Lucid Group, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Lucid Group second quarter 2025 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 star 1-1 on your touchtone telephone. I would now like to turn the conference over to your speaker for today, Nick Twork, Vice President of Communication. Please go ahead.

Thank you and welcome to Lucid Group's second quarter 2025 earnings call. Joining me today are Mark Winterhoff, our interim CEO, and Tawfiq Busaid, our CFO. Before handing the call over to Mark, let me remind you that some of the statements on this call include forward-looking statements under federal securities law. These include, without limitation, statements regarding the future financial performance of the company, production and delivery volumes, vehicles and products, studios and service networks, financial and operating outlook and guidance, macroeconomic, policy and industry trends, tariffs and trade policy, company initiatives, and other future events. These statements are based on various assumptions, whether or not identified in this communication, and on the predications and expectations of our management as of today. Actual events or results are difficult or impossible to predict and may differ due to a number of risks and uncertainties. We refer you to the cautionary language and the risk factors in our annual report on Form 10-K for the year ended December 31, 2024. Subsequent quarterly reports on Form 10-Q, current reports on Form 8-K and other SEC filings. And the forward-looking statements on page two of our quarterly earnings presentation available on the investor relations section of our website at ir.lucidmotors.com. We undertake no obligation to revise or update publicly any forward-looking statement for any reason except as required by law. 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 earnings presentation. With that, I'd like to turn the call over to Lucid's interim CEO, Mark Winterhoff. Mark, please go ahead.

Thank you, Nick. And thank you everyone for joining us in our second quarter 2025 earnings call. I'd like to begin by expressing my sincere appreciation to our employees, customers, partners, and shareholders. Your continued belief in our mission is what drives us forward every day. In the second quarter of 2025, we achieved meaningful progress on both operational and strategic fronts. We delivered 3,309 vehicles, up 38% year-over-year, now a sixth consecutive quarter of record deliveries. We produced 3,863 vehicles, up 83% year-over-year. As expected, ASP increased sequentially this quarter due to improved mix. However, Gross margin was negatively impacted by tariffs, as Tufik will detail in his remarks. First, we've been sharing with you that we are in active discussions about partnerships beyond selling or licensing our industry-leading EV technology. On July 17th, we took a big step in this direction with the announcement of a partnership with Uber and Nuro on a next-generation premium robotaxi created specifically for the use on Uber's ride-hailing platform. This partnership combines the industry-leading software-defined vehicle architecture of the Lucid Gravity, the scalability and proven capability of the NeuroDriver Level 4 autonomy system, and Uber's vast global network and dynamic fleet management, delivering a fully integrated Robotaxi experience developed for comfort, safety, and scale. Our industry-leading efficiency and technology, like our AV-capable sensor suite, redundant steering and braking systems, and highly efficient compact and high-power density motors help maximize uptime and reduce operating costs per mile, key success factors in a successful robotaxi program. The Lucid Gravity software-defined architecture makes it the ideal platform for third-party autonomy stacks. As part of the agreement, Uber will invest $300 million in Lucid, subject to a regulatory review. Uber plans to deploy a minimum of 20,000 Lucid Gravity vehicles equipped with the NeuroDriver over six years in dozens of markets around the world, with the first vehicles launching late next year. This is an important step for Lucid into the multi-trillion dollar global taxi market. but it's only the first step. And while we are working with external partners on this initiative, we continue developing our internal ADAS and AD capabilities, such as our recently announced hands-free driving software update, with more improvements to be announced. We're also leveraging our partnership with the King Abdullah University of Science and Technology, or KAUST, to train our AI models for ADAS and AD and bring cutting edge innovation from the lab to the road. I've been clear about our intention to monetize Lucid's technology through licensing deals or strategic partnerships. And this announcement signals our right to win in new markets. Uber's investment in Lucid is yet another example of a third party validating our highly advanced technical platform. And we remain in active discussions with other potential partners. Second, we follow