Lucid Group, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Lucid Group first quarter 2022 earnings conference call. Please be advised that today's conference is being recorded. Later, we will conduct a question and answer session. If you have a question, please press the star and one on your touchtone phone. I would now like to turn the conference over to your speaker for today, Maynard Um, Senior Director of Investor Relations. Please go ahead, sir.

Thank you and welcome to Lucid Group's first quarter 2022 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, particularly those regarding the future financial performance of the company, production and delivery volumes, macroeconomic and industry trends, company initiatives, supply chain dynamics, expansion of our studios and manufacturing facilities, and other future events are based on the information that we have as of today and constitute 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 quarterly report on Form 10-Q for the quarter ended March 31, 2022, 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, either 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 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 available on the investor relations section of our website at ir.lucidmotors.com. With that, I'd like to turn the call over to Lucid CEO and CTO, Peter Rawlinson. Peter, please go ahead.

Thank you, Maynard. In Q1, we delivered 360 vehicles to customers, nearly tripling the 125 cars delivered in Q4 of 2021. Furthermore, in April alone, we delivered well over 300 vehicles, demonstrating our accelerated production ramp. And this growth progression keeps us nicely on track for our 12,000 to 14,000 production target, as Sherry will tell us more about shortly. We're pleased with the demand we're seeing, and now we have more than 30,000 reservations as of today. Note that this 30,000 figure does not include the recent up to 100,000 car deal with the government of Saudi Arabia, which is entirely incremental. I'd like to thank the entire Lucid team for their dedication and hard work. We're off to a great start, and we're only just beginning. We have a lot of hard work ahead of us, but we're up for the challenge, and we're on track for some great milestones this year. In just two short quarters since we started deliveries, we've garnered many industry accolades, beating out some very well-established luxury car brands. The Lucid Air is now used in the same breath as some of the best-known luxury car luminaries in the market. And that's truly amazing if you think about it. In the first quarter, Lucid Air was named the best luxury electric car by U.S. News and World Reports. It was named luxury electric vehicle of the year by Cars.com. And best car to buy 2022 by Green Car Reports. Edmunds very recently reported an unprecedented 505 miles in their real-world EV range test of the Lucid Air Dream R, a new record. But most importantly, it's our customers who are truly delighted with Lucid Air. I believe as we get more of our vehicles into our customers' hands and as we expand our test drive program, our momentum will just continue to build. We're nearing completion of deliveries of Lucid Air Dream Edition and commenced deliveries of Air Grand Touring in the first quarter, also having announced the new Air Grand Touring performance model in April. The dual-motor Grand Touring Performance delivers 1,050 horsepower, making it the most powerful electric vehicle currently available in North America, combined with an exceptional EPA-estimated 446 miles range. The Air Grand Touring with up to 516 miles of EPA-restimated range has an unprecedented efficiency of 4.6 miles per kilowatt hour. And I'd like to spend a minute or two on this because I don't believe the importance of EV efficiency is well understood today. In order to drive widespread EV adoption, we must address the cost of making EVs. And here, the really fundamental question is not how much does a battery cost per se in terms of dollars per kilowatt hour, but moreover, how much does it cost to endow an EV with a given amount of range? For example, how much does it cost to create an EV with, say, 200 miles range or 300 miles range or a 400-mile EV? In this context, it's crucial to compare which is the better route to achieve this goal, a reduction in battery cost or an increase in efficiency. Well, with, say, a 10% increase in efficiency, it is possible to achieve the same range with a 10% smaller and therefore 10% less expensive battery. For example, we believe we can endow Lucid Air Pure with over 400 miles range with a battery pack size of less than 90 kilowatt hours. commercial advantage over the competition. But efficiency also drives other very important benefits. Unlike a gasoline car, where the benefit of efficiency is only felt at the cost of a fill-up at the gas station, an efficient EV is a fundamentally superior product in many ways, influencing weight, agility, range, and interior space and comfort. Reducing battery cost, although not to be dismissed, fundamentally only really benefits the cost of manufacture, whereas we expect increasing efficiency to benefit not only the cost of manufacture, but