Lucid Group, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Lucid Group fourth quarter and full year 2021 earnings conference call. Please be advised that today's conference is being recorded. If you object to the recording, you may disconnect at this time. Later, we will conduct a question and answer session. Instructions on how to queue for the questions will be given at that time. I would now like to turn the conference over to Lauren Simone, Investor Relations of Lucid. Ms. Salone, you may begin.

Thank you and welcome to Lucid Group's fourth quarter and fiscal year 2021 earnings call. Thank you for joining us today. On the call, we have Peter Rawlinson, our CEO and CTO, and Sherry House, our CFO. Our 10-K was filed and the earnings released for the issue after the close of market earlier today. Both are posted on our website. Before we get started, we want to emphasize that some of our statements made on this call particularly those regarding the future financial performance of the company, industry trends, company initiatives, and other future events, are based on the information that we have as of today and include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to numerous risks, uncertainties, and other factors that could cause actual results to differ from expectations. And we refer you to the cautionary language included in risk factors in our annual report on Form 10-K for the year ended December 31, 2021, as well as other documents filed or to be filed with the SEC for a fuller discussion of such risks, uncertainties, and other factors. Forward-looking statements made during today's call speak only as of the time they are made. and we are under no obligation and expressly disclaim any obligation to update, alter, or otherwise revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. You are cautioned not to place undue reliance on these forward-looking statements. 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 a reconciliation of GAAP versus non-GAAP results is currently available in our earnings press release issued earlier this afternoon, as well as in the appendix of our investor deck and available in the investor relations section of our website at ir.lucidmotors.com. And now I'd like to turn the call over to Lucid CEO and CTO, Peter Rawlinson. Peter, please go ahead.