through on our commitment to drive awareness for our products and the Lucid brand last week when we announced Timothée Chalamet as Lucid's first ever global brand ambassador. Chalamet will be featured in a new campaign promoting Lucid gravity that marks another significant milestone in our commitment to raise brand awareness. This first campaign of the partnership will launch in early September. In addition to stimulating near-term demand, this multi-year partnership with Timothy is designed to anchor the Lucid brand in popular culture ahead of our entry into the mass market with our midsize vehicles. Now, let me take a moment to go in depth to explain how these initiatives fit into our mission to not just deliver the best car in the world, but also the best business. Since we started our respective roles, Tawfiq and I have dedicated time to aligning our priorities for the business. We are laser focused on three important near-term priorities for Lucid. These are, first, operational discipline. Second, building a distinctive, scalable brand. And third, maintaining and enhancing a sustainable edge through our technology. Operational discipline relates to manufacturing, cost control, and practically every element of the business. As we communicated in our press release, our target is to produce 18 to 20,000 total vehicles in 2025. And as of the second quarter, we have produced just over 6,000. On this topic, I feel that it is important to acknowledge that we are not where we want to be, with lucid gravity production relative to our target at this point in the year. However, our team has been working very hard all year to address bottlenecks in our supply chain and improve manufacturing efficiency. I'm happy to say that we have overcome most of these issues and are beginning to ramp up lucid gravity production. We believe we will significantly increase production in the second half of the year. The challenges we faced were multifold, but can primarily be attributed to first, the capacity of certain suppliers in our supply chain, and second, the availability of magnets originating in China, an industry-wide challenge. To the first point, we've been working closely with our suppliers to alleviate issues that could prevent us from producing the necessary volume to achieve our targets in the second half of the year. We've also implemented key initiatives that are focused on fostering enhanced accountability and data-driven decision-making. We are already seeing the benefits of this as we work diligently to improve lucid gravity production. Turning to the second point, to mitigate geopolitical supply chain challenges, our team was able to quickly integrate substitute magnets in production. And because of our nimble in-house vertical integration, this process took weeks instead of months software changes manufacturing changes and software hardware integration all work together to make this happen without our vertical integration and ability for our team to make quick changes we would have stopped production in q2 i'm happy to say that we believe this issue is behind us and we have secured enough magnets to meet our production target for the remainder of the year As we have noted before, we have a strong commitment to our US-based manufacturing. We believe this will make us more resilient and help mitigate the impact of tariffs and other geopolitical issues. In that regard, I wanted to highlight a couple of recent announcements that further support our position. First, in June, we announced a preliminary agreement with Graphite One to source natural and synthetic graphite domestically. beginning in 2028. This agreement complements our existing non-binding supply agreement with Graphite One that was signed in April of 2024. Following this announcement, we helped establish the Minerals for National Automotive Competitiveness Collaboration, or MINAC, a partnership among U.S. critical minerals producers that are focused on supporting U.S.-based manufacturing and sourcing. We view these as necessary corrective steps to help insulate our supply chain from global volatility. We also recently celebrated the opening of Panasonic's U.S. factory in DeSoto, Kansas. Panasonic is one of our key suppliers, and the presence of this U.S. factory will strengthen our domestic supply chain starting in 2026. Our next priority is to amplify demand through brand marketing and partnership initiatives. Our team's hard work in this regard has been on display through recent announcements over the past few weeks that I've already discussed. I'm pleased with the progress we are making to enhance our brand, but this work is only the beginning. As I mentioned earlier in my remarks, in September, we plan to launch a new Gravity brand campaign featuring Timothy Chalamet as part of our broader partnership. To further deepen brand affinity and trust, we are expanding our efforts beyond traditional advertising. This includes new brand ambassador partnerships with world-class athletes, influential cultural