also the lifetime running costs, plus the lifetime environmental footprint, both through energy consumption and through raw material usage. Now, this final advantage is not to be dismissed lightly, because in a world with a potentially limited raw material supply chain, efficiency becomes the enabler for the manufacture of more electric cars. So, our first step has been to deliver a vehicle with a longer range than anyone else in the market. And our next step later this year will be to deliver a vehicle with a range of over 400 miles, but to achieve this with a smaller battery pack than the competition. And this is Lucid's commercial advantage. Now, we're only able to do this because we design, develop, and manufacture our own technology in-house. It's the combination of our proprietary ultra-compact powertrain, state-of-the-art high-voltage inverter, our bidirectional 900-volt WonderBox, exceptional aerodynamic design, and our scalable and modular battery pack, which is based on our extensive Formula E race experience. I'm aware of only one other who has the technology vertical integration we do. You simply cannot achieve this by buying off-the-shelf components. And I'm proud to say that our efficiency is industry-leading among commercially available passenger vehicles. While others will try to catch up to where we are today, we're not standing still. We're improving on our technological advancements and will drive more innovations and efficiency to remain ahead of the competition. We also continue to and developed 11 over-the-air software updates in Q1. We hear our customers, and we're delivering on their constructive feedback, many through over-the-air updates. We've designed our vehicles from a clean sheet to be one of the most advanced in the market, and with world-class vehicle technology that will enable us to deliver more features and enhancements without customers having to bring their vehicles in for service. We have the capability to control even the smallest of details in the car via software. With our software-defined vehicles, we can change everything from how the door handles function to increasing key fob battery life. And we'll continue to strive to meet the high standards of our customers by making their Lucids better and better over time. So we think we're extremely well positioned in the technology race. But we need to get Lucid Airs into the hands of more customers and ramping production of quality vehicles is my top priority. We have over 30,000 customer reservation holders as of today, demonstrating growing interest in Lucid and rising demand even as new competitors arrive. So we're intently focused on production as well as our expansion. And as you can see from the photo in the shareholder presentation, the AMP factory expansion in Arizona is seeing tremendous progress. And once complete, we'll have an additional 2.85 million square feet of production footprint and increase that annual production capacity in Arizona to 90,000 vehicles per year. We're also very excited to be breaking ground on our new factory in Saudi Arabia soon. And very shortly, we'll have the grand opening of our Munich studio, signaling the arrival of Lucid to the EU market. And more on this next week, when we will debut our EU plans. So our global expansion plans are on track. Now, having said that, I do want to highlight that supply chain dynamics are very fluid, and the COVID lockdowns in China that's impacting others in the industry are also resulting in some bottlenecks for us. But our team is doing an incredible job mitigating this to keep us on track. We also announced today that we're increasing prices of our vehicles that will go into effect at the beginning of June. The world has changed dramatically from the time we first announced Lucid Air back in September 2020. And I want to assure our existing reservation holders that we will be honoring current pricing for all existing customers as well as new reservations made before the end of the month. In order to ensure fairness and prioritization, we will be reaching out to reservation holders to facilitate order configurations in order to lock in pricing as their specified model becomes available. Now, lastly, I want to highlight a landmark agreement we made with the government of Saudi Arabia on April 20th. The government has undertaken to purchase up to 100,000 Lucid vehicles. This is one of the single largest electric vehicle purchases that I'm aware of, and we're delighted to be supporting Saudi Arabia in achieving its sustainability goals and net zero ambitions by bringing our advanced luxury EVs to Saudi Arabia. Shari will go into more details on this momentarily. So, in closing, I believe the electric vehicle market is still in the very early days of secular growth. And I've never been more excited than I am today about our technology, our products, our team, and our future. I firmly believe this is a technology race that is set to play out over the coming years. And I'm highly confident that we are well-placed to be a leader with our state-of-the-art in-house developed technology. With that, let me turn it over to Sherry for an update on our financials. Sherry.

