Lucid Motors Q4 2023 Earnings Call

[00:00:00] Welcome to Lucid Group's fourth quarter, 2023 earnings call. Joining me today are Peter

[00:00:05] Ronson, our CEO and CTO, and Goggin Dingra, our interim CFO and principal accounting officer.

[00:00:11] Before handing the call over to Peter, let me remind you that some of the statements on

[00:00:15] this call include forward-looking statements under federal securities laws. These include

[00:00:19] without limitations statements regarding the future financial performance of the company,

[00:00:24] production and delivery volumes, financial and operating outlook and guidance, macroeconomic

[00:00:29] and industry trends, company initiatives and other future events. These statements are

[00:00:33] based on predictions and expectations as of today and actual events or results may differ

[00:00:38] due to a number of risks and uncertainties. We refer you to the cautionary language and

[00:00:43] the risk factors in our most recent filings with the SEC and the forward-looking statements

[00:00:47] on page 2 of our investor deck available on the Investory Relations section of our website

[00:00:52] at ir.lucidmotors.com. In addition, management will make reference to non-GAAP financial

[00:00:58] measures during this call. A discussion of why we use non-GAAP financial measures and

[00:01:03] information regarding reconciliation of our GAAP versus non-GAAP results is available

[00:01:08] in our earnings press release issued earlier this afternoon as well as in our investor

[00:01:13] deck.

[00:01:29] Hello everyone and welcome to Killawada podcast about electric vehicles, renewable energy, autonomous

[00:01:34] driving and much much more. My name is Bodian, I am your host and on today's episode we are going

[00:01:41] to cover lucid motors Q4 2023 earnings call. Couple things before we jump into the call. Peter

[00:01:49] Robinson, lucid CEO and again de Hingre. Hopefully so they're right de Hingre. I practice this

[00:02:00] new CFO of lucid. Their opening remarks were 35 minutes long and I have a theory when they

[00:02:08] have very long opening remarks is that they don't want to talk to the analysts and they don't

[00:02:14] want to answer questions that might make them look bad. That's just my general thought. Sometimes

[00:02:26] we'll get opening remarks that are at most 20 minutes between both the CEO and CFO and then

[00:02:36] there are times 35 minutes. This whole earnings call was only an hour and five minutes long so

[00:02:42] more than half of it was the opening remarks and then they had retail investor questions. So right

[00:02:48] about the 45 minute mark, maybe a little less than that, they started taking questions from analysts.

[00:02:55] There's 20 minutes of questions in an hour and a half or an hour and five minute earnings call

[00:03:02] from analysts so we're going to break all that down for you but before we do I do need to say

[00:03:10] Peter Rollinson says, Tam a lot and I did not know what Tam was so I had to look it up so as far

[00:03:18] as I can tell when he says Tam in his throughout his throughout this earnings call he's talking about

[00:03:26] total addressable market. I hope that's clear. I don't know that I've ever heard him say that before

[00:03:33] or as many times as he did during this earnings call like if he said it before I just skip past it

[00:03:39] because there's lots of business e terms that I don't know what they are but he says Tam so many times

[00:03:46] it's the new laser focused of these earnings calls. He just says it over and over and over again.

[00:03:56] I don't know how much that's going to come across on the edited clips that I'm going to provide

[00:04:01] for you but boy he says a lot so let's go ahead and jump into Peter's opening remarks which

[00:04:10] you know kind of plays like a commercial. Like Heinrich Fiskar has nothing on Peter Rollinson

[00:04:17] when it comes to marketing. Peter Rollinson is the Joe Rogan whereas Heinrich Fiskar

[00:04:26] is the bald chubby podcaster who podcasts and is basement and is talking to you right now. I am

[00:04:32] I'm the buffoon. I'm the Heinrich Fiskar of podcasting as what I'm saying. All right let's get

[00:04:37] into Peter's opening remarks which as always have been edited down to be relevant for what we

[00:04:44] talk about on this show. You can always go and listen to the full earnings call and I'll put a link

[00:04:50] in the show notes. Through 2023 we dramatically expanded our advanced manufacturing plant in

[00:04:56] Arizona which we call amp one and that was in preparation for gravity. We built a state of the

[00:05:03] art a general assembly line that is capable of assembling both gravity and air on the same line

[00:05:11] and we'll continue to vertically integrate where it makes the most sense in areas of stamping,

[00:05:17] body and light for gravity, our paint shop expansion and the new power train facility at amp one.