Thank you, Lauren. We're excited to update you on Lucid's tremendous progress in the fourth quarter and for the full year of 2021. During the fourth quarter, we reached a significant milestone for Lucid. We commenced customer deliveries of the world's most advanced EV sedan. As of year-end 2021, this included 125 cars in customers' hands. while we've produced over 400 vehicles in total as of today. And of these, over 300 have now been delivered to customers. We accomplished these deliveries against the backdrop of an extraordinary supply chain and supply quality challenges. Indeed, we could have chosen to build faster, but we elected not to sacrifice quality given our unwavering commitment to the highest standards. These first deliveries of Lucid Air validate our mission to inspire the adoption of sustainable energy by designing and building captivating electric vehicles centered around the human experience. While the delivery of our first cohort of cars to consumers is important in its own right, It also represents the first real-world stress testing of a critical part of the customer journey, from reservation to order to production, delivery, and after-sales supports, including the over-the-air updates to the Lucid Air's onboard software. When you step back and think about it, we put both a full EV powertrain and vehicles into production across two separate and distinct factories, which I believe to be the very first time that that's ever been done. So we were able to run two parallel tracks simultaneously in our manufacturing, producing our proprietary powertrain and battery packs at one site, and then fully assembling the car a little way down the road at our AMP factory, an extraordinary achievement. And having worked through all of this, we are more confident than ever that we're building a quality foundation on which we can scale our business and build long-term growth. Starting and beginning to ramp production was a significant step in moving from concept to reality and delivering on our mission to create a future where there is no longer an artificial choice between doing great things and doing the right thing. The initial feedback from customers and third parties has been resoundingly positive. So many customers are saying that their Lucid Air is the best car that they have ever driven, and praise the quality of the build, enjoying the engaging, dynamic driving experience, whilst also relishing the luxurious interior ambiance. At the time of our last call, Lucid Air had just been named Motor Trends 2022 Car of the Year. Since then, we've continued to rack up industry accolades. We were named Best New Car to Buy in 2022 by Green Car Reports, the 2022 Luxury Green Car of the Year by Green Car Journal, and MotorWeek 2022 Driver's Choice Award for the Best EV. The EPA has officially certified the Lucid Air Dream Edition with the longest range of any EV at 520 miles. And subsequent to the end of the quarter, Inside EVs conducted a real-world driving test to validate our 500-mile range at a steady 70 miles per hour. I encourage you to take a look at their coverage, which is posted online. In addition, we have the fastest charging EV available today, independently verified to be capable of charging 300 miles in just 22 minutes. And as I recently told the New York Times, we've replaced range anxiety with range confidence. Now, on that note, I do want to emphasize a point which has been all too long overlooked here. Our transformative range and efficiency are as much due to our in-house software as our in-house hardware. We truly are becoming as much a software company as a hardware company. And I believe our efficiency in miles per kilowatt hour is an appropriate and valid metric for this. Now, these metrics reinforce that our powertrain is the most efficient in the market, in the real world, and in customers' hands. And this is a critical point. Our enhanced technology, enabling more miles from a smaller battery size, will allow us to shrink pack sizes for future products whilst maintaining a highly competitive range. And this is particularly advantageous for the Lucid Air Pure variant. All of this is translating to significant demand for our products. As of today, we had over 25,000 reservations for Lucid Air, representing a 47% increase from our 17,000 reservations in mid-November. Our reservation book represents a healthy mix across our products, from our higher-end trends through to our pure model. The Lucid Air Dream Edition was heavily oversubscribed and is completely sold out. We continue to see strong demand across our highest-performance product tiers. Actually, we're considering how best to address this demand. We are gratified that customers recognize the exceptional quality of our cars with their industry reading independently certified range, exceptional performance and handling, and unmatched efficiency. To address the rising demand for our products, we are actively working to expand our manufacturing facility in Arizona, AMP1. This is an imperative for us. Increased production capacity is essential to drive mass electrification and meet customer appetite for our vehicles. We continue to make good progress on the addition of 2.85 million square feet of manufacturing capacity as part of phase two. And Sherry will provide further details. And as we discuss ramping up our manufacturing footprint, today we are also excited to announce plans for a new factory in Saudi Arabia, our first international production facility. Lucid estimates that the selection of KSA as the location of its first international manufacturing plant may result in financial benefits to Lucid of up to $3.4 billion over 15 years. This facility will be a world-class manufacturing center with the ability to produce up to 150,000 vehicles annually at full capacity. We appreciate the efforts of the Ministry of Investment of Saudi Arabia, the Saudi Industrial Development Fund, and the King Abdullah Economic City to finalize this game-changing collaboration. We are thrilled that this collaboration will allow us to