voices, and globally recognized creators who share our vision and values. We are also developing strategic collaborations with brands and organizations at the forefront of sport and culture. These partnerships will allow us to tap in in new communities and strengthen emotional connection consumers have with our brand. Regarding the scalability of our brand, many new customers are now experiencing lucid gravity in our studios. and we're seeing a high order conversion rate for prospective customers once they experience the vehicle. In fact, our daily order rate has nearly doubled since display and test drive vehicles have been widely delivered to studios. Our final priority is to maintain and enhance our competitive edge through our technology. Engineering and technological excellence have long defined Lucid's brand. and we remain committed to this tenets as we grow the business. Just a few days ago, we deployed a software update to our DreamDrive Pro advanced driver assist system. This update enables hands-free driving and lane changes, and it's also expected to be released for Lucid Gravity later this year. Recently, we also began production of the 2026 Lucid Air. which features a new battery pack for touring models that extends the model's EPA-rated range to 431 miles, compared to 406 in the previous model year. Notably, all 2026 Lucid Air models now utilize the same AC compressor as the Lucid Gravity, marking the beginning of further efforts aimed at part commonization across our vehicle lines. The Lucid Air Grand Touring demonstrates its range leadership recently by garnering the Guinness World Record of the longest journey by an electrical vehicle on a single charge. Additionally, Car and Driver named the Lucid Air Sapphire the quickest car they've ever tested, toppling the Porsche Taycan Turbo GT Vespa. The Air Sapphire set a 0-60 time of 1.9 seconds and completed the quarter mile in 9.1 seconds. In Jason Kamisa's ultimate drag race on Hagerty, the Lucid Gravity Dream Edition with dual motors completed the quarter mile in 10.5 seconds, matching the quad motor Rivian R1S. But where the Lucid Gravity truly stood out was in acceleration beyond 60 miles per hour, showcasing the superior passing power and highly emerging confidence that define Lucid performance. The same Lucid Gravity Dream Edition can also reach 150 miles per hour faster than a Corvette Z06, according to Car and Driver. At the beginning of my remarks, I highlighted our recent partnership with Uber and Nuro, which showcases and validates that the advanced capabilities of Lucid Gravity provide an ideal platform on which to integrate AD technology. Looking ahead, our midsize platform vehicles will play a crucial role in maintaining Lucid's competitive edge in technology. These vehicles have been meticulously designed to achieve leading product features and specifications with low cost, enabling us to position our company for significant market expansion. By adopting this approach, we aim to strike a balance between cost competitiveness and high volume production, while still preserving the premium attributes that our customers have come to expect from Lucid. Technology leadership is the key enabler for this previously opposing combination. A prime example of this approach is our Atlas Drive unit, which serves as a cornerstone of our higher volume and cost efficiency strategy. We are committed to enhancing our powertrain efficiency leadership while simultaneously achieving lower costs and maintaining exceptional performance. Lastly, as you may know, the Lucid Gravity was the first non-Tesla vehicle sold to offer a built-in NEX connector and supports native Tesla supercharger network access. We have also recently opened this access for Lucid Air owners as well. As of July 31, Lucid Air owners with an approved adapter in North America can now charge their vehicles at any one of the 23,500 plus Tesla supercharger locations throughout the country with access integrated into their Lucid app. This is in addition to more than 30,000 CCS chargers already available across North America to Lucid drivers. In closing, We are not simply building electrical vehicles. We are pushing the boundaries of what EVs can be. From the record-breaking performance and efficiency of the Lucid Air to the game-changing Lucid Gravity to our upcoming midsize platform, our technology continues to redefine what's possible. But our mission isn't only to make the best EVs in the world. It's to build a great business around them. That means continuing to drive innovation while also scaling intelligently, building a robust supply chain, and making strategic decisions that position us for long-term success. We're entering a pivotal new phase, one where world-class engineering meets world-class execution. And with the talent, focus, and drive across our team, I truly believe we're just getting started. Thank you for your continued belief in Lucid not just as a car company, but as a company shaping the future of mobility and American manufacturing.