delighted to announce that Andrea Soriani recently joined Lucid as our new head of marketing. Now, Andrea brings over 25 years of experience in luxury brands and automotive, having worked at companies such as Maserati, Ferrari, and TAG Heuer.... We certainly expect the Lucid Air Sapphire and the Gravity SUV to further elevate awareness of the Lucid brand. There are many more grassroots efforts underway, capitalizing upon our incredibly passionate customers, who are also our biggest advocates. Now, there's a misconception out there that Lucid Air's starting price is far higher than it actually is.

I'm also delighted to announce that in dress Ceriani recently joined lucid as our new head of marketing.

<unk> brings over 25 years of experience in luxury brands and automotive having worked at companies such as Maserati Ferrari and tag Hoya.

And we certainly expect to lucid and Sapphire and the gravity SUV.

Elevate awareness of Pellucid brand.

There are many more grassroots efforts underway capitalizing upon our incredibly passionate customers who are also our biggest advocates.

Now there is a misconception out there.

Lucid at starting price is far higher than it actually is.

Peter Rawlinson: Many people out there really believe that the Lucid Air is a $200,000 car, when the fact is that the starting price for a Lucid Air Pure is $87,400, which we believe is a truly compelling offering in the marketplace today, and we're working on ways to achieve broader access. We started deliveries of the Lucid Airs with Stealth Appearance last month, and we'll deliver more Lucid Air Dream and Grand Tourings this quarter to customers in the EU and in Saudi Arabia. We've resolved some of the gating items, and we'll continue to focus on ramping up production of the Stealth Appearance and components for international shipments in Q2. We expect the Lucid Air Pure volumes in the back half to also ramp with the start of the Lucid Air Pure rear-wheel drive in North America.

Many people out there really believe that the lucid is a $200000 come.

The fact is that the starting price for lucid are pure is $87400, which.

Which we believe is a truly compelling offering in the marketplace today and we're working on ways to achieve broader access.

We started deliveries of the lucid as with self prepared last month and will deliver more lucid dream and Grand touring this quarter two customers in the EU and in Saudi Arabia.

We've resolved some of the gating items and we will continue to focus on ramping up production of <unk> for parents and components for international shipments in the second quarter.

We expect the lucid a pure volumes in the back half to also ramp with the start of the lucid a pure rear wheel drive in North America.

Peter Rawlinson: We're on track to produce over 10,000 vehicles in 2023, with company-wide initiatives ongoing that will enable higher volumes as market conditions allow. And Sherry will go through guidance in greater detail. So in closing, we recognize that we have more work to do, but we're making progress with our strategic priorities, and the team is totally energized. Our mission and our optimism are unchanged. We're committed to a more innovative and environmentally sustainable future, designing, building, and delivering the best EVs on the market as we expand globally and develop more exceptional vehicles, such as the Gravity SUV, which we plan to launch in 2024. I am confident that we have the most advanced technology, we have the right operational infrastructure and the know-how to deliver, and we have a track record of tenacity that will make us stronger.

We're on track to produce over 10000 vehicles in 2023.

Companywide initiatives ongoing that will enable higher volumes.

As market conditions allow and Sherri will go through guidance in greater detail.

So in closing we recognize that we have more work to do.

But we're making progress with our strategic priorities and the team is totally energized.

Our mission and our optimism are unchanged, we are committed to a more innovative and environmentally sustainable future.

Designing building and delivering the best EV on the market as we expand globally and develop more exceptional vehicles, such as the gravity SUV, which we plan to launch in 2024.

I am confident that we have the most advanced technology, we have the right operational infrastructure.

The know how to deliver and.

And we have a track record of tenacity that will make us stronger.

Peter Rawlinson: And so with that, let me turn over to Sherry for an update on our financials. Sherry?

And so with that let me turn it over to Sherry for an update on our financials Sherry.

Sherry House: Thank you, Peter, and thank you to those who are taking the time to join us today. I'd like to begin by calling out a few recent highlights. Last month, we announced that Lucid joined the United Nations Global Compact, the world's largest corporate initiative, advancing sustainable and socially responsible business practices. Sustainability is an integral part of what we do every day. It's our mission, and we view this as a natural progression in our sustainability journey as a company. Last month, we also signed the first annual agreement with the Human Resources Development Fund, or HRDF, in Saudi Arabia. This agreement operationalizes the memorandum of understanding signed with the HRDF in October 2022, and will facilitate Lucid training programs and will fund skills development and salaries for Saudi nationals who work within our organizations within Saudi Arabia.

Thank you Peter and thank you for taking the time to join US today I'd like to begin by calling out a few recent highlights.

Last month, we announced that Vista joined the United Nations Global compact the world's largest corporate initiative advancing sustainable and socially responsible business practices sustainability is an integral part of what we do every day, it's our mission and we view this as a natural progression in our sustainability journey at the company.

Last month, we also signed the first annual agreement with the human resources development.

<unk> HRD and Saudi Arabia. This agreement operationalized, the memorandum of understanding signed with the HRD assay in October 2022, and will facilitate boosted training program and will fund the skills development and salaries for Saudi Nationals, who work within our organization within Saudi Arabia.

Sherry House: The Public Investment Fund has connected us to many of the ministries throughout Saudi Arabia, and this HRDF agreement is another example of how those relationships and partnerships have resulted in significant economic and administrative support as we launch our international operations in the Middle East. The PIF has been a committed investor and a strategic partner for many years, and we're very grateful for their partnership and support. I'd also on the SEC investigation that was previously disclosed on 6 December 2021. On 27 April 2023, SEC staff informed Lucid that the SEC concluded their investigation related to the business combination between Churchill Capital Corp IV, which was Lucid's legal predecessor, and Atieva, Inc., in certain projections and statements.

The public investment fund is connected to many of the ministries throughout Saudi Arabia, and the <unk> agreement is another example of how those relationships and partnerships have resulted in significant economic and administrative support as we launch our international operations in the Middle East.

PAA has it been a committed investor in a strategic partner for many years and we're very grateful for their partnership and support.

I'd also.

Second.

That was previously disclosed in December six 2021.

On April 27, 2023 FC staff FCC staff informed me that the SEC concluded their investigation related to the business combination between Churchill Capital Corporation for which recent legal predecessor, and Akiva, Inc. In certain projections and statements I am.

Sherry House: I'm pleased to inform you that they do not intend to recommend an enforcement action by the SEC against the company, which we view as a very positive outcome. We consider this matter closed. I also want to talk about the Form S-3 and Form S-8 that you may have seen filed today after market close. We amended the existing S-3 with a filing of a new S-3. As you'll recall, we consummated a private placement of common stock to PIF for aggregate proceeds of $915 million in December 2022. In connection with this private placement, we agreed to register the shares with the SEC. The Form S-3 is intended to register these shares by amending the existing Form S-3 that we filed in August 2022. This action was to fulfill our contractual obligations regarding registration rights and is not a new issuance.

We used to inform you that they do not intend to recommend any enforcement actions by the SEC against the company, which we view as a very positive outcome. We consider this matter closed.

I also wanted to talk about the form S. Three and form S. Eight that you may have seen filed today after market close we amended the existing F. Three with a filing of a new S. Three.

You also recall, we consummated a private placement of common stock for aggregate proceeds of $915 million in December 2022.

Connection with the private placement, we agreed to register the shares with the SEC.

<unk> III is intended to register these shares by amending the existing form S. Three that we filed in August 2022.

The action was to fulfill our contractual obligation regarding registration rights and is not a new issuance.

Sherry House: We also filed a Form S-8. As a reminder, the Form S-8 is primarily to register the additional shares made available under the company's second amended and restated 2021 stock incentive plan, which was approved by the stockholders at the 2023 annual meeting on 24 April 2023. Moving to the business. As Peter mentioned, in Q1, we made the very difficult decision to streamline our workforce to better position the company for the future. We took a $22.5 million restructuring charge, which was at the lower end of the $22 to 28 million we indicated in late March, given that we were able to reallocate certain employees to other critical positions within the company. We anticipate the final part of this restructuring action, approximately $2 million, to occur in Q2. Now turning to our Q1 2023 financial results.

Also filed a form S. Eight as a reminder, the form S. Eight is primarily to register the additional shares made available under the company's second amended and restated 2021 stock incentive plan, which was approved by the stockholders at the 2023 annual meeting on April 24.

Moving to the business.

Peter mentioned in Q1, we made the very difficult decision to streamline our workforce to better position. The company for the future. We took a $22 5 million restructuring charge, which was at the lower end of the $22 million to $28 million. We indicated in late March given that we were able to reallocate.

Our employees to other critical positions within the company.

We anticipate the final part of this restructuring action approximately $2 million to occur in the second quarter.

Now turning to our 2023 first quarter financial results, we produced 2314 vehicle, 225% year over year and delivered 1400, six vehicles up approximately 291% year over year, making Q1 2023.

Sherry House: We produced 2,314 vehicles, up 225% year over year, and delivered 1,406 vehicles, up approximately 291% year over year, making Q1 2023 our second highest performing quarter in terms of production and delivery volumes, though its performance was less than Q4 2022. As we guided last quarter, we expected Q1 to be down significantly versus Q4 2022, while we work to drive up qualified awareness of our world-class products and also work to unlock production of Stealth, the European, and the Middle East variants. As Peter mentioned, we've now resolved some of those gating items and are focused on ramping these three areas further in Q2. For Q1, we recorded revenue of $149.4 million, which represented a year-over-year increase of 159%.

Second highest performing quarter in terms of production and delivery volume that was performance was flat in Q4 2022.

We guided last quarter, we expected Q1 to be down significantly versus Q4 2022, while we work to drive up qualified awareness of our world class product and also work to unlock production and sell the European and Middle East area.

As Peter mentioned, we've now resolved some of those gating item and are focused on ramping these three areas further in Q2.

For Q1.

We recorded revenue of $149 4 million, which represented a year over year increase of 159%.

Sherry House: Cost of revenue was $500.5 million for the first quarter. Our gross margin was down on a quarter-over-quarter basis. This reduction was driven by lower volumes, which we signaled would be down in our Q4 earnings call in February. As part of that $500.5 million in cost of revenue, we recorded impairment charges of approximately $227 million in Q1 related to lower of cost or net realizable value, which we also refer to as LCNRV, obsolescence, and losses from firm purchase commitments. Now, moving to operating expenses. R&D expense totaled approximately $229.8 million, up 3.8% sequentially, due in part to Gravity testing and tooling. Peter spoke about Gravity, and we're very excited that road testing has already begun.

Cost of revenue was $500 5 million for the first quarter, our gross margin was down on a quarter over quarter basis.

This reduction was driven by lower volume, which we signaled would be down in our Q4 earnings call in February .

As part of that $500 5 million in cost of revenue, we recorded impairment charges of approximately $227 million in Q1 related to lower of cost or net realizable value, which we also refer to as LC and RV.

So lesson and losses from firm purchase commitments.

Now moving to operating expenses.

R&D expense totaled approximately $229 8 million up three 8% sequentially due in part to gravity testing and tooling Peter spoke about gravity and we're very excited that road testing has already begun.

Sherry House: This increase was partially offset by the execution of cost initiatives to reduce outside services as well as freight. SG&A expense was approximately $168.8 million, down 1.2% sequentially. The sequential decrease was primarily due to lower-based staff compensation and IT expenses. While we are intently focused on optimizing costs, which I will talk about in a moment, it's equally important to note that we are continuing to invest behind our strategic and growth priorities, including sales and service, customer care, and the build-out of international offices and infrastructure. To that end, in the first quarter, we're excited to have opened five new studios and service centers.

This increase was partially offset by the execution of cost initiatives to reduce outside services as well as freight.

SG&A expense was approximately $168 8 million down one 2% sequentially. The sequential decrease was primarily due to lower based stock compensation expense.

Expenses.

While we are intently focused on optimizing optimizing costs.

Which I will talk about in a moment is equally important to note that we are continuing to invest behind our strategic and growth priorities, including sales and service customer care and the buildout of international offices and infrastructure.

To that end in the first quarter. We're excited to have opened five new studio and service centers three our international sites with one each in Montreal, Toronto in Oslo, Norway, and <unk> in the U S with one in Washington D C area and the second in the San Francisco Bay area. This brought our total at the end of the quarter.

Sherry House: Three are international sites, with one each in Montreal, Toronto, and Oslo, Norway, and two are in the US, with one in the Washington, DC, area and the second in the San Francisco Bay Area. This brought our total at the end of the quarter to 40. We'll continue to be strategic and judicious with our site expansions and are utilizing cost-effective pop-up studios with great effect to complement our studios for brand awareness. On the service side, we ended Q1 with 38 mobile vans in the fleet and 73 nationwide approved body shops to ensure high customer satisfaction as the fleet of Lucid vehicles continues to grow. Our stock-based compensation in the quarter was $55.3 million. We also recorded a non-cash expense of $40.8 million related to the change in fair value of our common stock warrant liability.

<unk> to <unk> 40.

We will continue to be strategic and judicious with our site expansion and our youth utilizing cost effective pop up studios with great effect to complement our studios for brand awareness.

On the service side, we ended Q1 with 38 mobile vans in our fleet and 73 nationwide approved body shops.

Sure high customer satisfaction, it's a fleet of lucid vehicles continues to grow.

Our stock based compensation in the quarter with $55 3 million.

We also recorded a non cash expense of $48 million related to the change in fair value of our common stock warrant liability.

Sherry House: As a reminder, this non-cash impact can be influenced quarter to quarter by a number of factors, with one of the larger factors being Lucid's share price at the end of the quarter. In Q1, we achieved an Adjusted EBITDA loss of $643.9 million. Now moving to the balance sheet. We ended the quarter with just over $3.4 billion in cash, cash equivalents, and investments, with total liquidity of approximately $4.1 billion. We're very proud of our ability to consistently sustain a strong balance sheet over time.

As a reminder, the noncash impact can be influenced quarter to quarter by a number of factors with one of our larger factors being the share price at the end of the quarter.

In Q1, we achieved an adjusted EBITDA loss of $643 9 million.

Now moving to the balance sheet, we ended the quarter with just over $3 4 billion in cash.

Cash equivalents and investments with total liquidity of approximately $4 1 billion.

We're very proud of our ability to consistently sustain a strong balance sheet over time, we've been able to access a variety of funding option from the 2 billion Green convertible bond offering at the end of 2021 to the one 5 billion ATM and private placement at the end of 2022 alongside government support in <unk>.

Sherry House: We've been able to access a variety of funding options, from the $2 billion green convertible bond offering at the end of 2021 to the $1.5 billion ATM and private placement at the end of 2022, alongside government support in Saudi Arabia and the large $1 billion ABL facility we put in place with a world-class banking syndicate. We'll continue to take a holistic and opportunistic approach towards funding the business, and we continue to believe that we have access to various options in debt and equity markets, as well as access to low-cost government programs. Turning to inventory.

Saudi Arabia, and the large $1 billion ABL facility, we put in place with a world class banking Syndicate will continue to take a holistic and opportunistic approach towards funding the business and we continue to believe that we have access to various options and debt and equity markets as well as access to low cost government programs.

Turning to inventory inventory increased sequentially due to the pace of our production volume ramp versus delivery in the quarter raw materials associated with new vehicle variant that we are now producing at a higher volume of in transit inventory that we moved the remainder of the component which are eligible for ocean.

Sherry House: Inventory increased sequentially due to the pace of our production volume ramp versus delivery in the quarter, raw materials associated with new vehicle variants that we are now producing, and a higher volume of in-transit inventory as we move the remainder of the components, which are eligible for ocean transport, to sea. Over the balance of the year, we expect a significant reduction in raw material days of inventory on hand as supply chain pressures ease somewhat, we obtain more predictability in the transportation channels, and we refine our inventory management processes and systems. Capital expenditures were $242 million in Q1. Now, moving to the outlook. We are on track to produce over 10,000 vehicles in 2023, with company-wide initiatives ongoing that will enable Lucid to pivot to higher volumes as market conditions allow.

Court to fee.

Over the balance of the year, we expect a significant reduction in raw materials days of inventory on hand at supply chain pressures ease somewhat we obtain more predictability in the transportation channels, and we refine our inventory management processes and systems.

Capital expenditures for $242 million in Q1.

Now moving to the outlook.

We are on track to produce over 10000 vehicles in 2023 with companywide initiatives ongoing that will enabled lucid to pivot to higher volume as market conditions allow.

Sherry House: While we typically don't provide delivery guidance, we wanted to provide some directional color to help you with your modeling. For Q2, we are targeting deliveries to be up sequentially. We now have Pures in all US showrooms for test drives, and we have a broader set of buildable configurations available, so it is important to note that we are still scaling those programs, and we're continuing to work on our sales and qualified awareness initiatives. We expect that Q3 production and delivery numbers will ultimately be determined by how fast we are able to ramp the Pure buildable configuration. And as for Q4, we are expecting that to be our largest quarter of the year.

We typically don't provide delivery guidance, we wanted to provide some directional color to help you with your modeling.

For Q2, we are targeting deliveries to be up sequentially. We now have <unk> in all U S. Showrooms for test drive and we have a broader set of buildable configurations available, though it is important to note that we are still scaling those program and we're continuing to work on our sales and qualified awareness initiatives.

We expect that Q3 production and delivery numbers will ultimately be determined by how fast we are able to ramp the <unk> configuration and ask for Q4, we are expecting that to be our largest quarter of the year.

Sherry House: While I would again caution that there are many controllable and uncontrollable variables that can affect gross margin, I want to provide some context on our expectation for the direction of gross margin this year. In Q2, we expect improvement on higher sequential volume. We also expect to realize improvements throughout the year as a result of our cost efficiency and cost optimization efforts. Specifically, our workforce restructuring in Q1 is expected to result in annualized cost savings of approximately $91 million, geared towards cost of revenue, with the balance of the annual savings attributed to OpEx. We will start to see the full impact of this savings in Q2, less the approximately $2 million restructuring charge that we mentioned above, and which will hit in Q2. Second, we've been working a number of bill of material cost reduction efforts.

But again caution that there are many controllable and uncontrollable variables that can affect gross margin I wanted to provide some context on our expectation for the direction of gross margin this year.

In the second quarter, we expect improvement on higher sequential volume.

We also expect to realize improvements throughout the year as a result of our cost efficiency and cost optimization efforts.

Typically our workforce restructuring in the first quarter is expected to result in annualized cost savings of approximately $91 million geared towards cost of revenue with the balance of the annual savings attributed to Opex.