Thank you, Peter. Despite ongoing supply chain disruptions, we continue to see terrific progress in the business. This is largely due to the perseverance and astute problem-solving capabilities of the Lucid team across manufacturing, logistics, supply chain, and engineering. We're also grateful to our global supply base who work tirelessly with us to find real-time solutions to a very complicated and fluid supply chain situation. We're very pleased with the reservation momentum we're experiencing. We're seeing excellent increasing traffic to our Lucid studios, as well as visits to our website and our award-winning vehicle configurator, all indicating accelerating interest in the Lucid brand. I'd now like to turn our attention to our first quarter financial results. Our Q1 revenue was $57.7 million, which represents a quarter-over-quarter increase of 113%. We remain committed to scaling our business and expect to see significant growth in revenue as our delivery volumes ramp across GT, touring, and peer models. Cost of revenue in the first quarter was approximately $246 million. The expected increase was primarily related to personnel and overhead costs as we ramp up production as well as higher logistic costs in expedited freight due to ongoing supply chain disruption. As a result of these increased costs, we recorded an impairment charge of $96.4 million in the first quarter to reduce inventories to their net realizable value. As noted last quarter, we expect increased freight and overhead will result in impairment charges, which will negatively impact cost of revenue in 2022, but we expect this impact to lessen over time. R&D expense was $186.1 million, in line with our expectations. Peter talked about how our efficiency is driven by the in-house design, development, and manufacturing of our own proprietary technology, and we continue to focus on pushing the technology envelope. Specifically, we're investing in state-of-the-art battery and powertrain equipment and facilities, software advancements, and world-class talent. SG&E expense of $223.2 million was comprised in part of expenses related to growing our retail studio and service network, along with investments to build out our systems and personnel globally. We opened four additional studios and service centers and continue to prepare for growth in North America, Europe, and the Middle East this year. Stock-based compensation in the quarter was approximately $175 million. 116 million of this amount was in SG&A, 50 million was in research and development, and the balance of 8.5 million was in cost of revenues. In other income, we recognize the non-cash gain of approximately 523 million related to the mark-to-market value of private warrants. The value of the warrants can be influenced quarter-to-quarter by a number of factors, including Lucid Group's end-of-quarter share price. Moving to the balance sheet. We ended the quarter with close to $5.4 billion of cash on hand, which we expect will fund us 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 market. Capital expenditures were $185 million in Q1, and we expect CapEx for the year to be around $2 billion as we continue to invest in the incredible opportunity ahead. Our 2022 CapEx will be used for facility and machinery and equipment expansion in Arizona, retail and service center development, early investment in Saudi Arabia, and other CapEx associated with vehicle and component development. We remain committed to scaling our business and are executing against our strategic objectives. Ramping production is a high priority to fulfill growing demand as we're selling every vehicle we can make. As Peter indicated earlier, we successfully delivered 360 cars to our customers in Q1, and in April alone we delivered over 300 vehicles, demonstrating our accelerated production ramp. Total reservations grew to 30,000 as of today, which doesn't include the additional 100,000 units from the agreement with the government of Saudi Arabia. And we believe interest will continue to increase as the number of Lucidaires on the road grows and as more consumers are able to experience this luxury and performance in person. We continue to build out our physical presence through our expanding retail studio and service footprint. We added four new locations in Toronto, New Jersey, Arizona, and Southern California in the first quarter for a total of 24, and more recently opened a location in Boston. We have additional new locations planned for 2022, including a grand opening of our first European studio in Munich, Germany next week. In the first quarter, we started deliveries of the Grand Touring Air, and in April, we announced the Grand Touring Performance. We announced pricing for the Grand Touring Performance at $179,000, reflecting our appreciation for our early Lucid Air dream purchasers, but also reflecting cost increases in the commodity, supply chain, and logistics end market. To align these fluid market dynamics, we're announcing price increases to our Lucid Air line. As of June 1st, The new pricing will be $154,000 for Grand Touring, $107,400 for Touring, and $87,400 for Pure. And as Peter said, we will honor current pricing for all existing customer reservations as well as new reservations made before the end of the month. As long as potential customers convert their reservations to orders within 30 days of the opening of the order system, While we are and always will be intently focused on finding ways to lower the cost of making our vehicles and providing value to our loyal customer base, we also need to be mindful of the changing industry dynamics and will continue to be vigilant and take action as necessary. As Peter also mentioned, we entered into a landmark agreement with the government of Saudi Arabia where they will undertake to purchase up to 100,000 vehicles over a 10-year period. The initial commitment is to purchase 50,000 vehicles with an option to purchase up to an additional 50,000 vehicles. Deliveries will start no later than 2023 and we expect orders will range from 1,000 to 2,000 vehicles annually and increase to 4,000 to 7,000 vehicles starting in 2025. The purchase price of the vehicles will be determined based on the lower of the standard retail price for the applicable vehicle in Saudi Arabia and the standard retail price for the applicable vehicle in the United States plus the logistics and importation costs and other costs of delivering and homologating vehicles to meet the regulations of Saudi Arabia. We're also excited to announce that we'll be breaking ground very shortly on our previously announced manufacturing facility in Saudi Arabia, which should enable us to meet the growing demand for Lucid's products over time. On our last earnings call, we announced agreements with the Ministry of Investment of Saudi Arabia, the Saudi Investment Development Fund, and the King Abdullah Economic City. We are honored to be a part of the country's vision of transformation and their commitment to advancing the automotive ecosystem and the manufacturing of sustainable transportation in the country. Moving to our production outlook. Similar to many companies in our industry, we continue to face global supply chain and logistics challenges, including COVID-related factory shutdowns in China. We are working closely with our suppliers to mitigate the impact of disruption. While any extended disruptions could result in an impact to our production forecast, today we are reiterating our 12,000 to 14,000 vehicle production guidance for 2022 based on the information we have at this point, combined with our mitigation plan. We're also reiterating our capex of roughly $2 billion in 2022 and continue to believe our current cash on hand is sufficient to fund our scaling well into 2023. From a product perspective, we're excited to start delivering the air grand touring performance in June and the air touring in air pure later this year. with Project Gravity SUV remaining on target to begin production in the first half of 2024. And much more to come. In closing, I want to thank our dedicated and talented employees and our partners and suppliers who are working to bring our award-winning products to the global marketplace. We're confident that our in-house technology, coupled with our investments in our manufacturing, sales, and service footprint, will enable us to meet our growing customer demand and provide substantial benefits for all of our stakeholders. Following Peter's closing remarks, we'll begin the Q&A portion of today's call. Today's Q&A will feature questions from some of our retail investors and important constituency of our shareholder base through the Say Technologies platform. With that, I'd like to turn it over to Peter for closing remarks.