introduce the world's most advanced electric vehicles to more people and additional markets in the coming years, and also enables us to further our shared ambition to transform the economy of the KSA to sustainable transportation and energy. We look forward to breaking ground shortly and expect the facility to begin production in 2025. In the more immediate term, like many manufacturers, our production has been and indeed continues to be impacted by supply chain challenges. As you saw from our press release today, we have updated our 2022 production outlook for Lucid Air to a range of 12,000 to 14,000 vehicles. As a vertically integrated company, Our technology and engineering foundation gives us significant advantages. We have control over both software and hardware, and the proprietary powertrain and battery pack technology have been holistically designed for scalability of automated manufacturing. And because we have a clean sheet approach without the constraints of managing a legacy internal combustion-based business, we've been able to pivot and adapt quickly if availability of certain components is disruptive. As an example, we have been able to manage the chip shortage in partnership with our suppliers. The supply chain issues that we are experiencing from factors including component shortages are insistence on the highest quality parts and logistics issues. In some cases, the pandemic meant that our teams could not visit our suppliers in person to ensure alignment on engineering specifications and tooling. As travel has opened back up, our supplier quality teams have been able to address many of these issues. I will note that these issues are impacting only a handful of our approximately 250 suppliers. and are not affecting critical single source or dual source components like semiconductors or batteries. Instead, it's being commodity items like glass and carpets, and we've adapted by changing our specifications or, indeed, switching vendors if needed. In some limited cases, we are evaluating additional opportunities to move production in-house, to drive further efficiencies. We believe we will move past the key bottlenecks we're experiencing in the next few months with further improvement in the second half. We're continuing to augment our skills and capabilities and refine our processes in supply chain and logistics. As a startup, our priority is to gain efficiency and improve as we scale. None of this is possible without an experienced team that brings decades of experience in the automotive industry, including in manufacturing and the supply chain. Indeed, we recently added Ralph Jacobs, a veteran of Audi and Volkswagen, as vice president of program management to help spearhead our launch efforts alongside our existing leadership team. Overall, While we are optimistic that our current shortages will ease over the coming quarters, we also know that unexpected issues will arise in the future. And we are confident that we have and continue to augment the right team in place to manage them. We are at an inflection point in terms of consumer interest in and adoption of electric vehicles. which means our timing as we scale simply couldn't be better. The entire car market is going electric. One need not look further than the six Super Bowl ads for electric vehicles to know that the tide has turned. Whether it's Bentley planning to be all EV by 2030, GM and Renault-Nissan investing significant sums to build EV capacities over the next few years, or Volvo's effort to become the first all-electric legacy automaker. We've started where they're all heading, and I like our odds. As we put the first Lucid Air Dream Edition cars into customers' hands, we're at the forefront of one of the most significant transitions in mobility in generations. Now, not all EVs are equal. Our technology supports the greatest efficiency, as well as the roomiest interior for an exterior footprint of our size. And with the growing interest in EVs, the opportunity is enormous. And we are well positioned to target an expanding global market in the years ahead. We are attracting all types of consumers, not just luxury traditional car buyers, but also early EV adopters, consumers seeking performance, and consumers focused on sustainability. I hope you'll stop by one of our studios to see our products up close and learn more, if indeed you haven't already. As we look ahead, we are continuing to expand our retail footprint with our first studios in Europe and Middle East planned to open later this year. In addition, We're making progress in the development of new models such as our Gravity SUV. We continue to experience earnest interest in Gravity, and our ambition is to make Gravity as outstanding as our first product in the sedan category. We now expect Gravity production to begin in the first half of 2024, which will help ensure it meets our commitment to high quality standards. This will also provide us additional time to implement learnings and best practices from our AIR launch. I continue to personally oversee the engineering developments at Gravity, and I'm becoming increasingly excited by its sheer disruptive potential. In closing, I'm confident we have the right combination of technology, people, products, and funding to continue to break new ground in the large and growing market for electric vehicles. We have a significant cash position and a strong balance sheet to support the scaling of our business and to capture the tremendous growth ahead. We have great confidence that our technology will lead the industry in development of new products that will redefine consumers' expectations of EVs. 2021 was a great year for Lucid. And at the same time, we're only getting started. While I certainly have been frustrated by the supply chain and logistic setbacks that we've experienced, our conviction and proof points in what we can accomplish has never been greater. I'm incredibly proud of our team and everything that we've achieved to date. And with that, Let me turn it over to Sherry for an update on our financials. Sherry.