We'll start to see the full impact of the savings in Q2, plus the approximately $2 million restructuring charge that we mentioned above which will hit in Q2.

Second we've been working a number of bill of material cost reduction effort, we're expecting to see a cost savings by the end of the year not necessarily throughout the year with more reductions already identified for 2024.

Sherry House: We're expecting to see a cost savings by the end of the year, not necessarily throughout the year, with more reductions already identified for 2024. Third, we have restructured a number of our freight contracts, and we believe that we'll continue to see improvements in this area over time. Lastly, we're working diligently to reduce the days outstanding of our raw material inventory. Over the past 18 months, we have held additional inventory due to concerns on part availability and logistics slowdown, and in some cases, banking of parts due to tooling capacity planning. However, this excess inventory has significant storage costs, reduces our ability to benefit from commodity price reductions that are now occurring, and also increases risk for obsolescence as some parts expire or are outdated due to engineering changes.

Third we have restructured a number of our freight contracts and we believe that will continue to see improvement in this area over time.

Lastly, we're working diligently to reduce the days outstanding of our raw material inventory over the past 18 months, we have held additional inventory due to concerns on part availability and logistics slowdown and in some cases banking apart due to tooling capacity planning. However, this excess inventory.

<unk> has significant storage cost reduces our ability to benefit from commodity price reductions that are now occurring and also increases risk for obsolescence is some parts expire or are updated due to engineering changes. We believe that there is significant savings as we unwind some of this excess inventory and simultaneously refine our tracking and.

Sherry House: We believe that there is significant savings as we unwind some of this excess inventory and simultaneously refine our tracking and inventory systems. These actions will both reduce our working capital and our cost of revenue. Other growth margin tailwinds include the opportunity from the Inflation Reduction Act, which we think could contribute as much as a couple thousand dollars per vehicle, and the regulatory environment is also getting more stringent, and we see opportunity on the emission credit side around the world. Recall, we signed our first emission credit deal in Q4 of 2022. Regarding our liquidity position, we ended the quarter with approximately $4.1 billion in total liquidity, which we believe provides sufficient capital at least into the second quarter of 2024.

<unk> systems. These actions will both reduce our working capital and our cost of revenue.

Other gross margin tailwind is include the opportunity from the inflation reduction Act, which we think could contribute as much as a couple thousand dollars per vehicle in the regulatory environment is also getting more stringent and we see opportunity on the emission credit side around the world.

Recall, we signed our first emission credit deal in Q4 of 2022.

Regarding our liquidity position, we ended the quarter with approximately $4 $1 billion in total liquidity, which we believe provides sufficient capital at least into the second quarter of 2024.

Sherry House: Moving to CapEx, we expect capital expenditures for 2023 to be between $1.4 and 1.6 billion, reflecting some efficiencies which were identified over the last quarter and deferrals in our capital outlay. CapEx will support our continued growth objectives as we strategically invest in manufacturing capacity and capabilities, our retail studios and service center capabilities across the globe, and development of different products and technologies in other areas supporting growth of Lucid's business. Phase two of the factory build-out in Arizona is progressing, and we believe will benefit from a number of cost efficiencies, including moving logistics more fully on site and later bringing stamping in-house.

Moving to Capex, we expect capital expenditures for 2023 to be between one four and $1 6 billion, reflecting some efficiencies which were identified over the last quarter and deferrals in our capital outlay.

Capex will support our continued growth objectives, as we strategically invested manufacturing capacity and capabilities are retail studios and service center capabilities across the globe and development of different products and technology.

The other area of supporting growth of lucid business.

Phase two of the factory build out in Arizona is progressing and we believe will benefit from a number of cost efficiencies, including moving logistics smart fully onsite and later, bringing stamping in house. We're also looking at bringing phase two online in stages on a shop by shop basis, which we expect will allow us to defer.

Sherry House: We are also looking at bringing phase two online in stages on a shop-by-shop basis, which we expect will allow us to defer some capital expenditures and associated depreciation expense until 2024, without a delay in the estimated Gravity timing. With regard to our manufacturing progress in the Middle East, the first Semi-Knockdown, also referred to as SKD, facility in Saudi Arabia, with capacity of up to 5,000 units, is nearly complete, and equipment and installation will begin next month. We had a ribbon cutting for our SKD building in Casa Grande, Arizona, trained up staff that came over from the Middle East, and we expect to be operational in Saudi Arabia in Q3. This is very exciting and exactly where we want to be. In closing, I want to express my gratitude to the entire Lucid team, as well as our investors, partners, suppliers, and customers.

Some capital expenditures and associated depreciation expense until 2024 without a delay and the estimated gravity timing with.

With regard to our manufacturing progress and the middle East.

Semi knockdown also referred to as FTE facility in Saudi Arabia with capacity of up to 5000 unit is nearly complete and equipment and installation will begin next month, we had a ribbon cutting for our SPD building in Casa Grande, Arizona trained staff that came over from the Middle East and we expect to be.

<unk> on Saudi Arabia in Q3, this is very exciting and exactly where we want to be in.

In closing I want to express my gratitude to the entire list of team as well as our investors partners suppliers and customers with your support and commitment. We are several steps closer to realizing an environmentally sustainable future with that let me turn it back to <unk> to get to your question Maynard.

Sherry House: With your support and commitment, we are several steps closer to realizing an environmentally sustainable future. With that, let me turn it back to Maynard to get your questions. Maynard?

Maynard Um: Thanks, Sherry. We'll now start the Q&A portion of the call. We'll start by taking Q&A from our retail investors to the safe platform, very important constituency of our shareholder base, followed by live analyst questions. So our first retail question is: Peter, you have said, "I'd just like to underpromise and like to overdeliver." You promised 20,000 deliveries in 2022 and 49,000 in 2023. We got 4,022, and guidance is just 10 to 14 for 2023. When will we see underpromising and overdelivering? It has been the complete opposite so far.

Thanks, Jerry will now start the Q&A portion of the call, we'll start by taking Q&A from our retail investors to the <unk> platform very important constituency of our shareholder base followed by life analyst questions. So our first retail question is Peter <unk> said, I'd, just like to under promise and like to over deliver you promised 20000 delivery.

In 2022% and 49000 in 2023, we've got 4022 and guidance is just 10 to 14 for 2003 when will we see under promising and over delivering it has been the complete opposite so far thank you.

Sherry House: Thank you, Maynard.

Peter Rawlinson: Thank you, Maynard.

Peter Rawlinson: ... I'd just like to say, start by saying to everyone, I acknowledge and empathize with the frustration, and I take this very seriously. You know, under-promising and over-delivering isn't about setting low standards or being complacent. It's about being realistic and proactive, and then going above and beyond to try to exceed expectations. And we as a management team, we take this very, very seriously. Back in 2021, hardly anyone could have foreseen the disruption to the logistics and supply chain that we saw in 2022, that affected the whole industry. It wasn't just Lucid. It was a bunch of other car companies. Very established names were affected the same way.

I'd, just like to say start by saying to everyone on our technology and facilities.

With the frustration.

Take this very seriously.

Under promising and over delivering isn't about <unk> being complacent.

And I'm being realistic.

Active.

And then building above and beyond.

To try to exceed expectations and we have a management team we've taken very very seriously.

Back in 'twenty one.

And one could have foreseen.

The disruption to the logistics and supply chain that we saw in 2022 that affected the whole industry. It wasn't just lucid there was a bunch of old account companies very established names were affected the same way.

Peter Rawlinson: You know, I was part of a team that worked night and day in that factory to resolve issues throughout 2022, and as a huge team effort, we did that. And now we're facing challenges in the market, macroeconomic effects, and high interest rates, which do impact. We've seen the withdrawal of the federal tax incentives at the end of 2022. And these are factors which are very difficult to predict. When we guide, we do so with absolute honesty and integrity to the very best that we are able to estimate. And I totally empathize with our shareholders who are here with us through the long run. But I nevertheless believe that this is a technology race, that the technology that we've developed is unique, it's hugely differentiating.

I was proud of the team that were non consenting.

Hi, Craig to resolve issues around 22.

<unk> is a huge team effort we did that.

And now we are facing.

A challenges in the market and macroeconomic effects and high interest rates, which do impact.

We've seen the withdrawal of the.

The federal tax incentive for BMD.

2022, and these are Frank is which is very difficult to predict when we go and we do so with absolute honesty and integrity to the very best that we are able to estimate.

And I truly empathize with shareholders, who are here with us through the loan book.

Nevertheless believe that this is a technology.

So the technology that we've developed is unique it's hugely differentiation it will enable us to push the punto comes down because we've got more efficiency, which means we can go further with less pantry energy, which means we can go the same distance as anyone else with smaller that created some batteries at the high.

Peter Rawlinson: It will enable us to push the price of cars down because we've got more efficiency, which means we can go further with less battery energy, which means we can go the same distance as anyone else with smaller batteries, and batteries are the high cost item, which gives us an advantage in terms of potential gross margin. And I believe this will come to bear in the future. And we've also got compelling products coming. We've got Sapphire, which is gonna be a halo product for the brand and help grow brand awareness. As we know, that is a limiting factor right now. And then we've got the big one for production coming next year and on track, the Gravity, which I think is gonna be a seminal product.

Cost Arlington, which gives us.

An advantage in terms of potential gross margin and I believe this will come to bear.

In the future and we've also got compelling products coming we've got <unk>, which is going to be a CLO product halo product for the brand and help grow brand awareness.

<unk>.

Yes.

As we know there is a limit.

And frankly right now and then we've got the big one for production coming next year and on track with gravity, which I think is going to be.

Peter Rawlinson: I temper this with unerring optimism for the future, for Lucid.

Seminal products. So temper this was.

Peter Rawlinson: I temper this with unerring optimism for the future, for Lucid.

Optimism for the future.

Lucid.

Maynard Um: Thanks, Peter. The second question is: Would you consider launching the Gravity with a more price-accessible trims first to attract more buyers, considering the current economy conditions?

Thanks, Peter the second question is would you consider launching the gravity with a more price accessible trims first to attract more buyers considering the current.

Economy conditions.

Sherry House: Yeah, firstly, I would say that from a principal perspective, and given where we are in the life cycle maturity of our company, we do think it's important to balance between volume and price, and not to optimize one to the detriment of the other. Your question is timely because we have been studying this topic, looking at launch cadence, the time between launches, and the price elasticity curves, and where the intersection of those end up optimizing for the company. It's still a little bit early for us to comment on our intended approach, but what I can say is that we've already sourced about 80% of the components on the Gravity. It's going really well, and we've been able to stay within our cost targets, which will ultimately give us maximum flexibility to react to dynamic market conditions over time.

Yes, Firstly I would say that from a principal perspective, and given where we are in our lifecycle maturity of our company. We do think it's important that balance between volume and price.

To optimize one to the detriment of the other your question is timely because we have been studying this capex looking at launch cadence the time between launches and the price elasticity curve and where the intersection of those and optimizing for the company.

Still a little bit early for us to comment on our intended approach, but what I can say is that we've already sourced about 80% of the components on the gravity, it's going really well and we've been able to stay within our cost targets, which will ultimately give us maximum flexibility to react to dynamic market conditions over time, we're also taking lessons.

Sherry House: We're also taking lessons learned from the Air and looking how we shrink the amount of time between trim launches, hence getting all buildable configurations into all regions out to the public faster. And finally, we know it's important that customers are aware of the full price spectrum for the vehicle. We found that a lot of people simply don't know that we offer, in the case of an Air, a vehicle with a starting price of $87,000, as Peter mentioned a few moments ago, and hence, awareness is something that we continue to focus on. So we'll keep you posted as we can share more, perhaps at the Gravity unveil later this year and in 2024 as we approach starter production.

<unk> learned from the air and looking how we shrink the amount of time between trim launches, hence getting all buildable configurations into all regions out to the public faster and finally, we know it's important that customers are aware of the full price spectrum for the vehicle. We found that a lot of people simply don't know that we offer in the case.

And are a vehicle with a starting price of 87000 as Peter mentioned, a few moments ago and hence awareness is something that we continue to focus on so we'll keep you posted as we can share more perhaps at the gravity unveil later this year and in 2024 as we approach startup production.

Maynard Um: Thanks, Tawanda. Can we turn it over to phone questions, please?

Thanks.

And we turn it over to our phone questions. Please.

Operator: Sure. Ladies and gentlemen, as a reminder to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by for our first question. Our first question comes from the line of Chris Pierce with Needham and Company. Your line is open.

Sure, Ladies and gentlemen, as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

Please standby for your first question.

Our first question comes from the line of Chris Harris with Needham and company. Your line is open.

Chris Pierce: Hey, good afternoon. Just a clarification, did I hear you right, that test drives are up 2x in Q1 2023 versus the Q4 of last year? And if that is the case, I was just curious what was driving that, given the Dream Ahead Tour launched in the Q2, I believe.

Hey, good afternoon, just a clarification.

Our test drugs or up to <unk>.

<unk> 23 versus the fourth quarter of last year and if that is the case I was just curious what was driving that given the dreamer head toward launched in the second quarter I believe.

Peter Rawlinson: That is correct. It's been a whole holistic series of activities that we've initiated, which collectively will form the basis for our forthcoming marketing strategy. It's not just been the Dream Ahead tour that's garnering a lot of test drives, but we've been much more proactive, both at studio level, through initiatives that we've undertaken from headquarters here to get more people in the car. People are blown away by the sportiness, the driver engagement, the refinement, the comfort of driving a Lucid Air. People who have never driven EVs before are attracted to this.... So it's all about getting people behind the wheel to experience. Very few people will actually buy a car without experiencing a test drive. So I see this as a conduit, a sort of gateway to a future purchase and ownership experience.

That is correct, it's been a whole holistic series of activities that we've initiated sage, which collectively will form.

The basis for our post.

<unk> coming marketing strategies, not just theme the green the hand tool, that's bringing garnering a losses transcribes, but we've been much more crime.

Both the studio level through initiatives that we've undertaken from from headquarters here to get more people in Macau people blown away by the spool seamless the growing engagements the refining the comforts are driving elucidate people, who have never driven.

These before are attracted to this so it's all about getting people behind the wheel to experience very few people will actually buy a car.

Without experiencing a test drive so I see this as a conduit.

The gateway to a future purchase and ownership experience.

Chris Pierce: Okay, and then just lastly for me, with the cars available on the website right now, cars you have in inventory, is there something you're doing to kind of that coincides with the test drives or the Dream Ahead to kind of work through that inventory? Or is it just about whatever specifications or configurations a customer wants, you'll build that, you know, based on whatever they order? I just kinda wanna get a sense of, I know you're not profiting in time or price, but how you're kind of thinking about, you know, those two dynamics.

Okay.

Okay and then just lastly for me with the cars available on the website right. Now are cars. We have in inventory is there something you're doing to kind of coincide with the test drives of the dreams kind of work through that inventory or is it just about whatever specifications or configuration as a customer once you'll build that based on whatever they order. It just kind of want to get sense of.

I know youre, not perfecting our price, but how you kind of thinking about those two dynamics.

Peter Rawlinson: Well, we've got we're reconfiguring the website to make the customer experience more seamless, more straightforward. We're showing the cars we have currently available that can be spec'd on that website. And of course, we're building to order. We've recently introduced the Stealth, the dark side look of the Lucid Air, and that's really attracting a very different audience. It's a very different vibe, a more youthful appearance to that car, and it's a very handsome manifestation of the range. So we're doing all those things. We've got increasing volumes of Touring out there. We've got Tourings in the studio to experience and test drives are undergoing.

What we've got we are reconfiguring the <unk>.

Web site to make the customer experience.

More seamless more straightforward.

We are sharing the costs that we have currently available.

It can.

Ken can be spent on that web sites.

Of course, we are building to order, we've recently introduced the self dark selling Luke.

<unk>.

And Thats.

We will continue very different audiences are very different with volume and more youthful appearance to that call.

Yeah.

It's a very handsome manifestation of the range. So we're doing all those things we've got.

Increasing volumes of Turing.

Turing <unk> experience and test drugs, they are undergoing and of course, we're bringing more and more affordable versions of pure the pure coming out later this year, we will be bringing the rear wheel drive variance of the pure I don't remember that.

Peter Rawlinson: Of course, we're bringing more and more affordable versions of Air Pure, the Air Pure coming out, and later this year, we'll be bringing the rear wheel drive variant of the Air Pure out. Remember that although many people believe that a Lucid Air is a $200,000 car, it actually starts at $87,400, and we need to really dispel this myth.

Although the many people believe that elusive has assumed $1000 car you.

It actually starts at $87400 and we need to.

Really.

This move.

Operator: Thank you. Please stand by for our next question. Our next question comes from the line of John Murphy with Bank of America. Your line is open.

Thank you.

Please standby for our next question.

Our next question comes from the line of John Murphy with Bank of America. Your line is open.

John Murphy: Good afternoon, guys. Peter, in your comments there, it sounded like you were alluding to potentially licensing or selling the powertrain technology, and it sounded like that was actually, you know, pretty far along, potentially with some customers. I'm just curious if you can comment on that or give us any other color as to what those comments meant.

Hi, good afternoon guys.

Yes.

Peter in your in your comments.

It sounded like you were.

You alluded to potentially licensing or selling the powertrain technology and it sounded like that was actually.

Pretty far along potentially with some customers I'm just curious if you can comment on that or give us any other color as to what those comments Matt.

Peter Rawlinson: No, John, I'm not in a position to disclose anything tangible at this juncture. As I said earlier, but we continue to receive incoming interest, and I think there's a growing awareness that we have something very, very special here in terms of performance and efficiency. And if you can have something more efficient, you carry less batteries, so you burden with less battery weight, and this makes the car really more agile and more sporty, more a driver-focused experience. So the technology we have today is eminently suitable for higher performance vehicles with our drive units of 600 to 670 horsepower capability. When we develop lower power units, more affordable units for a mid-sized platform in a few years time, it's then that that technology would be, you know, more appropriate for more mainstream manufacturers.

John I'm not in a position to disclose anything tangible at this juncture.

As I said on the Earth.

But we continue to receive incoming interest and I think I think there is a growing awareness that we have something very very special year in terms of performance and efficiency and if you can have something more efficient you can be less batteries. So your burden with free weights and this makes the cut.

Really more agile and more sports you more of a driver focused experience.

What we have today.