Thank you, Sherry. We are intently focused on ramping production this year to get more of our award-winning vehicles into customers' hands. And this is a top priority, and we are pushing hard. Our geographic expansion plans are progressing as planned, and I believe our product roadmap is second to none. with the Grand Touring Performance, Grand Touring Pure, and Project Gravity on schedule for their respective timelines. And we'll have more to share with you in the future. And with that, let me turn it back to Maynard to get to your questions. Maynard.

Thank you, Peter. We'll now start the Q&A portion of the call. We'll start by taking questions from our retail investors sent in through the SAIT platform before we take questions from the phone and close out with a couple more investor questions. Our first question is, how do you intend to compete with both Tesla and Rivian given current supply chain and market constraints?

Well, we're highly confident that we can compete against the very best based upon our EV technology leadership. I mean, we compete on our technology differentiation, on our unprecedented efficiency, and in our in-house vertical integration. And I talked about our unprecedented efficiency in my prepared remarks. and how this is only possible because we design, develop, and manufacture our own technology in-house. We're truly vertically integrated. And you cannot achieve this just by buying off-the-shelf components. We also differentiate ourselves by having a luxury brand mindset. We focus on quality and having a customer-centric approach to our direct-to-consumer experience. We want our brand to reflect not only the best TV in the market, but also the experience of that to our customers. But the EV market is not a zero-sum game today. I mean, we compete in a global car market. And let's not forget, our primary competition is gasoline cars, not other EVs. You know, I've said before, I don't believe there's such a thing as just a market for EVs. There's a market for cars. And the EV market penetration is very low today. We believe the EV share will come at the expense of gasoline cars. So I'm incredibly optimistic. I see a tremendous amount of runway ahead of us. Sherry?

Yeah, I'd also add that in my prepared remarks, I spoke about the supply chain challenges that are impacting the entire automotive industry. Now, we've been able to mitigate some of these issues because of our vertical integration and our in-house design capabilities. When you design your own tech, it just allows you an increased level of flexibility and control. For example, because we design many of our own printed circuit boards, we've been able to redesign, qualify, and even source a different chip directly from our existing semiconductor supply base that we have direct relationships with. In other situations, as I mentioned last quarter, we've been buying ahead in the spot markets, and we continue to work really closely with our supply base to mitigate impact and look at risks ahead of time. But in some cases, we have had to switch suppliers, and we have even insourced where it made engineering and financial sense.

Our next question is, the investor presentation in July 2021 mentions a prototype energy storage system progressing well. How is the Lucid energy storage system progressing now, and when do you expect production for the Lucid ESS to begin?