Thank you, Peter. Today I'll share our Q4 and full-year results, which demonstrate the progress in our business model and conviction in our future opportunities. As Peter mentioned, 2021 was a critical year in establishing the foundation of our business operationally, which is reflected in our financial results. We are very excited to have started deliveries in the fourth quarter. Our Q4 revenue was $26.4 million, including $21.3 million from the initial 125 deliveries at the Lucid Air Dream Edition, which began in October. We also recorded $4.9 million in revenues from battery pack sales from the Formula E racing series. Our results in the fourth quarter reflect the inflection point we are at beginning to scale production and delivering vehicles while investing substantially in the future promise of the company. Costs of revenues were $151.5 million, which includes direct parts, materials, shipping and handling, overhead, and estimated warranty costs. Launch costs were a meaningful part of this number in Q4. We brought in additional manufacturing and quality personnel to ramp up production. These steps represent our commitment to the highest possible quality standards. We also experienced increased logistic costs and expedited freight due to supply chain disruption. As a result of these increased costs, we recorded an impairment charge of $48.9 million in the fourth quarter to reduce inventories to their net realizable value, less the cost to sell. In 2022, as we continue to ramp production, we expect increased freight and overhead will result in impairment charges that could negatively impact cost of sales, though this impact should lessen over time. As an item further down in the P&L, we also incurred on December 31st the $583 million non-cash expense related to the mark-to-market gain on private warrants. Our R&D costs in 2021 totaled $750 million, which was in line with our expectations. These efforts have focused primarily on the development of the battery and powertrain technology, the Lucid Air, Project Gravity, and future generations of our electric vehicles. We will continue to invest in our technology leadership. As more OEMs bring EVs to market, it's critical that we maintain our competitive advantages by delivering a unique combination of hardware and software that sets Lucid apart. Our Q4 SG&A costs of $197 million were comprised in part of expenses related to growing our retail studio and service network, along with investment to build out our global e-commerce platforms, IT, and other G&A systems. We opened six additional studios and service centers and have hired personnel in North America, Europe, and the Middle East as we prepare the business for international sales and service in 2022. Over the next several quarters, we will continue to build out our core business systems and direct-to-consumer digital and physical infrastructure to transact with customers in new countries. Additionally, operating expenses were impacted by stock-based compensation in the amount of $151 million in Q4, including vesting under the CEO Equity Award Agreement. We expect that additional shares will vest under the CEO Equity Award Agreement in early March. We've also strengthened our leadership team with key hires in accounting and finance. We appointed Gagan Dhingra as Vice President of Accounting and Internal Controls and Principal Accounting Officer, And Mustali Hussain is Managing Director, Global Treasurer, and Head of Financial Services. Together, they bring decades of strategic leadership experience in building accounting and financial functions at multinational public companies. Attracting and retaining talented, experienced people that want to be part of this new wave of transportation will be key to our success. So far, despite constraints on the labor market generally, we've been able to add talented colleagues to the Lucid team across geographies and levels in the organization. Overall, and as reflected in our financial results, we continue to invest in best-in-class technology, processes, personnel, and systems. This is a theme you will continue to hear throughout 2022 as we create the infrastructure necessary to scale globally and operate effectively as a large public company. As we prioritize scaling our business, we've executed strongly against our strategic objectives, setting the stage for another growth surge in 2022 commensurate with the increasing demand for the Lucid Air. As you heard from Peter, we successfully produced 400 vehicles and delivered approximately 300 cars to our customers, and our total reservations have increased to over 25,000 as of today. We've received multiple prestigious third-party accolades, as well as great feedback from customers to receive their cars. We continue to see strong demand for our premium products. In fact, the demand for Grand Touring at $139,000 is even higher than our lower-priced touring model. We also have seen increasing reservations for the Lucid Air Pure Trim level, which we are targeting at a price point of less than $70,000 for consumers in the U.S. after the impact of tax incentives. With our reservations reflecting estimated revenues of more than $2.4 billion, we're accelerating our plans for growth as quickly as possible. Our retail footprint grew significantly in 2021, and we reached our goal of opening 20 studios and service centers by the end of the year, with additional new locations planned for 2022. In addition, we're seeing strong progress to increase our total capacity from 34,000 units to 90,000 units with the Phase II expansion of AMP-1 in Arizona coming online in late 2023. Phase II, which is an additional 2.85 million square feet, will include an in-factory logistics center, on-site stamping facility, and the relocation of our powertrain center to AMP-1 from another location in Arizona thereby helping to speed the assembly of finished goods and improve our overall efficiency. In addition to the groundbreaking announcement we made today about our plans to build a new manufacturing facility, we continue to explore additional sites in China and possibilities in Europe. All of these efforts underscore our global ambitions and reflect the interest we are seeing for our products around the world. As mentioned by Peter, We are managing through supply chain challenges that you've heard about at numerous companies across industries this early in the season. At Lucid, we have the right experience and resources to help mitigate these issues. In some cases, we're buying ahead to reduce the risk of part shortages. This will be a use of cash in the coming year, as some items now require more than a year's lead time. In situations when suppliers have not been able to deliver, there are multiple options to resolve these issues, and we've executed on all of them as needed to effectively deal with the current situation, including collaborating with existing suppliers to improve throughput and quality, switching suppliers if we deem that's the best approach and necessary enhancements cannot be executed to our satisfaction, and bringing the manufacturing in-house. Our holistic approach is a key competitive advantage, and when AMP1 Phase 2 comes online, it will allow us to become even more nimble in the quarters ahead. As we consider Lucid's global market opportunity, the strength of our balance sheet is a leading asset. Building upon our successful listing on NASDAQ, we issued $2 billion in green convertible bonds in December. We were also selected to the NASDAQ 100 in December. As a result of our successful fundraising initiatives in 2021, we ended the year with over $6.2 billion of cash on hand, which ensures we are funded well into 2023. We have multiple options for additional funding to further solidify our position, which will enable us to continue to be opportunistic in the markets. Balance sheet strength and financial discipline are central to our approach as we build our infrastructure and execute on the massive opportunity ahead. In all, we invested $421 million in CapEx in 2021, and these foundational investments will help deliver on the promise of electrification. All in, with everything we've accomplished recently, we have the elements in place to execute successfully on our plans the core pillars for future scalability and growth. Now turning to guidance. We're updating our outlook for 2022 production to a range of 12,000 to 14,000 vehicles. This projection represents our best estimate as we analyze our relationship with our suppliers and where the bottlenecks still exist in the supply chain, as well as our own internal plans to improve logistics. We expect to remain supply chain constrained in select parts of the business in the coming months and project improvement in the second half of the year. As we look at our operating expenses for the year, we expect to continue to see investment in our vehicle programs as well as investment in our retail operations, planning, and business support functions. We will also be supporting our entry into the European and Middle East markets during 2022. We anticipate capital expenditures in the range of $2 billion in 2022, which includes investment to support our manufacturing facilities and associated machinery tooling and equipment, and retail network and service development, both domestically and internationally, as well as software and technology investments. This represents a nearly 5x increase compared to our spending in 2021, as we work to dramatically scale our business. We are considering other accelerations and opportunistic projects and will act on them as they make sense during the year. We remain committed to our business model of starting with the production of higher trim products before moving to other tiers. With this in mind, we will be starting production of pure later this year, which will lead to higher volumes and scaling. In closing, We are still in the early innings of the electric vehicle revolution and believe that we are well positioned to emerge as one of the winners. We're confident that we have the right technology, people, products, and funding trajectory to succeed. In just a moment, Peter will make some final comments and begin the Q&A portion of today's call. Today's Q&A will feature questions fielded from some of our retail investors with the aid of the Say Technologies platform, consistent with our commitment in November to introduce a mechanism to include questions from this important part of our shareholder base. We're excited to address those questions here. With that, I'd like to turn the call back to Peter. Thank you.