Imminently suitable for higher performance vehicles with our drive units of 600 to 670 horsepower capability. When we develop low power units more affordable units for mid sized platform in a few years' time.

Does that technology would be.

More appropriate for more mainstream manufacturers, we've new laws.

Peter Rawlinson: We've not proactively gone out to seek any engagement in this arena, but we've had multiple OEMs come speak to us, and we are in dialogue with several right now, and that's all I really can disclose at this juncture.

<unk> gone out to seek any engagement in this arena, but we've had multiple Oems come speak to us and we are in dialogue with several right now and.

And Thats, all I really can disclose at this juncture.

John Murphy: Okay, and then, Sherry, maybe just 2 quick financials questions for you.

Okay, and then maybe just two quick financial questions for you the $411 million of finished finished goods inventory would indicate there is almost 4000.

Sherry House: Sure.

John Murphy: The $411 million in finished, finished goods inventory would indicate there's almost 4,000, you know, in stock. Is that, you know, about riders or something else in that finished goods inventory that would be considered that wouldn't be a completed vehicle?

<unk>.

In stock is that about writers or something else in that finished goods inventory that would be.

We consider that wouldnt be complete vehicle.

Sherry House: Yeah, that is a little bit misleading, so I'm glad you asked the question, John. The finished goods inventory has the inventory that is available for sale, but it also includes our test fleet vehicles, loaner vehicles that we have in order to give optimal customer care experiences, you know, for the end customer, showroom cars as well. These are vehicles that ultimately, after, you know, a few thousand miles on them or perhaps no miles on them, in the case of showroom cars or media cars, that we will ultimately sell, but they're not available for sale today. So it's important to differentiate between available for sale today and finished goods inventory that is being used for other customer-facing purposes.

It is a little bit misleading. So I'm glad you asked the question John .

The finished goods inventory has the inventory that is available for sale, but it also includes our test fleet.

Nichols loaner vehicles that we have in order to give optimal customer care experiences for the end customer showroom cars as well. These are vehicles that ultimately after a few thousand miles on them or perhaps no miles on them in the case of showroom cars their media cars that we will ultimately sell but they're not available for sale today.

So it's important to differentiate between available for sale today and finished good inventory that is being used for other customer facing purposes.

John Murphy: Okay, and then just the other financial question. I mean, there's a lot going on right now, so I haven't had a chance to completely go through that S-3, but it sure looks like-

Okay, and then just the other financial question I mean, there's a lot going on right now so I haven't had a chance to completely go through that is three but it sure looks like.

Sherry House: Sure.

John Murphy: A mixed shelf. I mean, is there the availability for you to raise material amounts of capital under that shelf that's been filed? Or, I mean, I'm sorry, once again, I haven't gone through the details there, but it looks at first blush, like there's a lot of room for you to raise capital.

A mixed shelf I mean is there the availability for you to raise material amounts of capital under that that shelf thats been filed or I'm, sorry, once again I haven't gone through the details here, but it looks at first blush like there's a lot of room for you to do.

To raise capital.

Sherry House: Well, again, this is not a new issuance. This is really just a contractual obligation that was associated with the subscription agreement that we did with the PIF back in December 2022.

Well again this is not a new issue and this is really just a contractual obligation that was associated with the subscription agreement that we did with the Pis back in December of 2022.

John Murphy: Okay, great. Thank you very much, guys.

Okay.

Great. Thank you very much guys.

Sherry House: Okay.

Peter Rawlinson: Thank you, John.

Okay. Thank you Jim.

Operator: Thank you. Please stand by for our next question. Our next question comes from the line of Andrea Shepard with Cantor Fitzgerald. Your line is open.

Thank you.

Please standby for our next question.

Our next question comes from the line of Andrew Shepherd with Cantor Fitzgerald. Your line is open.

Andres Sheppard: ... Hi, good afternoon, everyone. Congrats on the quarter, and thanks for taking our questions. Peter, I wanted to perhaps follow up from the one of the last questions in terms of the licensing. You know, I realize you're not providing additional color on that. I'm seeing if I can—maybe I can ask the question slightly differently. You know, given the slight reduction in the production guidance for this year and gross margins where they are, I guess, what is the reluctancy to introduce this as a new revenue stream? You know, you have the proof of concept with the Formula E Series. You've, you know, continued to talk about the technology and how superior it is relative to competitors. So I'm just trying to understand, you know, why not introduce this sooner rather than later? Thank you.

Hi, good afternoon, everyone. Congrats on the quarter and thanks for taking our questions.

Peter I wanted to perhaps follow up from the one of the last questions.

So if the licensing I realize you're not providing additional color on that and see if I can maybe I can ask the question.

Slightly differently given the slight reduction in the production guidance for this year in gross margins where they are.

What is the reluctance to to introduce this is a new revenue stream you have the proof of concept with the Formula E series.

We continue to talk about the technology.

How are superior it is relative to the competitors. So I'm just trying to understand why not introduce this sooner rather than later thank you.

Peter Rawlinson: Oh, well, there's no reluctance on our part. We're very open and engaged. You know, we have to prioritize here. Last year, my laser focus was working crazy hours in the factory. That's what I was doing, crazy hours to resolve logistics and supply chain issues. My laser focus right now is amplifying for brand awareness and creating a cohesive strategy with Andrea to market this brand and make many more people aware that we've got the best car on the planet. Our tech roadmap, I believe is extraordinary. We will be launching progressively more affordable versions of our tech, which would be appropriate for OEs in different parts strata of the market. And, you know, so there's nothing tangible to announce right now.

This does no reluctance on our part we're very open and engaged.

We have a we have to prioritize here last year my laser focus.

Working crazy hours in the factory, that's what I was doing crazy.

To resolve logistics and supply chain issues.

Mine laser focus right now is amplifying for brand awareness and creating a cohesive strategy with Andrea to market. This brand and make many more people aware that we've got the best call on the <unk>.

Our second roadmap I believe is extraordinary.

We will be launching progressively more affordable versions of our tech, which would be approved for different.

It is a different cost structure of the markets.

So.

There is nothing tangible to announce right now we're in dialogue with.

Peter Rawlinson: We're in dialogue with third parties, and, you know, I will make an appropriate announcement should that bear fruit. But there's no reluctance on our part. We're open and receptive, but it's... I really have to focus on our products right now rather than proactively chasing licensing.

Third policies.

Well.

I will make an appropriate announcement should.

Bear fruit, but theres no reluctance on our part we're open and receptive but it's.

I really have to focus on.

Our products right now Ross, who proactively chasing licensing.

Andres Sheppard: Got it. Okay, understood. Thanks, Peter. And maybe as a quick follow-up, was wondering if you can perhaps just give us any color on the deliveries starting to Saudi Arabia, you know, as part of the major agreements. There was a brief comment there from Sherry at the end. Sorry if I missed it. Just wondering if maybe you can elaborate a bit further, you know, just in terms of how you see those progressing. Yeah. Thanks.

Got it okay understood. Thanks, Peter and maybe as a quick follow up.

Was wondering if you could perhaps just give us any color on the deliveries starting to to Saudi Arabia as part of the major agreements. There was a brief comment there from sharing the and sorry, if I missed it just wondering if maybe you can elaborate a bit further.

Just in terms of how you see those progressing yeah. Thanks, Yeah. So I think youre, referring to the Ministry of Finance agreement that we have.

Sherry House: Yeah. So I think you're referring to the Ministry of Finance agreement that we have, in which they have committed up to 50,000, maybe up to a total with the option for another 50,000, up to a total of 100,000 units over the next 10 years. We are progressing those conversations. We are in active dialogue. We're in the process of building out the specs for the first vehicles that they want to receive later this year. So that is actively ongoing.

In which they.

They have committed up to 50000, maybe up to a total with the option for another 50000 up to a total of 100000 units over the next 10 years. We are progressing our conversations we are in active dialogues. We are in the process of building out.

For the first vehicles that they want to receive later this year. So that is actively ongoing.

Andres Sheppard: Okay. Thanks, guys. Congrats again. I'll pass it on. Thank you.

Okay. Thanks, guys. Congrats again I'll pass it on thank you.

Peter Rawlinson: Thank you.

Sherry House: Thank you.

Thank you. Thank you.

Operator: Thank you. Please stand by for our next question. Our next question comes from the line of Steven Fox with Fox Advisors. The line is open.

Thank you please standby for our next question.

Okay.

Our next question comes from the line of Steven Fox with Fox Advisors. Your line is open.

Steven Fox: Hi, good afternoon. 2 questions, if I could. First of all, the change in guidance in terms of going from 10,000 to 14,000 to 10,000. How much of that would you say is related to just some concerns on the macro or your ability to build brand versus just factory production issues? Any details you can provide on that, and then I have a follow-up.

Hi, good afternoon, two questions if I could first of all the change in guidance in terms of going from 10 to 14000.

10000.

How much of that would you say is related to just some concerns on the macro or your ability to build brand versus just factory production issues. Any details you can provide on that and they know they have to follow up.

Peter Rawlinson: Yeah, I think it's, it's important as we take a very responsible perspective of this, that we match the cars that we build, the production volumes, with the cars that we deliver, and, and that's the balancing act. Certainly, we believe that the macroeconomics are playing a part in the deliveries right now. We also believe that the interest rates play a part, even for a high-end product, even in this part of the market, interest rates do provide a headwind. But we've got initiatives within the company to turn the faucets on, to up the volumes, should those market conditions improve. And, you know, that we're ready to scale up pending that.

Yes, I think it's important as we take a very responsible perspective of this.

We match the cars that we build with production volumes with the comps that we deliver.

And that's the balancing act.

Certainly we believe.

The macroeconomics are playing a pause in.

The deliveries right now we also believe.

The interest rates play apart even for high end products, even in this part of the market interest rates too.

Provider.

Headwind.

We've got initiatives within the company consumed the sausage to up to the end use should those are market conditions improve and we are ready to scale up pending that.

Peter Rawlinson: As we amplify brand awareness, and also I come back to this misconception, which seems to be out there, that, yes, people believe it's a $200,000 car, and it's actually, the entry-level price is $87,400. It's probably conceivable that people think of it as a $200,000 car, dollar car because it's so amazing, but actually it's much more attainable, and we need to spread that word as well.

Also as we amplify brand awareness and also I come back to this misconception, which.

Seems to be out there.

Yes people believe it is a 200000 gold accounts, thanks to the entry level price is $87400. It appropriately conceivable that people think of it as a 200000 telecom.

Amazing, but actually it's much more attainable and we need to spread that word as well.

Steven Fox: Great, that's helpful. And then just in terms of, you mentioned maybe bringing phase two online in stages. Can you just talk to sort of the triggering point for that and whether... I don't know, whether if you focus on certain stages besides the CapEx efficiencies, it helps in any other ways or in terms of how you- how the vehicle production goes from a cost standpoint and your ability to react to changes in demand. Thank you.

Great. That's helpful. And then just in terms of you mentioned maybe.

Bringing phase III online in stages can you just talk to sort of the triggering point for that and whether I don't know, whether if you focus on certain stages. Besides.

The capex efficiencies that helps in any other ways.

In terms of how you how the vehicle production goes from a cost standpoint, and your ability to react to changes in demand. Thank you.

Sherry House: Yeah, yeah. No, I think it's an important question. So we're in the process of adding significant, I think, 2.85 million sq ft additional in Arizona, Casa Grande facilities, and it's a number of our shops are being either expanded or new buildings. And what we're finding is that as we look at our production plan, that we have the ability to continue to eke out a bit more volume out of some of our existing machinery, tooling, equipment in the existing shops for a bit longer, which would allow us to take certain of the shops, you know, like stamping, perhaps paint, and potentially delay the onboarding of those, hence you will delay the depreciation expense that accompanies that particular machinery, tooling, equipment, and facility to a little bit longer.

Yeah, Yeah, no I think it's an important question. So we're in the process of.

Adding significant I think $2 85 million additional square feet in Arizona, Casa Grande facility, if and it's a number of our shops are being either expanded or new building.

And what we're finding is that as we look at our production plan that we have the ability to continue to eke out a bit more volume out of some of our existing machinery tooling equipment and the existing shop for a bit longer which would allow us to take certain of the shops.

Campaign, perhaps pain and potentially delay the onboarding of <unk>, Hence you will delay the depreciation expense that accompanies that particular machinery tooling equipment and facility to a little bit longer. The other thing. We're doing is we are really carefully looking at all of the equipment.

Sherry House: The other thing we're doing is we're really carefully looking at all of the equipment that's going in each of these shops, and to the extent that there is volume equipment that could potentially be delayed, like the addition of additional robots, for instance, we're looking to put those in place and activate those as they're needed versus doing it all at one time. The other thing that's really unique about what we're doing in the general assembly hall is that we're gonna have the ability to dial up the jobs per hour between a few different jobs per hour points.

Thats going in each of these shops and to the extent that there is volume equipment.

Could potentially be delayed like the addition of additional.

Robots for instance, we're looking to put those in place and activate those as they're needed first is doing it all at one time. The other thing that's really unique about what we're doing in the General Assembly Hall is that we're going to have the ability to dial up the jobs per hour between a few different job.

Sherry House: So it's not a unit step increase in the direct labor and bringing on the equipment, but instead, we'll have the ability to dial that up gradually, and we're gonna work to be really thoughtful about that so we can minimize depreciation expense and also the amount, just efficiency of the workforce as well.

Crowder points, so it's not a unit step.

Increase in direct labor and bringing on the equipment, but instead, we will have the ability to dial that up gradually and Brooklyn and work to be really thoughtful about that so we can minimize depreciation expense and also the amount.

Just efficiency of the workforce as well.

Steven Fox: Great, that's all very helpful. Appreciate the answers. Thank you.

Great. That's all very helpful. I appreciate the answers thank you.

Operator: Thank you. Please stand by for our next question. Our next question comes from the line of Doug Detten with Evercore. Your line is open.

Thank you please standby for our next question.

Our next question comes from the line of Doug <unk> with Evercore. Your line is open.

Doug Detten: Thank you. Hi, Peter, Sherry, and team. So, you know, looking at ASPs, they were about $106,000 per vehicle this quarter. So that either implies some heavy discounting, you know, below MSRP or a lot of the Pure trim. Can you maybe speak a little more to that and how we can think about that going forward?

Doug Dutton: Thank you. Hi, Peter, Sherry, and team. So, you know, looking at ASPs, they were about $106,000 per vehicle this quarter. So that either implies some heavy discounting, you know, below MSRP or a lot of the Pure trim. Can you maybe speak a little more to that and how we can think about that going forward?

Thank you hi, Peter sharing team so looking at Asps. They were about 106000 per vehicle this quarter.

Some heavy discounting below MSRP or a lot of your trend can you maybe speak a little more to that and then how we can think about that going forward.

Sherry House: Yeah, so I think that when you think about the mix, as it starts to differ from 2022, you're starting to have more dominance in trims other than Grand Touring and Dream, right? So now you start having more prevalence of Touring. We're starting to get Pure in there. But as you go forward through the balance of this year, there is gonna continue to be healthy mix because some of the higher trim levels are gonna start going and are going to the Middle East and Europe. And so you're gonna start to see the exposure of those products, those higher-end products in those regions, while you simultaneously start to ramp Pure in the US and then later send that overseas as you're exiting the year and into 2024. So you're gonna continue to see this mix of, of trims.

So I think that when you think about the mix as it starts to defer from 2022 youre starting to have more dominance and trends other than Grand touring and Dream right. Now you start having more prevalence of Turing, we're starting to get curious in there, but as you go forward through the balance of this year.

Sure there is going to continue to be healthy mix because some of the higher trim levels are going to start going in or going to the middle East and Europe , and so youre going to start to see the exposure of those products of higher end products in those regions. While you simultaneously start to ramp here in the U S.

And then later said that overseas, yes, youre exiting the year and into 2024, so you're going to continue to see the mix of trends. We did have a 7500 kind of continuation program.

Sherry House: We did have a 7,500 kind of continuation program that lasted the first couple of months of the year, and that also is reflected in the revenue numbers that you do see.

Laughter. The first couple of months of the year couple of few months of the year and that also is reflected in the revenue numbers that you do see.

Doug Detten: Okay. And it's safe to say that $7,500 continuation program will come off, going forward throughout 2023?

Doug Dutton: Okay. And it's safe to say that $7,500 continuation program will come off, going forward throughout 2023?

Okay, and it's safe to say that $7500 continuation program will come off going forward throughout 'twenty three.

Sherry House: It did come off, yes.

It did come off yes, yes.

Doug Detten: Yes. Okay. And then just one quick modeling question for you, Sherry, on the LCNRV cadence. You know, is there any sort of guide on how we might see those charges hit in the remainder of this year and the next, just so that we can, you know, lay it out cleanly in the model and understand, you know, how those might affect the bottom line?

Doug Dutton: Yes. Okay. And then just one quick modeling question for you, Sherry, on the LCNRV cadence. You know, is there any sort of guide on how we might see those charges hit in the remainder of this year and the next, just so that we can, you know, lay it out cleanly in the model and understand, you know, how those might affect the bottom line?

Yes, Okay and then just one quick modeling question for you Sherry on the LC and RV cadence is there any sort of guide on how we might see those charges in the remainder of this year and the next just so that we can lay out cleanly in the model and understand how those might affect the bottom line.

Sherry House: Yeah, I know it's a great question. The LCNRV charges have been really kind of between $180 million, $200-ish million, $220 million, the last three quarters. So we've kind of seen it basically leveling off. We do expect to see an improvement of that over time, because part of the charge is associated with the inventory we have on hand. Given my comments that we're looking to reduce the days outstanding inventory on hand and not bringing fresh inventory in, in terms of raw material, and also work in process, finished goods, we would expect that to start to taper down. So as you're looking forward this year, we are expecting some, some reduction in that over time.

Yeah, no. It's a great question, the LC and RV charges has been really kind of in between $180 million 200 ish million to $20 million. The last three quarters that we've kind of seen it basically leveling off we do expect to see an improvement of that over.

Time, because part of the charge is associated with the inventory we have on hand, given my comments that we're looking to reduce the days outstanding and inventory on hand did not bringing fresh inventory and in terms of raw material, which and also work in process finished goods.

We would expect that to start to taper down so as youre looking forward. This year, we are expecting sub some reduction in that over time. The other thing that we have had in some impairments there.