Yeah, well, we're primarily focused on vehicles today, but we do fully recognize that our tech is extensible to other growth markets that we can help drive, you know, our sustainability mission. We analyzed different markets to understand where our tech could give us a unique advantage to compete with, and one of the most promising ones we called out was energy storage, or ESS. Now, our first prototype has validated the capability of our technology. It's running, and it's here at our headquarters here in Silicon Valley. to our solar field array, and it's working well. And we've installed a significant solar array at our AMP1 factory in Arizona, and that is in readiness to connect and integrate our second prototype there at the factory, and this is currently in the development phase.

Yeah, and to put this in context, it's a small amount of our people and financial resources today, but we see a lot of future potential here. We've been examining and we are examining multiple end markets, including residential, commercial, industrial, and utility to see where it might be best for us to play today. But right now we're focused, firstly, and laser focused on the vehicle market. But we'll be sure to keep you apprised as we have any more to say on this topic and as developments come forth.

Our next question is, with the report of Saudi Arabia buying upwards of 100,000 cars from the company, do you think that will drive more buyers from other areas of the world? Or are there other big orders such as that that just aren't public?

Thanks Maynard. Yeah, we're seeing many legislation from a number of other countries towards achieving a goal of zero emissions. And that aligns with the mission of our company to bring sustainable technologies to the world. And we're thrilled that Saudi Arabia has shown such vision and commitment to our company. The government undertook to purchase up to 100,000 Lucid vehicles, and we believe they're buying the very best EV tech there is. And the purchase price of the vehicles will be based on our standard retail prices, as we shared in our earlier announcement. Just to put this in context, this is one of the single largest electric vehicle purchases that we're aware of, and we're delighted to support Saudi Arabia in achieving its sustainability goals and net zero ambition. I also want to highlight that in connection with the King of Dell Economic City, the SIDF and the MESA agreements that we signed in February, we expect to receive up to $3.4 billion in financing and incentives with respect to CapEx and operations for our manufacturing factory in KSA. This includes financing provided by the SIDF loan, and that's disclosed in our 10-Q. In addition, we recently secured a revolver facility from Gulf International Bank, which is also disclosed in our subsequent events section if you want more detail. We also expect that the unprecedented efficiency that we have aligns very strongly with what fleet operators care about, and there's many benefits also to our bidirectional technology. So we don't have anything to announce today, but we think our efficiency and our bidirectional technology are going to be a really important part of the value proposition to this set of potential customers.

Our next question is, what is Lucid's plan for a charging network? Tesla obviously has the advantage over the EV market right now with their network of chargers. Will Lucid be mirroring a similar solution or will there be an adapter to utilize other charging networks?

Yeah. Well, I mean, first of all, the remarkable efficiency and range of Lucid Air, I mean, you can replace range anxiety with range confidence. You can go further in the first place. And we also have an advantage because we have the fastest charging car in the world. We've demonstrated up to 300 miles range in about 22 minutes. It's a profound commercial and technology advantage. You simply charge less when you have greater efficiency and the longest usable range. And there's also, I believe, that we have a significant second mover advantage. We've got a 900-volt vehicle. Others are at 400 volts. And we have a much faster charging vehicle. And when you need to charge, you can charge your Lucid Air virtually anywhere in North America using an open-source combined charging system, the CCS plug, the current standard. That's super important that we're open-source charging. And then we can buy an Ayers Wonderbox boost charger. It can automatically recognize your air, adjust the incoming voltage, and boost voltage for the quickest possible charge. So it's got boost voltage capability. And this makes charging easy at home, or at any public station. And you can also charge up by plugging the included Lucid mobile charging cable into a typical household outlet or a NEMA 1450 for a faster rate of charge. Now, that said, along with AIR's astonishing range, you can also benefit from our partnership with Electrify America and the most extensive network of ultrafast public charging stations nationwide. And they have over 750 stations and over 3,300 chargers, I believe, across the U.S., and plan to have more by the end of the year. And don't forget, when you reserve an air by June 30th, 2022, you'll get complimentary access to up to 350 kilowatt charging for three full years in the USA.

Next question. Are you planning on releasing a new vehicle this year? If so, when do you think it would come out?