Thank you, Sherry. I hope it's clear why we're so energized by what we've accomplished in the past few months and by how much opportunity is still ahead of us. We're looking forward to continuing our dialogue with all of you in the months ahead as we build momentum in the business. And with that, let me turn it back to Lauren to get your questions.

Thank you, Peter. It is now time for our Q&A session. we will start by taking a few questions we received from investors who submitted questions on the SAI technology platform. We have implemented this platform to enable shareholders to post questions directly to our management team, and we have chosen questions which address topics that we felt were not discussed in our prepared remarks. We will also take questions from our research analysts. And the first question we received from our retail investors is related to Lucid's current and forward-looking competitive strategy. Do you have any strategies in mind to compete with Tesla?

Well, that's a fascinating point, actually. Well, in fact, we really don't see ourselves competing directly with any particular car companies. Our goal and my goal is straight out to make the very best cars. We want to make the very best electric cars in the world. Our mission is to inspire the adoption of sustainable energy. I actually believe the elusive air is the best product in the world already. I believe we're at the forefront of that technology. And the proof points are that we have the most efficient EV with the highest range certified by the EPA. We have the highest voltage, the fastest charging. And these are also proven and validated outside by real world third parties and customers. But what excites me the most is we're advancing state of the art. I'm really confident that we can do that because I know the product roadmap. For me, it's product, product, product.

Thank you, Peter. And our next question is supply chain related. How is Lucid approaching the chip shortage?

Yeah, as Peter mentioned in his prepared remarks, to date we've not experienced a gating issue with semiconductors. This is really for several reasons. First, Lucid has significant electrical and hardware engineering talent, and we design many, but not all of our printed circuit boards in-house. Hence, when certain of these shortages have surfaced, we've been able to adjust our designs and revalidate and resource promptly, largely using our existing direct relationships. I mean, second, we stay in close contact with our supply base to understand any critical shortages. And we do periodically leverage the spot market to secure chips that are at risk. And we purchased ahead where it makes good business sense. In fact, just recently, I approved a purchase rec for a chip that required a 72-week lead time. This is not a trivial process to actively manage the chip shortage situation, and it does continue to evolve. But Lucid is really well-positioned to deal with these sort of challenges because of our deep subject matter expertise and the direct relationships that we enjoy with many of the semiconductor leaders.

Thank you, Sherry. And our next question, any update on the Apple car discussion?

Well, I've been asked this question a number of times in the past. Unfortunately, we have nothing to provide related to discussions with Apple or any other potential partner at this point. But I would say that said, we do recognize the attractiveness of our product and technology for such companies, and we're always open to discussion. I mean, I think our efficiency, our connectivity, the sensor suite are significant points of attraction for such partnerships in the autonomous vehicle space, or as it relates to other in-cabin monetization opportunities. I think we really recognize that we are in the process of creating in Lucid Air a computer on wheels, and that software development is a huge part of that. We've been focused upon developing software as much as hardware. In the past year, we've brought in significant leadership from Apple and other disruptive technology companies to take our digital engineering leadership. We remain very open-minded on this front and we're excited about potential for partnerships.