Sherry House: The other thing that we have had in some impairments there is we had mentioned some obsolescence, we had mentioned some scrap. I had mentioned the fact that we have some different activities ongoing, to really address that in a more proactive way. And that's partly us improving our systems. It's partly us not having to hold as much inventory on a precautionary basis because we're not experiencing the same supply chain issues and the same COVID issues that we had in the past. So bringing down that inventory, making sure it's more current inventory, will also improve the situation throughout the year.

We mentioned some obsolescence we had mentioned some scrap I had mentioned the fact that we have some different activities ongoing to really address that in a more proactive way.

Partly us improving our systems, it's partly if not having to hold as much inventory on a precautionary basis, because we're not experiencing the same supply chain issues and the same COVID-19 issues that we had in the past so bringing down that inventory, making sure. It's more current inventory will also improve the situation throughout the year.

<unk>.

Doug Detten: Understood. Thank you for the detailed answer.

Doug Dutton: Understood. Thank you for the detailed answer.

Understood. Thank you for the detail and detailed answer.

Sherry House: Of course. Thank you.

Of course, thank you.

Operator: Please stand by for our next question. Our next question comes from the line of Tobias Viess with Redburn. Your line is open.

Please standby for our next question.

Okay.

Our next question comes from the line of Tobias <unk> with Redburn. Your line is open.

Tobias Beith: Hi, thanks for taking my question. If we exclude the non-cash inventory write-down charge, your COGS per unit only improved by about 8% versus Q4 2022, which likely reflects the rotation towards the lower content, Pure and Touring variants, but also some of the discounts that you just mentioned. Are you able to provide some data points for analysts and investors on the work that's being done internally to remove the costs from the vehicle?

Hi, Thanks for taking my question.

If we exclude the noncash inventory write down charge.

Your Cogs per unit only improved by about 8% versus the fourth quarter of 2022, which likely reflects the rotation towards lower content pure and touring sirens, but also some of the.

Discounts that you just mentioned are you able to provide some data points for analysts and investors on the work that's being done internally to remove the costs from the vehicle.

Sherry House: Yeah, absolutely. I mentioned a few of them in my prepared remarks. But let me provide some additional context. So some of the work that's being done is on Bill of Material cost down. Now, they have two different flavors. One part is commercial agreements that we have with our suppliers and improving piece price costs. Some of that happens, you know, as you're negotiating additional volume with them on new programs; they become more open to negotiating down piece price on current programs. So that's part of the effect. The other effect is when we are doing engineering changes that have a corresponding cost increase as well.

Yeah, absolutely I've mentioned, a few of them in my prepared remarks.

Let me provide some additional context.

Some of the work that's being done is on bill of material cost down now they have two different flavors. One part is commercial agreements that we have with our suppliers and in improving piece price cost some of that happens.

Youre negotiating additional.

Volume with them on new programs, they become more open to negotiating down piece price on current programs. So that part of the effect. The other effect is when we are doing engineering changes that have a corresponding cost increase as well. The bom cost is certainly something that we are expecting to see throughout the year.

Sherry House: So BOM cost is certainly something that we are expecting to see throughout the year, though you have to remember, when you've got inventory on hand and you're bringing new lower cost parts in, you gotta go through that inventory first. That's why I guided earlier that you're gonna start to see the impact of that more towards the end of the year and also as you get into 2024, because some of these items we know will actually take effect in 2024. Some of the other areas where we've been seeing some really good progress has been in freight, and that'll start to show up more in Q2 and Q3 as we've renegotiated some of our contracts there. And also, we're seeing improvements in manufacturing overhead as well.

Now you have to remember when you've got inventory on hand, and you are bringing new lower cost parts and you got to go through that inventory. One that's why I guided earlier that you're going to start to see the impact if that more towards the end of the year and also as you get into 2024, because some of these items, we now will actually take effect in 2024.

Some of the other areas, where we've been seeing some really good progress has been in freight and that will start to show up more in Q2 and Q3.

We renegotiated some of our contracts there and also.

We're seeing improvements in manufacturing overhead as well and then as a result of the workforce reduction there.

Sherry House: Then as a result of the workforce reduction, there's improvements that you're gonna start seeing. More of it's gonna be in cost to revenues than in OpEx, and you're gonna start seeing that in Q2. So these are different cost down initiatives that will start flowing through the gross margin. Then, of course, we talked about the greenhouse gas credits, the Inflation Reduction Act, some of those things, some of the trims that we have, those will start hitting a little bit later in the year, is our expectation.

There are improvements that youre going to start seeing more of it is going to be in cost of revenues than in opex, you're going to start seeing that in Q2. So these are different call.

Cost down initiatives that will start flowing through the gross margin and then of course, we talked about greenhouse gas credits the inflation reduction act some of those things.

Trends that we have those will start hitting a little bit later in the year is our expectation.

Tobias Beith: Okay, cool. Thank you. And, I guess my-

Okay cool thank you.

Sherry House: Yeah.

Tobias Beith: My second question is that the Lucid Air began production roughly one year after beta prototyping testing began. And clearly, COVID impacted some of the start of production timeline. But shouldn't analysts and investors use the same timeline to conclude that the Gravity SUV begins production in roughly 9 to 12 months from now, given your announcement that this nameplate has just begun road testing?

Sherry House: Yeah.

My second question is that it.

The looser that began production roughly one year after beta prototyping test testing began.

Clearly COVID-19 impacted some of it to start production timeline.

But shouldnt analysts and investors use the same timelines conclude that the gravity SUV begins production in nine to 12 months from now given your announcement that this nameplate has just begun road testing.

Peter Rawlinson: All I can say is that we've got to get the product absolutely right. There is a gestation period between data and start of production. There's also a nomenclature issue here. We're on target for start of production late 2024 for the Gravity.

Okay.

I can say is that.

We've got to get the prototypes for Iranians there is.

Just station period between.

Sure.

Data.

Production is also a nomenclature issue here, we are on target to start production late 2004.

The grant between.

Tobias Beith: Okay, cool. Well, but perhaps, maybe could you outline exactly what needs to happen for the between now and the start of production? Just maybe so that we can track it in real time. I don't know when, when you expect the, the-

Okay.

Perhaps maybe you.

You outline exactly what needs to happen.

For the split between now and the start of production, maybe so that we could trucking in real time.

Peter Rawlinson: Yeah

Tobias Beith: ... vehicle to get homologated, et cetera, et cetera.

When do you expect the vehicles.

Peter Rawlinson: Yeah. Yeah, well, I mean, homologation comes relatively late because that has to be conducted to process some tooling, representative levels of authenticity for that represent production. So right now, we're road testing the beta vehicles for the core attributes: structural integrity, drivability, suspension tuning. We're starting on some of the brake development, the traction control, the anti-lock braking systems, the core attributes of the vehicle. Then we will move to a phase of interior development. They won't have representative interiors at this stage. Later this year, we'll move the betas with representative interiors. We can do all that development. Then the long lead tooling items are being kicked off, because some of the parts take over a year to tool.

Smaller gates, it et cetera, et cetera, yes, yes, well I mean home obligation comes relatively light because of that to be conducted to process and tooling represented.

Levels of authenticity for that represent production. So right now we are.

On road testing of the debates of vehicles for the core attributes structural integrity C. <unk> C suspension tuning we starting on some of the bright developments.

The traction control braking systems.

Attributes.

Then we will move to a size of interior development.

Representative of interiors at this stage later this year will move bases with.

Representative into areas, where we can do OLED development than the lonely tooling items.

Are being kicked off because some of the parts take over a year to two and then we will go through a preproduction run through.

Peter Rawlinson: And then we'll go through a pre-production run through next spring, culminating in production late 2024. On track.

Next spring.

Culminating in production late 2024.

Tobias Beith: Great.

Peter Rawlinson: I believe it will be a seminal product. It's Gravity is on track. It's the big one. It's gonna be a landmark. Seven-seater, third row, three-row, super practical, super high performance, extraordinary range, extraordinary performance attributes.

On track.

And I agree this will be a seasonal a seminal product.

Gravity is on track, it's the big one is going to be a landmark seven seats.

Three row supercritical Super High performance extraordinary range exhibit extraordinary performance attributes.

Tobias Beith: Great. This has been super helpful. Thank you. I'll pass the line on.

This has been super helpful. Thank you I'll pass the line.

Sherry House: Thank you.

Operator: Thank you. Please stand by for our next questioner. Our next question comes from the line of Ron Josey with Guggenheim. Your line is open.

Thank you.

Please standby for our next question.

Our next question comes from the line of branches cycle with Guggenheim. Your line is open.

Sure.

Ron Jewsikow: Good evening, and thanks for taking my questions. Peter, just wanted to get your thoughts on kind of competitive dynamics in the market right now. From our vantage point, it feels like a pretty challenging market for luxury electric vehicles, but wanted to get your view on if price cuts from one of your large domestic competitors on their luxury line of vehicles is having any impact on demand for Lucid vehicles.

Good evening.

Thanks for taking my questions.

Peter just wanted to get your thoughts on kind of competitive dynamics in the market right now from our vantage point it feels like.

Youre pretty challenging market for for luxury electric vehicles, but.

I wanted to get your view on the price cuts from.

Your one of your large domestic competitors.

Third luxury vehicles is having any impact on.

On demand for lucid vehicles.

Peter Rawlinson: Well, I think what you're referring to is perhaps a different part of the market. I believe that there is a challenge to the entire market right now because of macroeconomics and because of interest rates, which actually do affect this place of the market. You know, we're seeing key competitors from Germany discounting their products very heavily. That's not just the US manufacturer that you may be referencing. The Germans are heavily discounting their vehicles, and I think there are challenges right across the marketplace. I think what we need to do is just amplify awareness, just how compelling our product is.

Well I think what you're referring to is perhaps the different parts of the markets.

Belief.

There is a there is a challenge.

The market right now because of macroeconomics and because of interest rates, which actually do affect displace the markers.

We are seeing.

A key competitors from Germany.

Counting their products very heavily.

It's not just the.

The U S manufacturer that you may be.

You may be referencing the Germans are heavily discounting their vehicles.

And I think there is challenges right across the marketplace I think what we need to do is just amplify awareness.

How compelling product is we've gotten better range better into their comfort, we've got more legroom refers to challenging with more efficient through a high technology.

Peter Rawlinson: We've got better range, we've got better interior comfort, we've got more leg room, we're faster charging, we're more efficient, we're higher technology. We've got a fundamentally superior driver engagement experience. I was taking some potential customers for a test drive just yesterday, and they were just blown away by the overall driving and riding experience. And we just need to get more people behind the wheel. That's what this is about. We don't have a hundred-year heritage or history. We don't have an existing customer base. We need to win new advocates, new customers.

Fundamentally superior growing user engagement experience I was taking some potential customers protest trying just yesterday and they were just blown away by the rule.

And riding experience and we just need to get more people behind the wheel. That's what this is about we don't have a 100 year heritage of history, we don't have an existing customer base, we need to win a new advocacy new customers.

Ron Jewsikow: That's, that's super helpful, and it's good to hear you're out in the field kind of promoting the product.

Yes.

That's super helpful and it's good to hear you are out in the field kind of promoting the product.

Peter Rawlinson: I personally, most weekends I'm out meeting customers at events, and the grassroots evangelism is growing. This doesn't happen overnight. This will take some time. We are planting acorns for a forest to come in the future. Make no mistake.

Firstly, most weekends announce meeting customers.

And the grass roots evangelism is growing and this doesn't happen overnight. This will take some time, we are planting a combs for for us to to come in the future maintenance mistake.

Ron Jewsikow: Makes perfect sense. I guess just you gave the data points around test drives and the number of cities you're going to for the Dream Ahead tour. Is there anything you can... commentary you can provide on kind of the cadence for order trends since that started? Or is it too early?

It makes perfect sense I guess, just you gave the data point around test drives and the number of cities Youre going to for the Dream ahead tours. There is there anything you can commentary you can provide on.

Kind of the cadence for order trends.

It started or.

Peter Rawlinson: It's too early to do that, and there are so many factors that overlay, it's very dangerous. But what I would say is this, that we've more than doubled the number of test drives in the last quarter, and I believe that very few people would buy a car without test driving. I see that as a key stepping stone, a key conduit, a very relevant metric, and that is a step towards purchasing, ownership. And then what we see is the best salespeople we've got are our customers, that become advocates, and some of them even evangelize for us. And there's something very genuine about that.

Or is it too early.

It's too early to do that.

<unk> is very dangerous, but what I would say is that.

We've more than doubled the number of test runs in the last quarter and I believe that very few people, who would buy a car without test drive it and I see that as a key stepping stone a key conduit heads a very relevant metric and that is a step towards.

Purchasing ownership and then what we see is.

Salespeople with those are our customers.

Become advocates and some of them even evangelize for us.

Something very genuine about them.

Sherry House: Yeah, these test drives also give us personal touch points in order to enter into dialogue with the customers, better understanding their needs. And then it also, I would say that as we've set up the Lucid Financial Services business in the US and then growing that overseas, that's another touch point where we can gain intelligence on what the customer needs, the pricing that they're looking for, the interest rates that they're looking for. And all of these are gonna be data points that we can use to refine offerings that are gonna best meet, meet the customer needs.

These tests are it's also gave us personal touch points in order to enter into dialogue with the customers better understanding their needs and then it also I would say that as we've set up the lucid financial services business in the U S and in growing that overseas. That's another touch point, where we can gain intelligence on what the customer needs the <unk>.

Reising that theyre looking for the interest rates that theyre looking for and all of these are going to be data points that we can use to refine offerings that are going to best meet the customer needs.

Peter Rawlinson: We're streamlining the whole customer experience, making the website much more intelligible, more intuitive, more user-friendly, streamlining, streamlining the ordering process, online.

Streamlining the whole customer experience, making the wind side much more intelligible more intuitive user friendly streamline during some of the streamlining the ordering prices.

Online.

Ron Jewsikow: That's super helpful. And just last quick question for me, kind of Gravity. Any learnings from the Air launch process over the last 12 to 18 months that, that'll help inform the, the Gravity launch, call it 12 months from now?

That's super helpful and just last quick question from me kind of gravity.

Any learnings from the.

The air launch process over the last 12 to 18 months that will help inform the.

The gravity launch call it 12 months from now.

Peter Rawlinson: Oh, yes, of course. I mean, we want to, we want to continuously improve. And there's a continuous improvement and learning process, which we take very seriously, the teams here. The engineering team in Gravity works very closely with production team, design for process, design for manufacture. And, this is a, this is a really collaborative, a team sport, which we take very seriously. I really believe Gravity is gonna be a seminal product. I don't think there's gonna be anything out there that's, even close. It's taken all technology that we've developed to date and more that we're gonna throw at this car, because the problem with SUVs is getting range without an unduly large battery, which becomes super heavy, and then you lose payload capacity on the car.

Yes of course, I mean, we want to we want to continuously improve and there is a continuous improvement in learning process, which we take very seriously. The teams here Big engineering team and gravity works very closely with production theme resuming full process design for manufacture and.

This is a this is a really collaborative teams for which we take very seriously I really believe gravity is going to be a seminal product.

Adam is going to be anything else.

Even closed it has taken.

All technology that we've developed to date and more that we're going to throw this.

The problem with Suvs is getting range without alone Julie large battery, which become Super heavy and then you lose payload capacity.

Peter Rawlinson: So this is a multidimensional, hugely technical challenge, and it's only now, I believe, that we're ready to really give it our best shot. Gravity is gonna be huge for us. I'm very excited about it.

So this is this is a multi dimensional hugely.

Nickel challenge and it's only now I believe that were ready to really give it up is sure a gravity is going to be huge for us I'm very excited about it.

Ron Jewsikow: Very helpful color. Thanks, Peter, Sherry, and team. I'll hop back in the queue.

That's very helpful color.

Peter Sherry.

I'll hop back in the queue.

Operator: Thank you. Ladies and gentlemen, due to the interest of time, I would now like to turn the call back to Maynard for closing remarks.

Thank you.

Ladies and gentlemen, due to the interest of time I would now like to turn the call back to <unk> for closing remarks.

Maynard Um: This concludes Lucid's Q1 2023 earnings conference call. Thanks, thank you all for joining us today, and you may now disconnect.

This concludes <unk> first quarter 2023 earnings conference call. Thank you all for joining US today and you may now disconnect.

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Operator: Hello, and thank you for standing by, and welcome to Lucid Group's Q1 2023 Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this time, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. I would now like to hand the conference over to Maynard Um. You may begin.

Hello, and thank you for standing by and welcome to elusive groups first quarter twenty-three earnings conference call.

You will then hear automated message advising your hand is raised.

To withdraw your question. Please press star one again.

I'd now like to hand, the conference over to Maynard you may begin.

Maynard Um: Thank you, and welcome to Lucid Group's Q1 2023 earnings call. Joining me today are Peter Rawlinson, our CEO and CTO, and Sherry House, our CFO. Before handing the call over to Peter, let me remind you that some of the statements on this call include forward-looking statements under Federal Securities law. These include, without limitation, statements regarding the future financial performance of the company, production and delivery volumes, financial and operating outlook and guidance, macroeconomic and industry trends, company initiatives, and other future events. These statements are based on predictions and expectations as of today, and actual events or results may differ due to a number of risks and uncertainties.

Thank you and welcome to lucid group's first quarter 2023 earnings call. Joining me today are Peter Robinson, our CEO and CTO and Sherry House, our CFO before handing the call over to Peter Let me, let me remind you that some of the statements on this call include forward looking statements under Federal Securities Law. These include without limitation statements.

Regarding the future financial performance of the company production and delivery volumes financial and operating outlook and guidance.

The macroeconomic and industry trends company initiatives and other future events. These statements are based on predictions and expectations as of today and actual events or results may differ due to a number of risks and uncertainties. We refer you to the cautionary language in the risk factors in our most recent filings with the SEC and the forward looking statements on page two of our investor deck.

Earlier this afternoon.

Well as in the Investor deck with that I'd like to turn the call over to lucid CEO and CTO Peter Robinson Peter Please go ahead.

Peter Rawlinson: Thank you, Maynard, and thank you everyone for joining us for our Q1 earnings call. In Q1, we produced 2,314 vehicles and delivered 1,406. Now, Sherry will go into more detail on our financials, but I would like to first thank all our employees. We have the best EV on the market and really, I believe, the best car on the market, and it would not have been possible without the collective efforts of our entire team, which is a direct result of tremendous perseverance, resourcefulness, and teamwork. I want to express my deep personal gratitude to everyone who has contributed to, and the teams that will help advance our mission going forward. I'm very excited about our future and the opportunities that lie ahead of us.