Thanks, Minard. So the answer to that is yes. In our outlook section of the shareholder presentation, also in my prepared remarks, we said we would have the air grand touring performance in June, and then that's going to be sequentially followed by the air touring in the air pier later this year. And, of course, we still have the production of the Project Gravity SUV starting in the first half of 2024. Thank you.

We'll now take some questions from the phone lines. David, can we take the first question, please?

Yes, thank you. If you are using a speakerphone, please pick up your handset before pressing star and 1 to ensure your signal reaches our equipment. If your question has been answered and you wish to remove yourself from the queue, please press the pound key. And we'll take our first question from the site of Itay McCauley with Citi. Please go ahead. Your line is open.

Great. Thanks. Hi, everybody. First, I was hoping you could share the production numbers in Q1. I apologize if I missed it earlier, and also where you were in April. And I know you talked about deliveries for the quarter and production for the full year, but hoping to get a sense of where you are on the production ramp.

Yeah, sure. Great to have you with us, by the way. We had 360 deliveries in Q1, and then as for production vehicles in Q1, we had nearly 700 deliveries.

Perfect. Any kind of early update on Q2, maybe an April number?

Well, we actually delivered over 300 vehicles to customers in April. And this is a very interesting progression, almost a geometric progression we're seeing here. Because, you know, in Q1 of this year, we delivered 360 to customers. And very nearly triple what we delivered to customers, 125 in Q4 of last year. And then we're seeing over 300 customer deliveries in April. And it's so easy to do sort of invalid math here. People take a quarter and they multiply it before and come to the wrong answer for the year. This is a progression. It's almost a geometric progression that we're seeing unfolding.

So, Amy, as we said in our prepared remarks, we are reiterating our 12,000 to 14,000 guidance for the balance of the year. So long as the supply chain logistics disruptions aren't material and our mitigation plans are effective, and we've been watching the China lockdown situation really closely, we have had a little bit of impact there. We had a couple of days that we did shut down, and we did have a little bit of slowing for about a week and a half in April. But we have mitigation and We were able to get access to some warehouses. We were able to move production to another area of China in one case. And so long as things continue to progress and really resolve through the course of May, we're feeling comfortable with what we've stated.

Indeed, we're reiterating our 12,000 to 14,000 vehicle production forecast for 2022 and that's based on the information we have at this point combined with our current mitigation plans.

Great, that's very helpful. Just a quick follow-up. On the price increase, I think you alluded to it a bit before, is that all reflective of higher input costs? And if you could maybe talk a little bit more detail about specific cost increases you're seeing, kind of what's sort of in there that you're trying to kind of cover for?

Yeah, sure. Let me provide some context there. Well, first of all, the pricing actions that will be effective June 1st won't start to impact our financials in a meaningful way likely until 2023. There might be some slight positive impact in 2022. Our raw material exposures have been ranging in call it 5% to 10% of our BOM costs, depending on the vehicle variant. And these actions will help to offset those inflationary pressures throughout this year, which are typically delayed due to the way the contracts are written. Usually the indices move and then we pay either the quarter or semi-annually following that. We do have other exposures, though, including expedites, which have been very high due to the supply chain disruptions and record freight prices. We also have a little bit of exposure on steel and construction costs. A lot of that's locked in for our phase two, but we do have a little bit of exposure on the back end with respect to steel. So looking ahead, I'd say our current belief is that costs will stay elevated or slightly higher than they are today for the next couple of quarters. And then we are expecting some stabilization might occur.

Great. That's very helpful. Thank you.

Sure.

David, we'll take our next question, please.

Of course. We'll take our next question from Charles with Redburn. Please go ahead. Your line is open.

Hi. Thanks for taking my questions. My first one, again, just on the price rises that you've announced today. So I think the price rises are between 8% and 13%. And if I look at some of your competition, I know that Rivian raised its prices on average by 18% back in March, and Tesla's raised the price of the Model S by 25% over the last 12 months. So do you think that there's further room for raising the prices that you have on the Lucid Air, especially given the quality of the product, as you mentioned?

Here's what I would say about that, and good to have you with us here today. I'd say we don't know for certain. The situation is very fluid. We are actively monitoring it, and we will act as required. We are pushing ahead also, though, with many engineering changes and cost reduction initiatives that are aimed at lowering our cost basis for the vehicles, so that is helping to offset some of this as well. But if we do have to raise further, one of the things that we're comforted by is we know that we offer a very unique value proposition to customers, and we believe there's no other vehicle on the market that offers the same combination of efficiency, performance, range, space, and design that we have. So, like other companies, we are experiencing these real increases in commodities, and we're just going to have to balance the benefits that we provide to all our stakeholders, whether it be our customers, our suppliers, or our investors. But we believe that the action we're taking right now best optimizes, and then as for future, we're just going to have to watch and see.