Thank you. We remain open-minded on this front and are excited about potential for partnership. I will now take a question from John Murphy with Bank of America. Your line is open.

Good afternoon, everybody. Thanks for the information. I'd say that two quick ones. First, Peter, as you think about the causal factors for the reduction in your planned production this year, I mean, you're citing supply chain It appears that maybe some of the capacity expansion and reorganization has, you know, put forth or been prioritized over ramping volume in the near term for the benefit of the long term. And there might be some other micro issues that we can't see. I'm just wondering if you could kind of bucket those or maybe rank those in, you know, order of sort of impact. And then also as we think about this, you know, does this change your outlook for 2023 volumes or is this sort of short-term pain for long-term gains?

There are some interesting points. I mean, first of all, I would say that we have been primarily constrained. We've got about 250 suppliers worldwide, notionally about 3,000 parts. And this has been really a phenomenon of just a small handful of our 250 suppliers. Paradoxically, we've been mainly impacted in commodity supply parts. For example, finish parts, trim parts for the exterior, even glass and carpet. So it's not the core technologies of the vehicle that have been largely impacting us here. And we have, you're right, we've chosen quality over volume. We don't want to get sucked into myopic view of short-term numbers. We're building a brand. with a 10-year plan. And our customers have been really grateful and appreciative of the quality that we've built into our car, the build quality. So we've prioritized quality over numbers.

For 2023, just to provide a little bit of context there, you know, the supply chain situation is quite dynamic, and we will share guidance as we experience more of the following quarters, and we'll be doing that in Q4 for sure. What we can say, though, is that the tooling is coming on nicely within the factory for Phase 2, and that is enabling us to be able to produce up to 53,000 Lucid Airs as we are – by the end of 2023. So we do have the ability to bring, we are bringing on this tooling that's going to enable, you know, continued availability of production.

Exactly. And by way of risk mitigation, John, we are supplying particular support to some suppliers to up their processes and bring them in line with our quality expectations. Some we're actually reallocating the supply to new suppliers, and in some instances we're actually bringing processes and manufacturing in-house so that we can have vertically integrated control of quality and volume.

Okay, that's very helpful. And then just a second question around the Saudi facility. Do you expect the financing to come from internal funds that you have, Or do you think the public investment fund will be a key component of funding that capacity addition, I should say, even expansion, but the incremental addition of that facility in Saudi Arabia? It just sounds like there would be a lot of interest in the diversification from their standpoint, so they might be able to or willing to put more capital in. I'm just curious what your expectations are there.

Well, first of all, we ended the year with $6.26 billion of cash in the balance sheet. So that in and of itself funds us really well into 2023. So as we look to launch these efforts here in 2022, we already have the cash available to us to be able to use. I mean, as we move forward with our forward business plan, we plan to leverage many sources of capital. It could come from governments. It could come from the capital markets, whether it be debt or equity. And right now we see just a tremendous number of opportunities for funds. So we're going to look at what's going to be in the best interest of the shareholders and be really opportunistic looking for cash that is efficient.

Okay, that's incredibly helpful. Thank you, guys.

Thank you. Our next question comes from the lineup. I'd say, Michael, with Citi, your line is open.

Great. Thanks, everybody. A couple of questions, just first going back to the supply chain pressures. Toby, you can maybe articulate. It sounds like you expect most of the recovery to happen in the second half of the year. Maybe talk about how much visibility you have over the next few months with some of the suppliers you mentioned and just the degree of confidence of how to think about the cadence of improvement in production throughout the year.

Yes, well, we have an unerring focus on addressing some of the supply chain challenges. We see them to continue for the next few months. but we see an uptake in the second half of the year. So we're really optimistic that we're going to be able to resolve these. And again, this is a small handful of suppliers. We're not talking about fundamental technologies here. We're talking largely, paradoxically, commodity suppliers, finishers, carpet, glass, and things like that. And unfortunately, you can't sell a single quality car unless those, particularly those visible parts, are absolutely perfect. So we're very optimistic that we will resolve, but it's going to take a few months, and the second half of the year, we'll see a significant uptake. And our guidance is based upon that premise.