Thank you Mike and thank you everyone for joining us for our first quarter earnings call.

In quarter, one we produced 2314 vehicles and delivered 1406.

Jerry will go into more detail on our financials, but I would like to thank.

All our employees, we have the best EV on the market and really I believe is the best car on the market and it would not have been possible without the collective efforts of.

Our entire team, which is a direct result of tremendous perseverance with thoughtfulness and teamwork.

I want to express my deep personal gratitude to everyone, who has contributed to and the teams that will help advance our mission going forward.

I'm very excited about our future and the opportunities that lie ahead of US we have the best EV on the market and really unbelievable come on the market and it would not have been possible without the collective efforts of the entire team.

Peter Rawlinson: We have the best EV on the market, and really, I believe, the best car on the market, and it would not have been possible without the collective efforts of the entire team. I would like to welcome three new members of the board, Sherif Marakby, Chabi Nouri, and Ori Winitzer. Together, they bring significant global experience in the areas of marketing, finance, and operations across automotive, technology, and luxury consumer goods. Now, these additions are a reflection of the company's evolution as we mature to the growth and brand awareness stage of our life cycle. I'd also like to congratulate Turqi Alnowaiser on his appointment as Lucid's chairman of the board, and also thank Andrew Liveris for his guidance during his service as chairman.

I would like to welcome three new members of the board shares correct.

<unk> and <unk> wins.

Together, they bring significant global experience in the areas of marketing finance and operations across automotive technology and luxury consumer goods.

These additions are reflection of the company's evolution as we mature to the growth and brand awareness stage of our lifecycle.

I'd also like to congratulate <unk> on his appointment as loose as chairman of the board and also thank Andrew Liveris for his guidance during his service as chairman.

And also a heartfelt thank you to.

Going board members Nancy Gioia.

Only part of us.

And Frank Lindenberg.

Mr contributions and dedication to <unk> mission.

Now at last quarter I laid out key significant strategic priorities for the company number one growth and brand awareness and number two a laser focus upon cost.

We've taken immediate action on <unk>, we made the decision to adjust our workforce in Q1, given evolving business needs productivity improvements and broader economic uncertainty, which we like many others are not immune from whilst we believe this positions us to be.

More agile and puts us in the best position for success moving forward. It was nonetheless, a difficult decision.

Jerry will speak to our coast focusing greater depth. So let me provide an update on our growth and brand awareness progress.

Peter Rawlinson: Now, we continue to make strides in growing our brand awareness, and I'm proud to say that Lucid Air was recently awarded a number of prestigious industry accolades, adding to our existing portfolio of awards, such as the 2022 MotorTrend Car of the Year. At the 2023 New York International Auto Show, Lucid Air was crowned the 2023 World Luxury Car. Lucid Air was also named to the U.S. News & World Report 2023 Best Hybrid and Electric Cars lists for Best Luxury Electric Car. Now, these awards reinforce our belief that the Lucid Air is not just the best EV in the world, but the best car available in the world today. The Lucid Air sets a new industry benchmark for range, and two versions that were the first EVs to achieve an EPA estimated range over 500mi.

Now we continue to make strides in growing our brand awareness and I'm proud to say that lucid.

Was recently awarded a number of prestigious industry accolades, adding to our existing portfolio of awards such as the 2022 motor trend car of the year.

At the 2023, New York International Ultrashape loose today was crowned the 'twenty two 'twenty three world luxury car.

Lucid Air was also named the BV U S News and we will report 2023, best hybrid and electric cars lists for best luxury electric car.

These awards reinforce our belief that the lucid is not just the best TV in the world, but the best available in the world today.

The lucid as a new industry benchmark for range and two versions that were the first evs to achieve an EPA estimated range over 500 miles.

Peter Rawlinson: And we set these new standards, thanks in part to our groundbreaking in-house developed technology, which continues to garner significant industry attention. In fact, Lucid recently received the 2023 Newsweek Powertrain Disruptor of the Year award. I cannot underscore enough how advanced our technology is, making it the best in the world on many metrics. I believe that we are years ahead of our next closest competitor, who in turn, we believe, is several years ahead of their next closest competitor. I believe that as more companies come to the realization that developing world-class powertrains is not as easy as we make it look, then we will continue to grow more interest in our patented hardware and software technology from other OEMs. And in fact, we continue to see interest from multiple parties.

And we set these new standard thanks in part to a groundbreaking enhanced development technology, which continues to garner significant industry attention.

In fact, Seleucid recently received the 2023, Newsweek powertrain disruptor of the year Award.

I believe that as more companies come to the realization of developing world class powertrain is not as easy as we make it look then we will continue to grow more interest and our patented hardware and software technology from other E M.

And in fact, we continue to see interest from multiple parties as I've said in the past whilst this is not an area, where we've put a tremendous amount of proactive attention I am pleased with the growing levels of interest and progress that we are receiving with these Oems.

Peter Rawlinson: As I've said in the past, while this is not an area where we put a tremendous amount of proactive attention, I'm pleased with the growing levels of interest and progress that we're receiving with these OEMs. So our technology and know-how is what enables us to have game-changing range, supercar levels of performance, super-fast charging, a luxurious and spacious interior, and exceptional aerodynamics. But I also want to stress that the best technology does not mean most complex nor most expensive. In fact, it's quite the opposite. I believe that our vehicles are fundamentally easier to manufacture in many ways than our competitors, and this is done through brilliant in-house engineering, a design for manufacture, and very high degrees of innovation. And we're not resting on our laurels. We're using advanced technology to drive down the costs for EVs.

So our technology and Knowhow is what enables us to have game changing range Super current levels of performance Super fast charging.

Heres, some spacious interior and exceptional aerodynamics.

But I also want to stress that the best technology does not mean, most complex nor most expensive in fact, it's quite the opposite Ali believe our vehicles are fundamentally easier to manufacture in many ways than our competitors and this is done through brilliant enhanced engineering design.

For manufacture and very high degrees of innovation.

And we're not resting on our laurels, we're using advanced technology to drive down the costs for Evs, we're moving towards a more efficient Tvs in order to decrease the battery pack sizes, which will enable lower cost vehicles, and we have much more to come with an exceptional technology roadmap.

Peter Rawlinson: We're moving towards more efficient EVs in order to decrease the battery pack sizes, which will enable lower-cost vehicles. We have much more to come with an exceptional technology roadmap, and further enhancements and innovations, pushing the envelope on what's possible, including for our mid-size platform. Now, looking more near term, Sapphire is on track for starter production later this summer in mid-September. The Lucid Air Sapphire will feature three motors, carbon ceramic brakes, an aerodynamic package, new sports seats, and track-tuned suspension for a sublime, driver-focused sporting experience. It's expected to boast a sub-two seconds nought to sixty miles an hour and a sub-four seconds nought to one hundred miles an hour, with a sub-nine seconds quarter mile at a top speed exceeding 200mi an hour.

And further enhancements and innovations pushing the envelope on what.

<unk>, including for a mid sized platform.

Now looking more near term is on track for startup production later this summer in mid September .

The lucid and sat Fi will feature three motors carbon ceramic brakes, and Arizona package.

New sports seats and tracking suspension for the blind growing Eva focused sporting experience.

It is expected to post <unk>.

Sub two seconds north of 60 miles an hour at a sub four seconds not.

Two 100 miles an hour with the sub nine second quarter model.

Speed exceeding 200 miles an hour.

Peter Rawlinson: I've been test driving Sapphire, very recently, and I'm finding it extremely satisfactory in terms of its performance. I'm also excited to announce that the Gravity SUV entered a new phase of development, with road testing having started a couple of weeks ago. Just as the Lucid Air redefined the sedan category, I believe that the Gravity SUV is positioned to do exactly the same for its corresponding SUV category. Indeed, we're taking all the best elements of Air and putting them into an SUV: game-changing range and efficiency, amazing interior space, fast charging performance, and luxury. And just last week, I was out in a Gravity on a test drive, and I'm delighted with the progress that has been made. Make no mistake, the Gravity SUV will be a true landmark.

Test driving sapphire.

Very recently and I'm finding it extremely satisfactory in terms of its performance.

I'm also excited to announce the gravity SUV entered a new phase of developments with road testing having started a couple of weeks ago, just as the lucid are redefined the sedan category I believe the gravity of CV is positioned to do exactly the same.

For its corresponding SUV category. Indeed, we're taking all of the best elements of that and putting them into an SUV game changing range and efficiency amazing interior space challenging performance and luxury.

And just last week I was out in a gravity on a test drive and Im delighted with the progress that's been made.

Make no mistake, the gravity SUV will be a true landmark.

Peter Rawlinson: And we can't wait for you to experience the Gravity SUV at an unveil later this year, at which time you'll be able to place a reservation. We think you're gonna absolutely love it. Now, in software, we continue to make big strides. We had 5 over-the-air updates in Q1, with a number of features that customers have been requesting, including CarPlay and scheduled charging. And indeed, we're working on many more exciting updates. We're listening intently to what our customers want, while simultaneously providing more in-house design features to provide our customers with whatever best-in-class experience they prefer... Now, what's more important is to emphasize that we've designed our cars to be over-the-air updatable from the very start, and I believe that there are very few that have the over-the-air capability to the same degree. It's a platform on which we can do so much more.

And we can't wait future experienced the gravity SUV as an unveil later this year at which time, you'll be able to place a reservation, we think youre going to absolutely love it.

Now in software, we continue to make big strides we have five over the air updates in Q1 with a number of features that customers have been requesting including car play and schedule charging.

And indeed, we are working on many more exciting updates.

We're listening intently to what our customers want.

Simultaneously provide a more in house design features to provide our customers with what as a best in class experience they prefer.

And what's more important is to emphasize that we've designed our cost to be over the air updates of all from the very start and I believe that there are very few that have the over the air capability to the same degree.

It's a platform on which we can do so much more.

On our last earnings call in February I spoke about customer awareness of the lucid brand.

We see brand growth happening in stages, starting with the innovators than early adopters are moving too early majority and beyond.

And we're seeing some early wins.

The number of test drives has nearly doubled in the first quarter from the fourth quarter of last year I believe that seeing is believing and once you experienced the handling the quality the performance and the interior space of Lucid Airport yourself, you will understand the award winning nature of our vehicles, we see <unk>.

Peter Rawlinson: I believe that seeing is believing, and once you experience the handling, the quality, the performance, and the interior space of Lucid Air for yourself, you'll understand the award-winning nature of our vehicles. We see test drives as the key stepping stone for customers considering the purchase of a Lucid Air. We launched our Dream Ahead Tour last month, which is designed to showcase the Lucid Air's game-changing electric vehicle performance and technology. Consumers will have the opportunity to experience and drive our three Lucid Air models, the Lucid Air Pure, the Lucid Air Touring, and Grand Touring, and they'll do that in 42 key cities right across the US. In fact, the White House promoted our Dream Ahead Tour as part of President Biden's EV Acceleration Challenge, highlighting actions to encourage EV deployment.

Drives as the key steppingstone for customers considering the purchase of a lucid.

We launched our dream of head tool last month, which is designed to showcase the lucid as game changing electric vehicle performance and technology consumers will have the opportunity to experience and drive our free lucid our models the lucid at pure solicit at touring and.

Grand touring and they will do that in 42 key cities while across the USA.

In fact, the Whitehouse promoted during the head so as part of precedent spiking EV acceleration challenges challenge.

Highlighting actions to encourage EV deployment.

Peter Rawlinson: I'm also delighted to announce that Andrea Soriani recently joined Lucid as our new head of marketing. Now, Andrea brings over 25 years of experience in luxury brands and automotive, having worked at companies such as Maserati, Ferrari, and TAG Heuer. We certainly expect the Lucid Air Sapphire and the Gravity SUV to further elevate awareness of the Lucid brand. There are many more grassroots efforts underway, capitalizing upon our incredibly passionate customers, who are also our biggest advocates. Now, there's a misconception out there that Lucid Air's starting price is far higher than it actually is.

I'm also delighted to announce that and grass Ceriani recently joined lucid as our new head of marketing.

<unk> brings over 25 years of experience in luxury brands and automotive having worked at companies such as Maserati Ferrari and tachycardia.

And we certainly expect the lucid and Sapphire and the gravity SUV.

Elevate awareness of Pellucid brand.

There are many more grassroots efforts underway capitalizing upon our incredibly passionate customers who are also our biggest advocates.

Now there is a misconception out there.

Elusive at starting price is far higher than it actually is in.

Peter Rawlinson: Many people out there really believe that the Lucid Air is a $200,000 car, when the fact is that the starting price for a Lucid Air Pure is $87,400, which we believe is a truly compelling offering in the marketplace today, and we're working on ways to achieve broader access. We started deliveries of the Lucid Airs with Stealth Appearance last month, and we'll deliver more Lucid Air Dream and Grand Tourings this quarter to customers in the EU and in Saudi Arabia. We've resolved some of the gating items, and we'll continue to focus on ramping up production of the Stealth Appearance and components for international shipments in the second quarter. We expect the Lucid Air Pure volumes in the back half to also ramp with the start of the Lucid Air Pure rear-wheel drive in North America.

Many people out there really believe the lucid.

Is it $200000 come.

When the fact is that the starting price for lucid are pure is $87400.

Which we believe is a truly compelling offering in the marketplace today and we're working on ways to achieve broader access.

We started deliveries of the lucid as with self prepared slowest months and will deliver more lucid and dream and Grand touring this quarter two customers in the EU and in Saudi Arabia.

We've resolved some of the gating items and we will continue to focus on ramping up production of dumped appearance and components for international shipments in the second quarter.

We expect the lucid a pure volumes in the back half to also ramp with it starts with the lucid pure Ria will drive in North America.

Peter Rawlinson: We're on track to produce over 10,000 vehicles in 2023, with company-wide initiatives ongoing that will enable higher volumes as market conditions allow, and Sherry will go through guidance in greater detail. So in closing, we recognize that we have more work to do, but we're making progress with our strategic priorities, and the team is totally energized. Our mission and our optimism are unchanged. We're committed to a more innovative and environmentally sustainable future, designing, building, and delivering the best EVs on the market as we expand globally and develop more exceptional vehicles, such as the Gravity SUV, which we plan to launch in 2024. I am confident that we have the most advanced technology, we have the right operational infrastructure and the know-how to deliver, and we have a track record of tenacity that will make us stronger.

We're on track to produce over 10000 vehicles in 2023.

Company wide initiatives ongoing that will enable higher volumes.

As market conditions allow and Shelly will go through guidance in greater detail.

So in closing we recognize that we have more work to do.

But we're making progress with our strategic priorities and the team is totally energized.

Our mission and our optimism are unchanged, we are committed to a more innovative and environmentally sustainable future.

Designing building and delivering the best in these on the market as we expand globally and develop more exceptional vehicles, such as the gravity SUV, which we plan to launch in 2024.

I am confident that we have the most advanced technology, we have the right operational infrastructure and the know how to deliver and we have a track record of tenacity that will make us stronger.

Peter Rawlinson: And so with that, let me turn over to Sherry for an update on our financials. Sherry?

And so with that let me turn it over to Sherry for an update on our financials Sherry.

Sherry House: Thank you, Peter, and thank you to those who are taking the time to join us today. I'd like to begin by calling out a few recent highlights. Last month, we announced that Lucid joined the United Nations Global Compact, the world's largest corporate initiative advancing sustainable and socially responsible business practices. Sustainability is an integral part of what we do every day. It's our mission, and we view this as a natural progression in our sustainability journey as a company.... Last month, we also signed the first annual agreement with the Human Resources Development Fund, or HRDF, in Saudi Arabia. This agreement operationalizes the memorandum of understanding signed with the HRDF in October 2022, and will facilitate Lucid training programs and will fund skills development and salaries for Saudi nationals who work within our organizations within Saudi Arabia.

Thank you Peter and thank you for taking the time to join US today I'd like to begin by calling out a few recent highlights.

Last month, we announced that Mr joined the United Nations Global compact the world's largest corporate initiative advancing sustainable and socially responsible business practices sustainability is an integral part of what we do every day, it's our mission and we view this as a natural progression in our sustainability journey at the company.

Last month, we also signed the first annual agreement with the human resources development time or.

Or HRD, yet and Saudi Arabia. This agreement operationalized, the memorandum of understanding signed with the HRD assay in October 2022, and will facilitate boosted training program.

Finally skills development and salaries for Saudi Nationals, who work within our organization within Saudi Arabia.

The public investment fund had connected up to many of the ministries throughout Saudi Arabia, and the <unk> agreement is another example of how those relationships and partnerships have resulted in significant economic and administrative support as we launch our international operations in the Middle East. The PAA has had been a committed investor and a strict.

Keep it partner for many years and we're very grateful for their partnership and support.

I'd also.

On the SEC investigation that was previously disclosed in December six 2021.

On April 27, 2023 FC staff SEC staff informed us.

That the SEC concluded their investigation related to the business combination between Churchill Capital Corporation for which recent legal predecessor and of Tivo, Inc, and certain projections and statements I am pleased to inform you that they do not intend to recommend any enforcement actions by the SEC against the company, which we do.

Sherry House: I'm pleased to inform you that they do not intend to recommend an enforcement action by the SEC against the company, which we view as a very positive outcome. We consider this matter closed. I also want to talk about the Form S-3 and Form S-8 that you may have seen filed today after market close. We amended the existing S-3 with the filing of a new S-3. As you'll recall, we consummated a private placement of common stock to Ayer for aggregate proceeds of $915 million in December 2022. In connection with this private placement, we agreed to register the shares with the SEC. The Form S-3 is intended to register these shares by amending the existing Form S-3 that we filed in August 2022. This action was to fulfill our contractual obligations regarding registration rights and is not a new issuance.

As a very positive outcome, we consider this matter clubs.

I also wanted to talk about the form S. Three and form S. Eight that you may have seen filed today after market close we amended the existing F. Three with a filing of a new S. Three.

As you'll recall, we consummated a private placement of common stock to <unk>.

For aggregate proceeds of $915 million in December 2022 in connection with this private placement we agreed to register the shares with the SEC. The form S. Three as intended to register these shares by amending existing form S. Three that we filed in August 2022.

<unk> was to fulfill our contractual obligation regarding registration rights and is not a new issue.