Indeed, Charles. I think Sherry raises a really salient point here. It's not recognized sufficiently. Our efficiency advantage becomes a commercial advantage. We can provide a car with a competitive range for a smaller battery pack, and that helps in our cost structure.

Great. Thank you. And my second question, on the batteries, Can you just remind us what your current battery cell supplier relationships are, how they're structured, and the extent to which higher raw material input costs will hit you in 2022 or whether or not it's sort of delayed to 2023 and beyond? And finally, how much battery capacity is already locked in with your supplies and until when?

Sure. So we have long-term contracts with two of the major global suppliers. That's LG and Samsung. Those are multi-year in nature. We also have some stateside production that's going to be coming on board as well. On the raw material side, we are exposed, like most companies are, to the raw materials and the batteries. But we are fortunate in that we can leverage the buying power of LG and Samsung, their access to these raw materials going forward. Now, as for our availability, we are covered fully through this year, and we also have most of our coverage for the next couple of years, but we are working with both LG and Samsung, as well as another that we're in the process of validating this fall that we expect will come on board with them either later this year or early next year. And we're working with these three groups in order to supply the balance of what we need. But right now, things are looking promising at this point.

Indeed.

Great. Thank you.

David, we'll take our next question, please.

As a reminder, if you'd like to ask a question, please press the star and one keys on your telephone keypad. We'll take our next question from John Murphy with Bank of America. Please go ahead. Your line is open.

Good afternoon, everybody. Just a quick question on the VGA performance. I think if I put it right, the price was $179,000, and this is a new, as far as I can tell, it's been announced. So, not just in addition to the pricing, you're working on a mix, right? It seems like it would be very powerful as we think about revenue generation over time. So, one, is that number correct? And two, how much opportunity is there, even in the early days and maybe over time, to put out performance versions of your product that might garner a very strong mix in August to price?

Okay, there was a lot of static in the line, John, but I think we got some of that. I think you were asking about the GTP, the GT performance pricing. You're right, that is $179,000. That does sit above the new pricing that we just launched for the GT, which will be $154,000 effective June 1st. The base was 139 and will stay on the GT and will stay that through May 31st. Now, I think you were asking a little bit about like our revenue generation capability and maybe the ability of this product. You know, Peter, if you would talk maybe a bit about how you see, you know, customers' desire for this product.

Indeed, Sherry. I mean, what happened was that we were oversubscribed, very significantly oversubscribed for Dream Edition. And customers were asking, well, hey, we want, where's the 1,000 horsepower car? People have gone power crazy here. Where is the 1,000 horsepower car? We want a 1,000 horsepower car. So we quickly turned around, and we're very responsive. We're a tech company, fleet-footed, and we created the GT Performance at 1,050 horsepower. Now, that price reflects Our commitment to Dream Edition customers, they've put commitment and faith in us, and I think they've got a bargain.

So maybe to follow up, if we can really better match this, I would say it helps. How much opportunity is there in terms of doing more performance versions like this to the advantage of a mix, not just raising price?

Very difficult to hear what you're saying there, John.

He's asking about the ability to do more of these in the future.

I think there's always an opportunity. I think what's – I mean, this is showing the power of the brand, and it's showing that the product defines the brand. We are being considered as a brand that can command this sort of position in the market against the traditional Grandi marks already – because of the prowess of our product.

And the other thing I think you may have touched on was just mix generally. So let me give you a little bit of context there. Similar to last quarter, we continue to see the demand for the GT product exceeding that of the Touring. And we're building the GT product now. We'll then be building the Touring, then the Pure as we're exiting the year. So you're going to continue to see very strong mix throughout this year, slightly decreasing as you sequentially bring on these other products that are priced slightly lower.

That's a really healthy position for us because as we're ramping up, carefully maintaining the quality, it's great for us that we can sell higher-end products through that ramp-up and don't have to transition to more affordable products quite yet.