That's very helpful. Thanks for that call, Peter. Just a quick follow-up on the twenty five thousand plus reservations hope you can give a bit more context around the regional break down to where you're seeing the most uh... incremental demand coming from uh... i don't know yet you'll be caught on which you don't bother vehicles or segment some of these reservation holders are are kind of coming from an initial strike

So we announced we've got over 25,000 reservations. Last time we announced we'd had over 17,000 mid-November, so that's a well over 40% uptake. I think what's really important to recognize here is that that is just for lucid air. We haven't opened reservations for gravity, and this is a reservation that only opened in North America, Europe, and the Middle East. The lion's share of those reservations are a home market here in the US. And also, we have a fantastic mix here. Of course, the Dream Edition is sold out. We've actually started making Grand Tourings. And touring is coming later this year and reaching to something that really excites me, the Pure, before the end of this year. And we've got a really healthy mix. of orders between those models. Moreover, I should say, because the Dream Edition was so resoundingly sold out, we're looking at how we can address that actual latent demand out there for our higher end products.

That's very helpful. Thank you, Peter.

Thank you. Our next question comes from the line of Charles Caldicott with . Your line is open.

Thank you, guys. So my first question for Sherry. So CapEx, thanks for the guidance of $2 billion this year. I have in mind that at one stage last year, you were intending to spend $900 million in 22. And then I think in July, you announced a plan to accelerate some spending. But nevertheless, the $2 billion feels like a further raise on that acceleration. So can you talk to us a little bit about where that additional spending is going? and the benefits that should come from it. Yeah, maybe I'll start with that.

Yeah, of course. Actually, we were planning to spend, you know, closer to $900 million in 2021, and that was before we did that June update. In 2021, we ended up spending $421 million in CapEx, and it wasn't that anything is – Is delayed, it's just the payment of some of the capex ended up being shifted out by about a quarter. So a lot of that 500M essentially is now moving into 2022. so that is increasing the base amount. that you're seeing originally in 2022. And actually, our amount in 2022, the prior guidance was higher than that. It was, I believe, closer to $1.3 billion originally. And so now we're bringing in that $500. And then as you might recall in that June press release, we had talked about taking some of the spend, $350 million of the spend from 2025 and 6 and moving it into the earlier years. with an overall increase in capex of 6% to 7%. So really, you're not seeing anything different from that guidance that we provided before. You're seeing this kind of shift that's happening.

Okay, wonderful. Thank you. And my second question, you mentioned some input cost inflation, maybe around logistics. Obviously, we've seen it more broadly from raw materials. I'm wondering what sort of impact we should expect from that this year. And are you intending to offset any or maybe all of it with price rises?

Yeah, like many of the OEMs right now, we are definitely studying price and making sure that the value that we're providing to the customers makes sense in the context of the price that we're charging. And there may be opportunity there, and that's something we're going to continue to study over the future quarters, potentially to offset some of these increases, but also it just may make good business sense. So more to come on that. We're analyzing it. On the cost side, we do see – this continuing logistics cost increases both in air as well as land and, you know, and sea. And so part of what we're trying to do as we're starting to, you know, stabilize and moving out of some of the early launch is to move more of our parts from air to sea, which will bring down some of our costs. But despite our actions there, the costs are high regardless. So we are planning to still see these high costs throughout 2022. And we do expect that that is going to result in a negative gross margin for us through 2022 due to these impacts, the supply chain and logistic issues. And it's just going to end up attaching itself to the inventory costs, which is going to cause we anticipate further impairment charges within the within the cost of goods sold. But we do see that lessening as the year goes by, and we're taking lots of mitigating actions. As I mentioned, you know, things like that are overseas components, moving them from, you know, air to sea, and we're looking at getting early analysis on some of the shipping channels that we have, you know, looking at how we can aggregate shipments. So lots of actions are in the works there.

Great, thank you.

Thank you. Our next question comes from the line of Ali Fradri with Guggenheim Partners. Your line is open.

Great. Good afternoon. Thanks for taking my questions. First, just a quick clarification on the air production ramp. When do you expect to finish the Dream Edition deliveries and start delivering the Grand Touring trim?