Sherry House: We also filed a Form S-8. As a reminder, the Form S-8 is primarily to register the additional shares made available under the company's second amended and restated 2021 stock incentive plan, which was approved by the stockholders at the 2023 annual meeting on 24 April. Moving to the business. As Peter mentioned, in Q1, we made the very difficult decision to streamline our workforce to better position the company for the future. We took a $22.5 million restructuring charge, which was at the lower end of the $22 to 28 million we indicated in late March, given that we were able to reallocate certain employees to other critical positions within the company. We anticipate the final part of this restructuring action, approximately $2 million, to occur in Q2. Now, turning to our 2023 Q1 financial results.

We also filed a form S. Eight as a reminder, the form S. Eight is primarily to register the additional shares made available under the company's second amended and restated 2021 stock incentive plan, which was approved by the stockholders at the 2023 annual meeting on April 24.

Moving to the business.

Their employees to other critical positions within the company.

We anticipate the final part of this restructuring action approximately $2 million to occur in the second quarter.

Now turning to our 2023 first quarter financial results, we produced 2314 vehicles, 225% year over year and delivered 1400, six vehicles up approximately 291% year over year, making Q1 2023.

Sherry House: We produced 2,314 vehicles, up 225% year-over-year, and delivered 1,406 vehicles, up approximately 291% year-over-year, making Q1 2023 our second highest performing quarter in terms of production and delivery volumes, though its performance was less than Q4 2022. As we guided last quarter, we expected Q1 to be down significantly versus Q4 2022, while we work to drive up qualified awareness of our world-class products and also work to unlock production of Stealth, the European and the Middle East variants. As Peter mentioned, we've now resolved some of those gating items and are focused on ramping these three areas further in Q2. For Q1, we recorded revenue of $149.4 million, which represented a year-over-year increase of 159%.

Our second highest performing quarter in terms of production and delivery volume that was performance was less than Q4 2022.

As we guided last quarter, we expected Q1 to be down significantly versus Q4 of 2022, while we work to drive up qualified awareness of our world class products and also work to unlock production of cell the European and the Middle East Bay area.

As Peter mentioned, we have now resolved some of those gating item and are focused on ramping these three areas further in Q2.

For Q1, we recorded revenue of $149 4 million, which represented a year over year increase of 159%.

Sherry House: Cost of revenue was $500.5 million for Q1. Our gross margin was down on a quarter-over-quarter basis. This reduction was driven by lower volumes, which we signaled would be down in our Q4 earnings call in February. As part of that $500.5 million in cost of revenue, we recorded impairment charges of approximately $227 million in Q1, related to lower of cost or net realizable value, which we also refer to as LCNRV, obsolescence, and losses from firm purchase commitments. Now, moving to operating expenses. R&D expense totaled approximately $229.8 million, up 3.8% sequentially, due in part to Gravity testing and tooling. Peter spoke about Gravity, and we're very excited that road testing has already begun.

Cost of revenue was $500 5 million for the first quarter. Our gross margin was down on a quarter over quarter basis. This reduction was driven by lower volume, which we signaled would be down in our Q4 earnings call in February .

So lesson and losses from firm purchase commitments.

Now moving to operating expenses.

Sherry House: This increase was partially offset by the execution of cost initiatives to reduce outside services as well as freight. SG&A expense was approximately $168.8 million, down 1.2% sequentially. The sequential decrease was primarily due to lower base staff compensation and IT expenses. While we are intently focused on optimizing costs, which I will talk about in a moment, it's equally important to note that we are continuing to invest behind our strategic and growth priorities, including sales and service, customer care, and the build-out of international offices and infrastructure. To that end, in Q1, we're excited to have opened five new studios and service centers....

This increase was partially offset by the execution of cost initiatives to reduce outside services as well as freight.

SG&A expense was approximately $168 8 million down one 2% sequentially. The sequential decrease was primarily due to lower based stock compensation expense.

Expenses.

While we are intently focused on optimizing optimizing costs.

To that end in the first quarter. We're excited to have opened five new studio and service centers three our international sites with one each in Montreal, Toronto in Oslo, Norway, and <unk> in the U S with one in the Washington D C area and the second in the San Francisco Bay area. This brought our total at the end of the quarter.

Sherry House: Three are international sites, with one each in Montreal, Toronto, and Oslo, Norway, and two are in the US, with one in the Washington, DC area and the second in the San Francisco Bay Area. This brought our total at the end of the quarter to 40. We'll continue to be strategic and judicious with our site expansions and are utilizing cost-effective pop-up studios with great effect to complement our studios for brand awareness. On the service side, we ended Q1 with 38 mobile vans in the fleet and 73 nationwide approved body shops to ensure high customer satisfaction as the fleet of Lucid vehicles continues to grow. Our stock-based compensation in the quarter was $55.3 million. We also recorded a non-cash expense of $40.8 million related to the change in fair value of our common stock warrant liability.

<unk> to 40 will continue to be strategic and judicious with our site expansion in our user utilizing cost effective pop up studios with great effect to complement our studios for brand awareness.

On the service side, we ended Q1 with 38 mobile vans in our fleet and 73 nationwide approved body shops.

Sure high customer satisfaction, it's a fleet of lucid vehicles continues to grow.

Our stock based compensation in the quarter was $55 3 million.

We also recorded a non cash expense of $48 million related to the change in fair value of our common stock warrant liability.

As a reminder, the noncash impact can be influenced quarter to quarter by a number of factors with one of our larger factors being listed share price at the end of the quarter.

In Q1, we achieved an adjusted EBITDA loss of $643 9 million.

Now moving to the balance sheet, we ended the quarter with just over $3 4 billion in cash.

Cash equivalents and investments with total liquidity of approximately $4 1 billion.

We're very proud of our ability to consistently sustain a strong balance sheet over time.

Sherry House: We've been able to access a variety of funding options from the $2 billion Green Convertible Bond offering at the end of 2021 to the $1.5 billion ATM and private placement at the end of 2022, alongside government support in Saudi Arabia and the large $1 billion ABL facility we put in place with a world-class banking syndicate. We'll continue to take a holistic and opportunistic approach toward funding the business, and we continue to believe that we have access to various options in debt and equity markets, as well as access to low-cost government programs. Turning to inventory.

Been able to access a variety of funding options from the 2 billion Green convertible bond offering at the end of 2021 to the $1 5 billion ATM and private placement at the end of 2022 alongside government support in Saudi Arabia, and the large $1 billion ABL facility, we put in place with a world class banking.

Syndicate.

Continue to take a holistic and opportunistic approach towards funding the business and we continue to believe that we have access to various options and debt and equity markets as well as access to low cost government programs.

Sherry House: Inventory increased sequentially due to the pace of our production volume ramp versus delivery in the quarter, raw materials associated with new vehicle variants that we are now producing, and a higher volume of in-transit inventory as we move the remainder of the components which are eligible for ocean transport to sea. Over the balance of the year, we expect a significant reduction in raw material days of inventory on hand as supply chain pressures ease somewhat, we obtain more predictability in the transportation channels, and we refine our inventory management processes and systems. Capital expenditures were $242 million in Q1. Now moving to the outlook. We are on track to produce over 10,000 vehicles in 2023, with company-wide initiatives ongoing that will enable Lucid to pivot to higher volumes as market conditions allow.

Higher volume of in transit inventory that we moved the remainder of the component which are eligible for ocean transport Tiffany.

Over the balance of the year, we expect a significant reduction in raw materials days of inventory on hand, yes supply chain pressures eased somewhat we obtain more predictability in that transportation channels, and we refine our inventory management processes and systems.

Capital expenditures for $242 million in Q1.

Now moving to the outlook.

We are on track to produce over 10000 vehicles in 2023 with company wide initiatives ongoing that will enable lucid to pivot to higher volume as market conditions allow while we typically don't provide delivery guidance. We wanted to provide some directional color to help you with your modeling.

Sherry House: While we typically don't provide delivery guidance, we wanted to provide some directional color to help you with your modeling. For Q2, we are targeting deliveries to be up sequentially. We now have Pures in all US showrooms for test drives, and we have a broader set of buildable configurations available. So it is important to note that we are still scaling those programs, and we're continuing to work on our sales and qualified awareness initiatives. We expect that Q3 production and delivery numbers will ultimately be determined by how fast we are able to ramp the Pure buildable configuration. And as for Q4, we are expecting that to be our largest quarter of the year.

We expect that Q3 production and delivery numbers will ultimately be determined by how fast we are able to ramp the pure buildable configurations and ask for Q4, we are expecting that to be our largest quarter of the year.

Sherry House: While I would again caution that there are many controllable and uncontrollable variables that can affect gross margin, I want to provide some context on our expectation for the direction of gross margin this year. In Q2, we expect improvement on higher sequential volume. We also expect to realize improvements throughout the year as a result of our cost efficiency and cost optimization efforts. Specifically, our workforce restructuring in Q1 is expected to result in annualized cost savings of approximately $91 million, geared towards cost of revenue, with the balance of the annual savings attributed to OpEx. You will start to see the full impact of this savings in Q2, plus the approximately $2 million restructuring charge that we mentioned above and which will hit in Q2. Second, we've been working a number of bill of material cost reduction efforts.

Well I would again caution that there are many controllable and uncontrollable variables that can affect gross margin I wanted to provide some context on our expectation for the direction of gross margin this year.

In the second quarter, we expect improvement on higher sequential volume.

We also expect to realize improvements throughout the year as a result of our cost efficiency and cost optimization efforts spitz.

Specifically, our workforce restructuring in the first quarter is expected to result in annualized cost savings of approximately $91 million geared towards cost of revenue with the balance of the annual savings attributed to Opex.

You will start to see the full impact of the savings in Q2, plus the approximately $2 million restructuring charge that we mentioned above which will hit in Q2.

Third we have restructured a number of our freight contracts and we believe that will continue to see improvement in this area over time.

Lastly, we're working diligently to reduce the days outstanding of our raw material inventory over the past 18 months, we upheld additional inventory due to concerns on part availability and logistics slowdown and in some cases banking apart due to tooling capacity planning. However, this excess inventory has.

Significant storage costs.

It uses our ability to benefit from commodity price reductions that are now occurring and also increases risk for obsolescence is some parts expire or are updated due to engineering changes. We believe that there is significant savings as we unwind some of this excess inventory and simultaneously refine our tracking and inventory systems. These actions will be.

<unk> reduced our working capital and our cost of revenue.

<unk>, we signed our first emission credit deal in Q4 of 2022.

Regarding our liquidity position, we ended the quarter with approximately $4 $1 billion in total liquidity, which we believe provides sufficient capital at least into the second quarter of 2024.

Sherry House: Moving to CapEx, we expect capital expenditures for 2023 to be between $1.4 and 1.6 billion, reflecting some efficiencies which were identified over the last quarter, and deferrals in our capital outlay. CapEx will support our continued growth objectives as we strategically invest in manufacturing capacity and capabilities, our retail studios and service center capabilities across the globe, and development of different products and technologies, and other areas supporting growth of Lucid's business. Phase two of the factory build-out in Arizona is progressing, and we believe will benefit from a number of cost efficiencies, including moving logistics more fully on site and later bringing stamping in-house.

Capex will support our continued growth objectives, as we strategically invest in manufacturing capacity and capabilities are retail studios and service center capabilities across the globe and development of different products and technology.

And other area of supporting growth of lucid business.

Phase two of the factory build out in Arizona is progressing and we believe will benefit from a number of cost efficiencies, including movie logistics more fully on site and later, bringing stamping in house.

Sherry House: We're also looking at bringing phase two online in stages on a shop-by-shop basis, which we expect will allow us to to defer some capital expenditures and associated depreciation expense until 2024, without a delay in the estimated Gravity timing. With regard to our manufacturing progress in the Middle East, the first semi-knockdown, also referred to as SKD facility in Saudi Arabia, with capacity of up to 5,000 units, is nearly complete, and equipment and installation will begin next month. We had a ribbon cutting for our SKD building in Casa Grande, Arizona, trained up staff that came over from the Middle East, and we expect to be operational in Saudi Arabia in Q3. This is very exciting and exactly where we want to be. In closing, I want to express my gratitude to the entire Lucid team, as well as our investors, partners, suppliers, and customers.

We're also looking at bringing phase two online in stages on a shop by shop basis, which we expect will allow us to defer some capital expenditures and associated depreciation expense until 2024 without a delay and the estimated gravity timing.

With regard to our manufacturing progress and the middle East.

Semi knockdown also referred to as FTE facility in Saudi Arabia with capacity of up to 5000 unit is nearly complete and equipment and installation will begin next month.

We had a ribbon cutting for our SPD building in Casa Grande, Arizona trained staff that came over from the Middle East and we expect to be operational in Saudi Arabia. In Q3. This is very exciting and exactly where we want to be in.

In closing I want to express my gratitude to the entire list of team if all of our investors partners suppliers and customers with your support and commitment. We are several steps closer to realizing an environmentally sustainable future with that let me turn it back to me to get to your question Maynard.

Maynard Um: Thanks, Sherry. We'll now start the Q&A portion of the call. We'll start by taking Q&A from our retail investors through the Safe platform, very important constituency of our shareholder base, followed by live analyst questions. So our first retail question is: Peter, you have said, "I'd just like to underpromise and like to overdeliver." You promised 20,000 deliveries in 2022 and 49,000 in 2023. We got 4,022, and guidance is just 10 to 14 for 2023. When will we see underpromising and overdelivering? It has been the complete opposite so far.

Thanks, Jerry will now start the Q&A portion of the call. We will start by taking Q&A from retail investors through the same platform very important constituency of our shareholder base followed by life analyst questions. So our first retail question is Peter <unk> said, I'd, just like to under promise and like to over deliver you promised 20000 delivery.

In 2022% and 49000 in 2023, we got 4022 and guidance is just 10% to 14 for 23 when will we see under promising and over delivering it has been the complete opposite so far thank you might note.

Peter Rawlinson: Thank you, Maynard. I'd just like to say, start by saying to everyone, I acknowledge and empathize with the frustration, and I take this very seriously. You know, underpromising and overdelivering isn't about setting low standards or being complacent. It's about being realistic and proactive and then going above and beyond to try to exceed expectations. And we as a management team, we take this very, very seriously. Back in 2021, hardly anyone could have foreseen the disruption to the logistics and supply chain that we saw in 2022, that affected the whole industry. It wasn't just Lucid; it was a bunch of other car companies. Very established names were affected the same way.

Just wanted to start by saying to everyone acknowledges <unk>.

With the frustration.

Take this very seriously.

Under promising and over delivering isn't dependent setting low standards are being complacent.

I'm being realistic.

And proactive.

And then going above and beyond.

To try to exceed expectations and we have a management team we've taken very very seriously.

Back in 'twenty one.

And one could have foreseen.

Disruption to the logistics and supply chain that we saw in 2022 that affected the whole industry. It wasn't just lucid. It was a bunch of old account companies very established names were affected the same way.

I was proud of the team that were non consenting.

<unk> III to resolve issues around 22 and is a huge team effort we did that.

And now we are facing.

The challenges in the market and macroeconomic effects and high interest rates, which do impact.

We've seen the withdrawal of the.

The preclinical and tax incentive at the end.

2022, and these are Frank which was very difficult to.

Predict when we don't we do so with absolute.

Honesty and integrity to the very best that we have.

April two estimates and I truly empathize with shareholders, who are here with us through the loan book.

But nevertheless.

<unk> believes that this is a technology.

So the technology that we've developed is unique it's hugely differentiating it will enable us to push the prince of calms down because we've got more efficiency, which means we can go further with less pantry energy, which means we can go the same distance with anyone else with small of an increase in batteries at the high.

Peter Rawlinson: It will enable us to push the price of cars down, because we've got more efficiency, which means we can go further with less battery energy, which means we can go the same distance as anyone else with smaller batteries, and batteries are the high-cost item, which gives us an advantage in terms of potential gross margin, and I believe this will come to bear in the future. We've also got compelling products coming. We've got Sapphire, which is gonna be a halo product for the brand and help grow brand awareness. As we know, that is a limiting factor right now. And then we've got the big one for production coming next year and on track, the Gravity, which I think is gonna be a seminal product.

<unk> cost which gives us.

An advantage in terms of potential gross margin and I believe this will come to bear.

In the future and we've also got a compelling products coming we've got <unk>, which is going to be a CLO product halo product for the brand and help grow brand awareness.

Sure.

Yes.

We noted that as a limiting factor right now and then we've got the big one for production coming next year and on track the gravity, which I think is going to be.

Peter Rawlinson: So I temper this with unerring optimism for the future, for Lucid.

Seminal product so a.

Temper this was.

Optimism for the future.

<unk>.

Thanks, Peter the second question is would you consider launching the gravity with a more price accessible trims first to attract more buyers considering the current.

Economy conditions.

Sherry House: Yeah. Firstly, I would say that from a principle perspective, and given where we are in the lifecycle maturity of our company, we do think it's important to balance between volume and price, and not to optimize one to the detriment of the other. Your question is timely, because we have been studying this topic, looking at launch cadence, the time between launches, and the price elasticity curves, and where the intersection of those end up optimizing for the company. It's still a little bit early for us to comment on our intended approach, but what I can say is that we've already sourced about 80% of the components on the Gravity. It's going really well, and we've been able to stay within our cost targets, which will ultimately give us maximum flexibility to react to dynamic market conditions over time.

Yes, Firstly I would say that from a principal perspective, and given where we are in our lifecycle maturity of our company. We do think it's important that balance between volume and price.

To optimize one to the detriment of the other question is timely because we have been studying this capex looking at launch cadence the time between launches and the price elasticity curve and where the intersection of those and optimizing for the company. It's still a little bit early for us to comment on our intended approach, but what I can say is.

We've already sourced about 80% of the components in the gravity, it's going really well and we've been able to stay within our cost targets, which will ultimately give us maximum flexibility to react to dynamic market conditions over time. We're also taking lessons learned from the air and looking how we shrink the amount of time between trim lawn.

<unk>, hence getting all buildable configurations into all regions out to the public faster and finally, we know it's important that customers are aware of the full price spectrum for the vehicle. We found that a lot of people simply don't know that we offer in the case of an error a vehicle with a starting price of 87000 as Peter mentioned a few more.

<unk> ago, and hence awareness is something that we continue to focus on so we'll keep you posted as we can share more perhaps at the gravity unveil later this year and in 2024 as we approach startup production.

Maynard Um: Thanks, Tawanda. Can we turn it over to phone questions, please?

Thanks.

And we turn it over to our phone questions. Please.