That's absolutely right, Peter, because the absorption costs will start to improve over time as the volume increases as we get through the next couple of quarters and into next year. So you're going to start to see some relief on what you're seeing happening right now in the negative gross margins as that

greater level of production comes on board yeah we're seeing in reflected in the 30,000 orders that we've got we've now got the reservation 30 30,000 reservations a very healthy mix between a GT touring and pure

There's a revolver show that you mentioned of $267 million found in the P2, but then you also mentioned $3.4 billion, I think, of additional funding for the Saudi plants. Is that number correct, and where is that coming from, and how is that structured? And there's that incremental $5.4 billion in cash that's on the down sheet right now.

Sure, sure. So the revolver is from Gulf International Bank. That is in addition to the $3.4 billion of financing and incentives that we had mentioned. Now, in the 10-Q in the notes, you can go to Note 6, you can go to Note 19 and 20, you're going to see some detail in there about the SIDF loan, how it's structured. You'll also see mention to the GIB in there, the Gulf International Bank revolver, the $267 million that you just referenced. You'll also see in there information about our lease that we're getting through the King of Della Economic City, and you'll be able to see some of the dollars associated with that as well. So that's giving you some of the tools you need to be able to understand the financing that is available to us. And then additionally, there's incentives. Now, we did decide to proactively adopt a new government assistance standard, a disclosure standard as of January 1st. of this year. So as any of these incentives or any of these loan items come on board on our balance sheet and impact, we will be showing that in the financial statements through notes and disclosures. So you'll be able to get information fairly real time with respect to that. Now, you were breaking up a little bit. I think you were asking about the $5.4 billion of cash on hand. We continue to feel really good about our ability to be well into 2023, and the addition of some of these financing packages has continued to strengthen our liquidity situation and our access to financing. We did have some of that baked into our forward model, but this continues to de-risk that for us.

Great, David, we'll take the next question.

And there are no further questions on the phone at this time. I'll turn the call back to you, Maynard.

Thank you. So we'll now take our last retail investor question before concluding the call. And the last question is, what is Lucid's five-year plan?

Oh, Maynard, I think this is my favorite question, I think. We didn't... Pose this ourselves. It's about product, product, product. I'm an engineer. Product is king. And a great brand is built by having the best products, and it's actually defined by those products. And I'm so excited we're going to do AirPure, Project Gravity SUV, and further drive technology innovation. We have a roadmap. and a tech roadmap to keep on advancing. Now, really what we've done so far, step one was to establish Lucid as a global luxury brand and create a vehicle with incredible range through efficiency. We've done that. Now, step two is even more interesting because that is to scale globally into the premium segment and to commercialize vehicles that use smaller battery packs versus other vehicles in the market. And I've already noted that ramping production is my top priority. We're making really good strides here. Again, efficiency is our key USP. Now, beyond that, I'm aiming for a mid-sized platform in the decade. I'm really enthusiastic about that. We could only do this by starting off by creating our technology flagships, air and gravity first, By advancing the efficiency and setting the new EV benchmarks and then by making more affordable products. Remember, we design all our EV powertrain in-house. We develop it all and we manufacture it all in our special factory in Arizona. And we think we can become even more efficient over time. And that will translate well into our product roadmap. Sherry?

Sure. And if you look at our current manufacturing plans, we expect to have capacity for 500,000 vehicles annually as we cross the mid-decade mark. So to break that down, we're going from 34,000 capacity in Arizona to 90,000 with our Phase 2 expansion. As we complete the AMP1 Phase 2 expansion, we'll move directly into Phase 3, and we believe that can get us to about 350,000 annual vehicle capacity in Arizona. Then you add the 150,000 vehicle capacity from Saudi Arabia, and that gets you to about 500,000 by just after mid-decade. And then to remind investors, we do have the $5.4 billion on the balance sheet, as we just spoke with John Murphy. We do also have access to this financing in the kingdom, and we believe that this funds us well into 2023.

Exactly, Sherry. So, I mean, we're very focused on product, product, product in our long-term plan. New term, we're focused on ramping production and getting more of our vehicles into customers' hands. And, you know, I have to say in closing, I've never been more excited than I am today about our tech, our products, our team, and our future. The electric vehicle market is still in its very early days of secular growth. And I believe our focus on product, technology, quality, and service will put us in an enviable position market position.

Thank you, Peter. This concludes Lucid's first quarter 2022 earnings conference call. Thank you all for joining us today, and you may now disconnect.