Well, we've actually started delivering the grand touring already. And as soon as we're able to secure sufficient parts of sufficient quality, we will complete delivery to our customers of a dream edition. And that can't happen soon enough for me.

Great. Thank you, Peter. And then on the gravity SUV production launch now being expected in 2024 versus 2023 prior, can you provide us a bit more color on why you're pushing out the launch at this point? I think, is there anything specific you'd highlight that makes you feel like it's going to take longer to get the SUV out of the door since it does seem like most of the supply chain issues impacting production now should be transitory?

Yeah, exactly. So I just want to make it a better product. I'm really excited with the way it's developing. It's just going to be awesome. It's taken a few twists and turns in its development to make it even better than we'd anticipated. So I'm super pumped, and I think it deserves just a little bit longer. We also want to integrate a lot of the learnings of productionalization from Lucid Air into that program, have that healthy feedback loop of integrating those learnings. We're going to have a transformative SUV, which is going to embody the core Lucid DNA, product DNA, the space concept, and more compact on the outside, more space, more practicality, more luxury on the inside. And we're going to have an ultra-high efficiency SUV, which nobody's ever done before.

Thank you, Peter.

And we will next take our investor question through the Say Technologies platform. What's the future plan in terms of expanding sales and charging stations?

Oh, thanks, Lauren. Yeah, we're actively and thoughtfully investing in our retail studio and service center footprint to support our customers throughout their customer journey. And that's everything from discovery and initial interactions with our product and technology all the way through over-the-air updates and post-sales and service. You know, as we disclosed, we have increased our studio and service center footprint to 20 locations by the end of 2021. All of those were in North America, and we brought our first Canadian customer operation online in Q4, and we're excited to be entering the European and Middle East markets in 2022. We have started work on our Munich location, and we expect to open it this spring. And then we also have several other domestic and international announcements planned throughout this year. I should also mention that we have mobile vans deployed in over a dozen major metropolitan areas already, and we're going to be expanding that throughout the year as well. On the charging front, first off, we're fortunate to have the longest range and the fastest charging vehicle, so our charging frequency and duration is shortened. That said, we're continuing to enjoy the partnership that we've established with Electrify America, and we're actively studying whether it makes sense to deploy specific high-speed charging infrastructure on a case-by-case basis. You know, we're also watching the deployment plans for charging infrastructure that's funded by the U.S. government. And we're excited to hear that with the joint office that's being developed between transportation and energy, that they're looking to get some of these first charging infrastructure in place and online as soon as the end of this year. And so that's also going to benefit all of us in the EV sector. So we're excited about that as well.

Great. Thank you, Sherry. And the last question we will take from the Say Technology platform. What are the next plans for the company, and where do you see Lucid in 10 years?

Oh, wow. Well, as we discussed in our previous remarks, Right now, we're focused on ramping up production and achieving delivery targets. And we've got a laser focus on that. The whole team, the company, is just laser focused on that as we seek to fulfill what is now 25,000 reservations over 25,000 that have been placed by customers for just the lucid air. So now we've got Grand Touring in production and the next product is already taking place. Then we've got Touring coming later this year, but the one that I'm really excited about is Pure. Pure is on schedule for late this year, the Pure version of Lucid Air in its purest, most affordable form. And we're expanding our manufacturing footprint as well, both now through expansion at our AMP1 factory in Arizona, and that's through Phase 2. That will add 2.85 million square feet to our production footprint and will increase our annual production capacity in Arizona up to 90,000 vehicles per annum. And in addition, we'll be building out our AMP2, our second factory, in the Kingdom of Saudi Arabia, our first assembly site overseas. And that alone will add another 150,000 vehicle production per annum. As discussed, we continue to look at lucid gravity. That's on track for the first half of 2024. I'm super excited about how disruptive an SUV this is going to be. And, you know, overall, we have the industry's leading EV sedan, and we started customer deliveries. It's a significant achievement for our company. Next step is really about scaling, scaling, scaling, scaling, and capturing the tremendous opportunities ahead just as our consumer interest in EVs is reaching this inflection point. And, of course, I'm a product guy. It's going to be scale, scale, scale, product, product, product. This is a technology race. But, you know, to wrap up, I'd like to just say a few words, how grateful we are to all our stakeholders, to the employees, to investors, to our suppliers, our partners, for helping us in the progress and for helping realizing this all-important mission.

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.