Operator: Sure. Ladies and gentlemen, as a reminder to ask the question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by for our first question. Our first question comes from the line of Chris Pierce with Needham and Company. Your line is open.

Sure, Ladies and gentlemen, as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

Please standby for our first question.

Our first question comes from the line of Chris peers with Needham <unk> Company. Your line is open.

Hey, good afternoon, just a clarification did I hear you right.

Drugs are up to <unk> 23 versus the fourth quarter of last year and if that is the case I was just curious what was driving that given the dream of head toward launched in the second quarter I believe.

Peter Rawlinson: That is correct. It's been a whole holistic series of activities that we've initiated, which collectively will form the basis for our forthcoming marketing strategy. It's not just been the Dream Ahead tour. That's bringing, garnering a lot of test drives. But we've been much more proactive, both at studio level through initiatives that we've undertaken from headquarters here, to get more people in the car. People are blown away by the sportiness, the driver engagement, the refinement, the comfort of driving a Lucid Air. People who have never driven EVs before are attracted to this. So it's all about getting people behind the wheel to experience. Very few people will actually buy a car without experiencing a test drive, so I see this as a conduit, a sort of gateway to a future purchase and ownership experience.

That is correct, it's been a whole holistic series of activities that we have.

Initiate sage, which collectively will form.

The the basis for our.

Forthcoming marketing strategy, it's not just been the degree and the hand tool, that's bringing garnering a losses transcribes, but we'd be much more <unk>.

<unk> studio level through initiatives that we have.

Undertaken from from headquarters here.

Get more people in Macau people blew way Budd spookiness, the growing engagements to restoring the comforts are driving elucidate people, who have never driven evs before are attracted to this so it's all about getting people behind the wheel to experience the risk.

People will actually buy a car without experiencing a test drive so I see this as a conduit.

Sort of a gateway to a future purchase and ownership experience.

Chris Pierce: Okay, and then just lastly for me. With the cars available on the website right now, cars you have in inventory, is there something you're doing to kind of, like, coincides with the test drives or the Dream Ahead to kind of work through that inventory? Or is it just about whatever specifications or configurations a customer wants, you'll build that, you know, based on whatever they order? I just kind of want to get a sense of... I know you're not profiting time or price, but how you're kind of thinking about, you know, those two dynamics.

Yeah.

Okay, and then just lastly for me with the cars available on the website right on the cars. We have in inventory is there something you're doing to kind of coincide with the test drives of the dream.

Through that inventory or is it just about whatever specifications or configuration as a customer once youll build out.

Just on whatever they order just kind of want to get sense of.

I know you are not appropriately priced, but how youre kind of thinking about those two dynamics.

Peter Rawlinson: Well, we've got. We're reconfiguring the website to make the customer experience more seamless, more straightforward. We're showing the cars that we have currently available that can be spec'd on that website. And of course, we're building to order. We've recently introduced the Stealth, the dark side look of the Lucid Air, and that's really attracting a very different audience. It's a very different vibe, a more youthful appearance to that car, and it's a very handsome manifestation of the range. So we're doing all those things. We've got increasing volumes of Touring out there. We've got Tourings in the studio to experience and test drives are undergoing.

Well we of course, we are reconfiguring the the.

The website to make the customer experience.

A more seamless more straightforward.

We're showing the tons that we have currently available.

Can.

Ken can be spent on that web sites and of course, we're building to order. We've recently introduced the <unk> Luke.

<unk>.

And Thats.

We are currently in a very different audiences are very different design, a more youthful appearance to that call.

Yes.

It's a very handsome manifestation of the range. So we're doing all those things we've got.

Increasing volumes of Turing.

Turing <unk> experience and test drugs are undergoing and of course, we're bringing more and more affordable versions of it.

Peter Rawlinson: Of course, we're bringing more and more affordable versions of Air Pure, the Air Pure coming out, and later this year, we'll be bringing the rear-wheel-drive variant of the Air Pure out. Remember that although that many people believe that a Lucid Air is a $200,000 car, it actually starts at $87,400, and we need to really dispel this myth.

Pure the pure coming out later this year, we will be bringing the rear wheel drive variance of the pure <unk> remember that's a low that many people believe the elusive as a $200000.

It actually starts at $87400, we need to.

Really disciplined manner.

Operator: Thank you. Please stand by for our next question. Our next question comes from the line of John Murphy with Bank of America. Your line is open.

Thank you.

Please standby for our next question.

Okay.

Our next question comes from the line of John Murphy with Bank of America. Your line is open.

Sherry House: Good afternoon, guys. Peter, in your comments, there... It sounded like you were alluding to potentially licensing or selling the powertrain technology, and it sounded like that was actually, you know, pretty far along, potentially with some customers. I'm just curious if you can comment on that or give us any other color as to what those comments meant.

Hi, good afternoon guys.

Yeah.

Peter in your in your comments.

It sounded like you were you.

Alluding to potentially licensing or selling the powertrain technology and it sounded like that was actually.

Pretty far along potentially with some customers I'm just curious if you can comment on that or give us any other color as to what those comments meant.

Peter Rawlinson: No, John, I'm not in a position to disclose anything tangible at this juncture, as I said earlier, but we continue to receive incoming interest. And I think there's a growing awareness that we have something very, very special here in terms of performance and efficiency. And if you can have something more efficient, you carry less batteries, so you're burdened with less battery weight, and this makes the car really more agile and more sporty, more a driver-focused experience. So the technology we have today is eminently suitable for higher performance vehicles with our drive units of 600 to 670 horsepower capability.

John I'm not in a position to disclose anything tangible at this juncture.

As I said on the.

Earlier, but we continue to receive incoming interest and I think I think there is a growing awareness that we have something very very special year in terms of performance and efficiency and if you can have something more efficient you can be less.

So your burden with free weights and this makes the car.

Really more agile and more sports you more of a drawing the focused experience.

Knowledge that we have today.

Eminently suitable for higher performance vehicles with our drive units of 600 to 670 horsepower capability when we develop low.

Peter Rawlinson: When we develop lower power units, more affordable units for a mid-sized platform in a few years' time, it's evident that that technology would be, you know, more appropriate for a more mainstream manufacturers. We've not proactively gone out to seek any engagement in this arena, but we've had multiple OEMs come speak to us, and we are in dialogue with several right now. And that's all I really can disclose at this juncture.

And it's more affordable units for mid size platform in a few years' time.

Does that technology would be.

More appropriate for more mainstream manufacturers we've lost.

Actively going out to seek any engagement in this arena, but we have multiple Oems come speak to us and we are in dialogue with central link now.

Thats all I really can disclose at this juncture.

John Murphy: Okay. And then, Sherry, maybe just two quick financials questions for you.

Okay, and then maybe just two quick financial questions for you the $411 million of finished finished goods inventory would indicate there is almost 4000.

Sherry House: Sure.

John Murphy: The $411 million of finished, finished goods inventory would indicate there's almost 4,000, you know, in stock. Is that, you know, about riders or something else in that finished goods inventory that would be considered that wouldn't be a completed vehicle?

Units.

In stock is that about writers or something else in that finished goods inventory that would.

We consider that wouldnt be complete vehicle.

Sherry House: Yeah, that is a little bit misleading, so I'm glad you asked the question, John. The finished goods inventory has the inventory that is available for sale, but it also includes our test fleet vehicles, loaner vehicles that we have in order to give optimal customer care experiences, you know, for the end customer, showroom cars as well. These are vehicles that ultimately, after, you know, a few thousand miles on them, or perhaps no miles on them, in the case of showroom cars or media cars, that we will ultimately sell, but they're not available for sale today. So it's important to differentiate between available for sale today and finished good inventory that is being used for other customer-facing purposes.

It is a little bit misleading. So I'm glad you asked the question John .

The finished goods inventory has the inventory that is available for sale, but it also includes our test fleet.

Vehicles loaner vehicles that we have in order to give optimal customer care experiences for the end customer showroom cars as well. These are vehicles that ultimately after a few thousand miles on them or perhaps no miles on them in the case of showroom cars or media cars that we will ultimately sell but they're not available for sale today.

So it's important to differentiate between available for sale today and finished good inventory that is being used for other customer facing purposes.

John Murphy: Okay, and then just the other financial question. I mean, there's a lot going on right now, so I haven't had a chance to completely go through that S-3, but it sure looks like-

Okay, and then just the other financial question I mean it is.

A lot going on right now so I haven't had a chance to completely go through that is three but it sure looks like.

Sherry House: Sure.

John Murphy: A mixed shelf. I mean, is there the availability for you to raise material amounts of capital under that shelf that's been filed? Or, I mean, I'm sorry, once again, I haven't gone through the details there, but it looks at first blush like there's a lot of room for you to raise capital.

A mixed shelf is there the availability for you to raise material amounts of capital under that that shelf, that's been filed or I'm, sorry, once again I haven't gone through the details there, but it looks at first blush like there's a lot of room for you to raise capital.

Well again this is not a new issue and this is really just a contractual obligation that was associated with the subscription agreement that we did with the Pis back in December of 2022.

John Murphy: Okay. Great. Thank you very much, guys.

Okay.

Great. Thank you very much guys.

Sherry House: Okay.

Peter Rawlinson: Thank you, John.

Okay. Thank you Tom.

Operator: Thank you. Please stand by for our next question. Our next question comes from the line of Andrea Shepard with Cantor Fitzgerald. Your line is open.

Thank you.

Please standby for our next question.

Our next question comes from the line of Andrew Shepherd with Cantor Fitzgerald. Your line is open.

Andres Sheppard: Hi, good afternoon, everyone. Congrats on the quarter, and thanks for taking our questions. Peter, I wanted to perhaps follow up from the one of the last questions in terms of the licensing. You know, I realize you're not providing additional color on that. I'm seeing if maybe I can ask the question slightly differently. You know, given the slight reduction in the production guidance for this year and gross margins where they are, I guess, what is the reluctance to introduce this as a new revenue stream? You know, you have the proof of concept with the Formula E series. You've, you know, continued to talk about the technology and how superior it is relative to competitors. So I'm just trying to understand, you know, why not introduce this sooner rather than later? Thank you.

Hi, good afternoon, everyone. Congrats on the quarter and thanks for taking our questions.

Peter I wanted to perhaps follow up from the one of the last questions in terms of the licensing I realize you're not providing additional color on that and see if I can maybe I can ask the question.

Slightly differently given the slight reduction in the production guidance for this year in gross margins where they are.

I guess what is the reluctance to to introduce this is a new revenue stream you have the proof of concept with the Formula E series.

Continue to talk about the technology and how our superior in Israel.

So I'm just trying to understand why not introduce this sooner rather than later thank you.

Peter Rawlinson: Oh, well, there's no reluctance on our part. We're very open and engaged. You know, we have to prioritize here. Last year, my laser focus was working crazy hours in the factory. That's what I was doing, crazy hours to resolve logistics and supply chain issues. My laser focus right now is amplifying for brand awareness and creating a cohesive strategy with Andrea to market this brand and make many more people aware that we've got the best car on the planet. Our tech roadmap, I believe is extraordinary. We will be launching progressively more affordable versions of our tech, which would be appropriate for different OEs in different parts of the market. And, you know, so there's nothing tangible to announce right now.

There's no reluctance on our part we're very open and engaged.

We have we have to prioritize here last year My laser focus was working crazy hours in the factory, that's what I was doing crazy hours to resolve logistics and supply chain issues.

Laser focus right now is amplifying for brand awareness.

I encourage you to adhesive strategy with Andrea to markedly splendor make many more people aware that we've got the best on the planet.

Second roadmap I believe is extraordinary.

We will be launching progressively more affordable solutions of our tech, which would be approved for different Oems different cost structure of the markets.

So.

There is nothing tangible to announce right now we're in dialogue with third.

Peter Rawlinson: We are in dialogue with third parties, and you know, I will make an appropriate announcement should that bear fruit. But there's no reluctance on our part. We're open and receptive, but it's... I really have to focus on our products right now rather than proactively chasing licensing.

Policies.

Well.

I will make them approved personnel.

Should bear.

Bear fruit, but theres no reluctance on our part we're open and receptive, but I really have to focus.

Our products right now relevant proactively chasing licensing.

Andres Sheppard: Got it. Okay, understood. Thanks, Peter.

Got it okay understood. Thanks, Peter and maybe as a quick follow up.

Peter Rawlinson: Thank you.

Andres Sheppard: Maybe as a quick follow-up, was wondering if you can perhaps just give us any color on the deliveries starting to Saudi Arabia, you know, as part of the major agreements. There was a brief comment there from Sherry at the end. Sorry if I missed it. Just wondering, maybe you can elaborate a bit further, you know, just in terms of how you see those progressing. Yeah. Thanks.

I was wondering if you could perhaps just give us any color on the deliveries starting to <unk>.

Saudi Arabia as part of the major agreements there was a brief comment there from sharing the and sorry, if I missed it just wondering if maybe you can elaborate a bit further.

Just in terms of how you see those progressing yes, yes.

Sherry House: Yeah. So I think you're referring to the Ministry of Finance agreement that we have, in which they have committed up to 50,000, maybe up to a total, with the option for another 50,000, up to a total of 100,000 units over the next 10 years. We are progressing those conversations. We are in active dialogue. We're in the process of building out, the specs for the first vehicles that they want to receive later this year. So that is actively ongoing.

Yes, so I think youre, referring to the Ministry of Finance agreement that we have in <unk>.

Which they have committed up to 50000, maybe up to a total with the option for another 50000 up to a total of 100000 units over the next 10 years. We are progressing those conversations we are in active dialogues. We are in the process of building out.

For the first vehicles that they want to receive later this year. So that is actively ongoing.

Andres Sheppard: Okay. Thanks, guys. Congrats again. I'll pass it on. Thank you.

Okay. Thanks, guys. Congrats again I'll pass it on thank you. Thank.

Peter Rawlinson: Thank you.

Sherry House: Thank you.

Thank you. Thank you.

Operator: Thank you. Please stand by for our next question. Our next question comes from the line of Steven Fox with Fox Advisors. The line is open.

Thank you please standby for our next question.

Okay.

Our next question comes from the line of Steven Fox with Fox Advisors. Your line is open.

Steven Fox: Hi, good afternoon. Two questions, if I could. First of all, the change in guidance in terms of going from 10 to 14,000 to 10,000. How much of that would you say is related to just some concerns on the macro or your ability to build brand versus just factory production issues? Any details you can provide on that, and then I have a follow-up.

Hi, good afternoon, two questions if I could first of all the change in guidance in terms of going from 10 to 14000.

10000, how.

Peter Rawlinson: Yeah, I think it's, it's important as we take a very responsible, perspective of this, that we match the cars that we build, the production volumes, with the cars that we deliver, and, and that's the balancing act. Certainly, we believe that, the macroeconomics are playing a part in, the deliveries right now. We also believe that, the, the interest rates play a part, even for a high-end product, even in this part of the market, interest rates do, provide a, a headwind. But we've got initiatives within the company to turn the faucets on to up the volumes should those, market conditions improve. And, you know, that we're ready to scale up pending that.

Yes, I think it's.

So as we take a very responsible perspectives of this.

We match the cars that we build the production volumes.

The comps that we deliver.

And that's the balancing act.

Certainly we believe.

The macroeconomics are playing a part in.

The deliveries went now we also believe that.

The interest rates play apart even for high end products, even in this part of the market interest rates too.

Provider.

A headwind, but we've got initiatives within the company consumed the sausage one to up to the all news should those are market conditions improve and we are ready to scale up pending that.

Peter Rawlinson: As we amplify brand awareness, and also I come back to this misconception, which seems to be out there, that, yes, people believe it's a $200,000 car, and it's actually the entry-level price is $87,400. It's probably conceivable that people think of it as a $200,000 car because it's so amazing. But actually, it's much more attainable, and we need to spread that word as well.

And also as we amplify brand awareness and also I come back to this misconception.

Seems to be out there.

Yes people believe it is a 200000 billed accounts.

Entry level price is 87.

$400 it appropriately conceivable that people think of it as a 200000 telecom because it's amazing, but actually it's much more attainable and we need to spread that was as well.

Steven Fox: Great, that's helpful. And then just in terms of, you mentioned maybe bringing phase two online in stages, can you just talk to sort of the triggering point for that and whether... I don't know whether if you focus on certain stages besides the CapEx efficiencies, it helps in any other ways or in terms of how the vehicle production goes from a cost standpoint and your ability to react to changes in demand. Thank you.

Great. That's helpful. And then just in terms of you mentioned maybe.

Bringing phase III online in stages can you just talk to sort of the triggering point for that and whether I don't know, whether if you focus on certain stages. Besides the capex efficiencies that helps.

Any other ways.

In terms of how you how the vehicle production goes from a cost standpoint, and your ability to react to changes in demand. Thank you.

Sherry House: Yeah, yeah. No, I think it's an important question. So we're in the process of adding significant, I think, 2.85 million sq ft additional in the Casa Grande, Arizona facilities, and it's a number of our shops are being either expanded or new buildings. And what we're finding is that as we look at our production plans, that we have the ability to continue to eke out a bit more volume out of some of our existing machinery, tooling, equipment in the existing shops for a bit longer, which would allow us to take certain of the shops, you know, like stamping, perhaps paint, and potentially delay the onboarding of those, hence you will delay the depreciation expense that accompanies that particular machinery, tooling, equipment in facility to a little bit longer.

Yeah, Yeah, no I think it's an important question. So we're in the process of.

Adding significant I think $2 eight 5 million additional square feet in Arizona, Casa Grande facility, if and it's a number of our shops are being either expanded or new building and what we're finding is that as we look at our production plan that we have.

Have the ability to continue to eke out a bit more volume out of some of our existing machinery tooling equipment and the existing shop for a bit longer which would allow us to take certain of the shops.

Campaign.

Pain and potentially delay the onboarding of those hence you will delay the depreciation expense that accompanies that particular machinery tooling equipment and facility to a little bit longer. The other thing. We're doing is we're really carefully looking at all of the equipment that's going in each of the shop.

Sherry House: The other thing we're doing is we're really carefully looking at all of the equipment that's going in each of these shops, and to the extent that there is volume equipment that could potentially be delayed, like the addition of additional robots, for instance, we're looking to put those in place and activate those as they're needed versus doing it all at one time. The other thing that's really unique about what we're doing in the general assembly hall is that we're going to have the ability to dial up the jobs per hour between a few different jobs per hour points.

And to the extent that there is volume equipment that could potentially.

Chile be delayed like the addition of additional.

Robots for instance, we're looking to put those in place and activate those as they're needed versus doing it all at one time. The other thing Thats really unique about what we're doing in the General Assembly Hall is that we're going to have the ability to dial up the jobs per hour between a few different job.

Sherry House: So it's not a unit step increase in the direct labor and bringing on the equipment, but instead, we'll have the ability to dial that up gradually, and we're going to work to be really thoughtful about that so we can minimize depreciation expense and also the just efficiency of the workforce as well.

Prowler points, so it's not a unit step.

Increase in direct labor and bringing on the equipment, but instead will have the ability to dial that up gradually and Brooklyn of work to be really thoughtful about that so we can minimize depreciation expense and also the amount.

Just efficiency of the workforce as well.

Steven Fox: Great. That's all very helpful. Appreciate the answers. Thank you.

Great. That's all very helpful. I appreciate the answers thank you.

Operator: Thank you. Please stand by for our next question. Our next question comes from the line of Doug Detten with Evercore. Your line is open.

Thank you please standby for our next question.

Our next question comes from the line of Doug <unk> with Evercore. Your line is open.

Doug Detten: Thank you. Hi, Peter, Sherry, and team. So, you know, looking at ASPs, they were about $106,000 per vehicle this quarter. So that either implies some heavy discounting, you know, below MSRP or a lot of Pure trim. Can you maybe speak a little more to that and, and how we can think about that going forward?

Thank you hi, Peter sharing team so looking at Asps there were about 106000 per vehicle this quarter.

These are implied some heavy discounting below MSRP or a lot of your trend could you maybe speak a little more to that and then how we can think about that going forward.

Sherry House: Yeah. So I think that when you think about the mix, as it starts to differ from 2022, you're starting to have more dominance in trims other than Grand Touring and Dream, right? So now you start having more prevalence of Touring. We're starting to get Pure in there. But as you go forward through the balance of this year, there is going to continue to be healthy mix because some of the higher trim levels are going to start going and are going to the Middle East and Europe. And so you're going to start to see the exposure of those products, those higher-end products, in those regions, while you simultaneously start to ramp Pure in the US and then later send that overseas as you're exiting the year and into 2024. So you're going to continue to see this mix of, of trims.

Sure there is going to continue to be healthy mix because some of the higher trim levels are going to start going in or going to the middle East and Europe , and so youre going to start to see the exposure of those products with higher end products in those regions. While you simultaneously start to ramp here in the U S.

And then later said that overseas as you're exiting the year and into 2024, so you're going to continue to see the mix of trends. We did have a 7500 kind of continuation program.

Sherry House: We did have a 7,500 kind of continuation program that lasted the first couple of months of the year, couple- few months of the year, and that also is reflected in the revenue numbers that you do see.

Laughter. The first couple of months of the year couple of few months of the year and that also is reflected in the revenue numbers that you do see.

Doug Detten: Okay. It's safe to say that the $7,500 continuation program will come off going forward throughout 2023?

Okay, and it's safe to say that $7500 continuation program will come off going forward throughout 'twenty three.

Sherry House: ... It did come off. Yes.

It did come off yes.

Yes, Okay and then just one quick modeling question for you Sherry on the LC and RV cadence is there any sort of guide on how we might see those charges hit and the remainder of this year and the next just so that we can lay.

Laid out cleanly in the model and understand how those might affect the bottom line.

Sherry House: Yeah, I know it's a great question. The LCNRV charges have been really kind of between $180 million, $200-ish million, $220 million, the last three quarters. So we've kind of seen it basically leveling off. We do expect to see an improvement of that over time, because part of the charge is associated with the inventory we have on hand. Given my comments, that we're looking to reduce the days outstanding inventory on hand and not bringing fresh inventory in, in terms of raw material, which, and also work in process, finished goods, we would expect that to start to taper down. So as you're looking forward this year, we are expecting some, some reduction in that over time.

Yeah, no. It's a great question, the LC and RV charges have been really.

Hi.

Queen $180 million 200 ish million to $20 million. The last three quarters that we've kind of seen it basically leveling off we do expect to see an improvement of that over time, because part of the charge associated with the inventory we have on hand, given my comments that we're looking.

To reduce the days outstanding of inventory on hand, and not bringing fresh inventory and in terms of raw material, which and also work in process finished goods.

We would expect that to start to taper down so as youre looking forward. This year, we are expecting some some reduction in that over time. The other thing that we have had in some impairments there.

Sherry House: The other thing that we have had in some impairments there is we had mentioned some obsolescence, we had mentioned some scrap. I had mentioned the fact that we have some different activities ongoing, to really address that in a more proactive way. And that's partly us improving our systems. It's partly us not having to hold as much inventory on a precautionary basis, because we're not experiencing the same supply chain issues and the same COVID issues that we had in the past. So bringing down that inventory, making sure it's more current inventory, will also improve the situation throughout the year.

You had mentioned some obsolescence we had mentioned some scrap I had mentioned the fact that we have some different activities ongoing to really address that in a more proactive way.

It's partly us improving our systems, it's partly if not having to hold as much inventory on a precautionary basis, because we're not experiencing the same supply chain issues and the same COVID-19 issues that we had in the past so bringing down that inventory, making sure. It's more current inventory will also improve the situation throughout the year.

<unk>.

Doug Detten: Understood. Thank you for the detailed answer.

Understood. Thank you for the detail and detailed answer.

Sherry House: Of course. Thank you.

Of course, thank you.

Operator: Please stand by for our next question. Our next question comes from the line of Tobias Viess with Redburn. Your line is open.

Please standby for our next question.

Our next question comes from the line of Tobias <unk> with Redburn. Your line is open.

Hi, Thanks for taking my question.

If we exclude the noncash inventory write down charge your Cogs per unit only improved by about 8% versus the fourth quarter of 2022, which likely reflects the rotation towards lower content pure <unk>, but also some of the.

Discounts that you just mentioned are you able to provide some data points for analysts and investors on the work that's being done internally to remove the costs from the vehicle.

Sherry House: Yeah, absolutely. I mentioned a few of them in my prepared remarks, but let me provide some additional context. So some of the work that's being done is on Bill of Material cost down. Now, they have two different flavors. One part is commercial agreements that we have with our suppliers in improving piece price costs. Some of that happens, you know, as you're negotiating additional volume with them on new programs, they become more open to negotiating down piece price on current programs. So that's part of the effect. The other effect is when we are doing engineering changes that have a corresponding cost increase as well.

Yeah, absolutely I've mentioned, a few of them in my prepared remarks.

Let me provide some additional context.

Youre negotiating additional.

Volume with them on new programs, they become more open to negotiating down piece price on current programs. So that's part of the effect. The other effect is when we are doing engineering changes that have a corresponding cost increase as well. So bom cost is certainly something that we are expecting to see throughout the year.

Sherry House: So BOM cost is certainly something that we are expecting to see throughout the year, though you have to remember, when you've got inventory on hand and you're bringing new lower cost parts in, you gotta go through that inventory first. That's why I guided earlier that you're gonna start to see the impact of that more towards the end of the year and also as you get into 2024, because some of these items we know will actually take effect in 2024. Some of the other areas where we've been seeing some really good progress has been in freight, and that'll start to show up more in Q2 and Q3 as we've renegotiated some of our contracts there, and also, we're seeing improvements in manufacturing overhead as well.

Now you have to remember when you've got inventory on hand, and you are bringing new lower cost parts and you got to go through that inventory. One that's why I guided earlier that youre going to start to see the impact of that more towards the end of the year and also as you get into 2024, because some of these items, we know will actually take effect in 2024.

Some of the other areas, where we've been seeing some really good progress has been in freight and that will start to show up more in Q2 and Q3.

We've renegotiated some of our contracts there and also we're seeing improvements in manufacturing overhead as well and then as a result of the workforce reduction.

Sherry House: And then, as a result of the workforce reduction, there's improvements that you're gonna start seeing. More of it's gonna be in cost to revenues than in OpEx, and you're gonna start seeing that in Q2. So these are different cost down initiatives that will start flowing through the growth margin. Then, of course, we talked about the greenhouse gas credits, the Inflation Reduction Act, some of those things, some of the trims that we have, those will start hitting a little bit later in the year, is our expectation.

There is improvement that youre going to start seeing more of it is going to be in cost of revenues and an opex you are going to start seeing that in Q2. So these are different cost down initiatives that will start flowing through the gross margin. Then of course, we talked about greenhouse gas credits the inflation reduction Act.

Some of those things some of the trends that we have those will start hitting a little bit later in the year is our expectation.

Tobias Beith: Okay, cool. Thank you. And I guess my second question is that the Lucid Air began production roughly one year after beta prototyping testing began, and clearly COVID impacted some of the start of production timeline. But shouldn't analysts and investors use the same timeline to conclude that the Gravity SUV begins production in roughly 9 to 12 months from now, given your announcement that this nameplate has just begun road testing?

Okay cool. Thank you I guess my second question is that.

The looser that began production roughly one year off the base of prototyping test testing began and clearly COVID-19 impacted some at the start of production timeline.

Peter Rawlinson: All I can say is that, we've got to get the product absolutely right. There is a gestation period between data and start of production. There's also a nomenclature issue here. We're on target for start of production late 2024 for the Gravity.

Okay.

I can say is that.

We've got to get the prototypes <unk> adjust.

Just question period between.

<unk>.

Data.

Production. There is also a nomenclature issue here we are on target to start production late 2000 <unk> full.

Grant between.

Tobias Beith: Okay, cool. Well, but perhaps maybe could you outline exactly what needs to happen for the between now and the start of production? Maybe so that we can track it in real time. I don't know when you expect the vehicle-

Okay.

Perhaps maybe.

You outlined exactly what needs to happen.

Sure.

Now when you start to production, maybe so that we could trucking in real time.

When when you expect the vehicle.

Peter Rawlinson: Yeah.

Tobias Beith: to get homologated, et cetera, et cetera.

Peter Rawlinson: Yeah. Yeah, well, I mean, homologation comes relatively late, because that has to be conducted to process some tooling represented levels of authenticity for that represent production. So right now, we're road testing the beta vehicles for the core attributes, structural integrity, drivability, suspension tuning. We're starting on some of the brake development, the traction control, the anti-lock braking systems, the core attributes of the vehicle. Then we will move to a phase of interior development. They wouldn't have representative interiors at this stage. Later this year, we'll move the betas with representative interiors. We can do all that development.

Et cetera et cetera.

Yes, well I mean home litigation comes relatively light because of that to be conducted to process and tooling represented.

Our levels of authenticity for that represent production. So right now we are.

Road testing the debates of vehicles for the core attributes structural integrity C. <unk> C suspension to mean, we're starting on some of the developments.

Correction controlled antilock braking systems core attributes of the vehicle.

Then we will move to a size of interior development.

Representative interiors at this stage later this year will move basis with <unk>.

Representatives into areas, where we can do all that development than the long lead tooling items.

Peter Rawlinson: The long lead tooling items are being kicked off, because some of the parts take over a year to tool, and we'll go through a pre-production run through next spring, culminating in production late 2024, on track. I believe this will be a seminal, a seminal product. It's-- Gravity is on track. It's the big one. It's going to be a landmark. Seven seater, third row, three row, super practical, super high performance, extraordinary range, extraordinary performance attributes.

Being kicked off because some of the parts take over a year to two and then we'll go through a preproduction run through.

Next spring.

Culminating in production late 2024.

On track.

I'm a great it will be a seasonal a seminal product.

Gravity is on track, it's the big one is going to be a landmark seven seats.

Three row supercritical Super high performance extraordinary range exit.

Screw ordinary performance attributes.

Tobias Beith: Great, this has been super helpful. Thank you. I'll pass the line on.

Great. This has been super helpful. Thank you I'll pass the line.

Operator: Thank you. Please stand by for our next question. Our next question comes from the line of Ron Josey with Guggenheim. Your line is open.

Yes.

Thank you ladies.

Please standby for our next question.

Our next question comes from the line of branches cycle with Guggenheim. Your line is open.

Good evening.

Thanks for taking my questions.

Peter just wanted to get your thoughts on kind of competitive dynamics in the market right now from our vantage point it feels like.

While you are pretty challenging market for for luxury electric vehicles, but.

I wanted to get your view on if price cuts from.

Your one of your large domestic competitors.

Their luxury vehicles is having any impact on.

While demand for lucid vehicles.

Well I think what youre, referring to is perhaps the different parts of the markets.

Believe.

The reason there is a challenge.

Market right now because of macroeconomics and because of interest rates, which actually do affect displace for marketers.

We are seeing.

Key competitors from Germany.

Discounting their products very heavily.

Not just the.

The U S manufacturer that you may be you may be.

Referencing the Germans are heavily discounting their vehicles.

I think there is challenges right across the marketplace I think what we need to do is just amplify awareness.

Just how compelling.

It is we got better range better into comfort, we've got more legroom response to challenging we're more efficient through technology.

The main place superior growing user engagement experience I was taking some potential customers protest trying just yesterday and they would just blown away by the old rule grinding and riding experience and we just need to get more people behind the wheel. That's what this is about we don't have.

100 year heritage of history, we don't have an existing customer base, we need to win new and because new customers.

Ron Jewsikow: That, that's super helpful, and it's good to hear you're out in the field kind of promoting the product.

That's super helpful and it's good to hear Youre out in the field kind of promoting the product.

Personally most weekends amounts meeting customers.

Susan and the grass roots evangelism is growing and this doesn't happen overnight. This will take some time, we are planting a combs for for us to to come in the future maintenance mistake.

Ron Jewsikow: Makes perfect sense. I guess just, you gave the data points around test drives and the number of cities you're going to for the Dream Ahead Tour. Is there any commentary you can provide on kind of the cadence for order trends since that started? Or is it too early?

Kind of the cadence for order trends that started or.

Peter Rawlinson: It's too early to do that, and there are so many factors that overlay, it's very dangerous. What I would say is this: we've more than doubled the number of test drives in the last quarter, and I believe that very few people would buy a car without test driving. I see that as a key stepping stone, a key conduit, a very relevant metric, and that is a step towards purchasing, ownership. What we see is the best salespeople we've got are our customers that become advocates, and some of them even evangelize for us. There's something very genuine about that.

It's too early.

It's too early to do that and there are so many factors that overlay.

Dangerous, but what I would say is this that we've more than doubled the number of test runs in the last quarter and I believe that very few people, who would buy a car without test driving I see that as a key stepping stone a key conduit hedged a very relevant metric and that is the process spend.

Towards.

Purchasing ownership and then what we see is.

Salespeople with those are our customers.

<unk> become advocates and some of them even evangelize Flores.

So something very genuine about that.

Sherry House: Yeah, these test drives also give us personal touch points in order to enter into dialogue with the customers, better understanding their needs. And then it also, I would say that as we've stood up the Lucid Financial Services business in the US and then growing that overseas, that's another touch point where we can gain intelligence on what the customer needs, the pricing that they're looking for, the interest rates that they're looking for, and all of these are gonna be data points that we can use to refine offerings that are gonna best meet, meet the customer needs.

Yes. These test rates also give us personal touch points in order to enter into dialogue with the customers better understanding their needs and then it also I would say that as we've set up the lucid financial services business in the U S and in growing that overseas. That's another touch point, where we can gain intelligence on what the customer needs the <unk>.

Reising that theyre looking for the interest rates that theyre looking for in all of these are going to be data points that we can use to refine offerings that are going to best meet meet the customer needs. We are streamlining the whole customer experience, making the wind side much more intelligible more intuitive more user friendly screen laundering streamlining the order.

Peter Rawlinson: We're streamlining the whole customer experience, making the website much more intelligible, more intuitive, more user-friendly, and streamlining the ordering process online.

Wing prices.

Online.

Ron Jewsikow: ... That's super helpful. And just last quick question for me, kind of Gravity. Any learnings from the Air launch process over the last 12 to 18 months that, that'll help inform the, the Gravity launch, call it 12 months from now?

That's super helpful and just last quick question for me kind of gravity.

Any learnings from the air launch process over the last 12 to 18 months that will help inform.

The gravity launch call it 12 months from now.

Peter Rawlinson: Oh, yes, of course. I mean, we want to continuously improve, and there's a continuous improvement and learning process, which we take very seriously, the teams here. The engineering team, Gravity, works very closely with production team, design for process, design for manufacture. And this is a really collaborative team sport, which we take very seriously. I really believe Gravity is going to be a seminal product. I don't think there's going to be anything out there that's even close. It's taken all technology that we've developed to date and more that we're going to throw at this car, because the problem with SUVs is getting range without an unduly large battery, which becomes super heavy, and then you lose payload capacity on the car.

Yes of course, I mean, we want to we want to continuously improve and there is a continuous improvement in learning process, which we take very seriously the teams here.

Engineering team gravity works very closely with production theme resuming full process design for manufacture.

And this is a this is a really collaborative teams pools, which we take very seriously I really believe gravity is going to be a seminal product.

Adam is going to be anything out.

<unk>.

Even closed it has taken.

All technology that we've developed to date and more that we're going to throw at this.

The problem with Suvs is getting range without alone Julie large battery, which become Super heavy and then you lose payload capacity.

Peter Rawlinson: So this is a multidimensional, hugely technical challenge, and it's only now, I believe, that we're ready to really give it our best shot. Gravity is going to be huge for us. I'm very excited about it.

So this is this is a multi dimensional hugely.

Nickel challenge and it's only now I believe that were ready to really give it our best shot gravity is going to be huge for us I'm very excited about it.

Ron Jewsikow: Very helpful color. Thanks, Peter, Sherry, and team. I'll hop back in the queue.

That's very helpful color.

Peter Sherry.

I'll hop back in the queue.

Operator: Thank you. Ladies and gentlemen, due to the interest of time, I would now like to turn the call back to Maynard for closing remarks.

Thank you.

Ladies and gentlemen, due to the interest of time I would now like to turn the call back to <unk> for closing remarks.

John Murphy: This concludes Lucid's Q1 2023 Earnings Conference Call. Thanks, thank you all for joining us today, and you may now disconnect.

Maynard Um: This concludes Lucid's Q1 2023 Earnings Conference Call. Thanks, thank you all for joining us today, and you may now disconnect.

This concludes <unk> first quarter 2023 earnings conference call. Thank you all for joining US today and you may now disconnect.

Q1 2023 Lucid Group Inc Earnings Call

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