[00:05:27] We built the first ever car manufacturing plant in Saudi Arabia for semi-nop damn kits

[00:05:33] and more recently this year we also broke ground for the manufacturing of the completely built

[00:05:41] cars there. These are critical long-term investments that are reflected in our cost of good

[00:05:48] souls. Now the imagery in our earnings presentation I hope gives you some sense of the scope and

[00:05:55] scale of what we're doing. When you sit in person and walk the different shops in the factory

[00:06:02] you truly start to understand how we're building a state of the art factory for the future.

[00:06:09] In fact in January of this year we have more than 100 guests representing over 60 strategic

[00:06:18] suppliers for gravity, air and for potentially mid-size come to our factory. The feedback and support

[00:06:25] from our suppliers was extraordinary. They highlighted our best in class and advanced technology

[00:06:32] and continued investment in our production facilities which provide a material signal of our

[00:06:39] long-term commitment. My key message to them was one of growth, the critical need for

[00:06:48] obsessed partners focused upon excellence and the importance of driving this journey together.

[00:06:55] So I want to express my heartfelt gratitude to all of them.

[00:07:00] Peter Robinson, always the marketer. Some of the things that I did not include in this clip were

[00:07:08] Lucidair won a bunch of rewards. He did say that the Lucid gravity was great, it was fantastic.

[00:07:18] I don't think he said this quite this way but I wrote down greatest things since slice bread.

[00:07:24] The Lucid gravity, if you don't know is Lucid's full-sized SUV. He talked about it heading to Europe

[00:07:32] at some point. He talked about their sex with Avenue partnership which he said gives them access

[00:07:40] to sex customers and they can do sign up for test drives at the sex with out of new locations.

[00:07:47] So I mean, I would assume I know what demographic shops at sex with Avenue and that's

[00:07:56] probably a pretty decent partnership. I don't know how many conversions they're getting of sex

[00:08:02] customers but people who shop at sex with Avenue tend to have money so that's probably a good

[00:08:11] deal for them. Continuing on with the relevant parts of Peter's opening remarks.

[00:08:15] Now on the R&D side we continue to invest for future supremacy and I'm incredibly excited

[00:08:23] about our roadmap both from an innovation and from a cost perspective. In 2023 we also raised

[00:08:32] $3 billion including unparalleled support of $1.8 billion in equity funding from our largest

[00:08:40] shareholder, the PIF. Now Gaggen will talk about liquidity in further detail.

[00:08:47] We formed our technology licensing and access business through our first such deal with

[00:08:53] Asda Mervin and we're actively exploring additional and even broader technology and supply

[00:08:59] agreements. We also have sales to rental car company and we're very pleased with early results.

[00:09:08] This is range and efficiency are perfectly suited for fleets and in fact we saw new incremental

[00:09:15] orders from that rental car company due to demand. Of course we haven't yet scaled this business

[00:09:22] we're taking a method of approach which is prudent and we're pleased with what we've seen thus far

[00:09:29] this is yet another tool to help grow our brand awareness and allow potential customers

[00:09:35] experience the car. Okay so we've got a very brief R&D update in that if you're curious as to

[00:09:43] the $1.8 or $1. Whatever billion it was investment from PIF that's the Saudi public investment fund

[00:09:52] and Saudi Arabia has committed to purchasing 50,000 cars from Lucid

[00:09:59] and then there's an optional 50,000 more cars that they could purchase if they pick up that

[00:10:05] option over 10 years and these purchases include the Lucid Air, the Lucid Gravity and Lucid's

[00:10:12] upcoming mid-size platform which will be out sometime in 2026 and he mentioned a little bit about

[00:10:20] rental car companies. If you've been watching the news the Hertz CEO was ousted

[00:10:28] because of his investment in EVs because of a variety of reasons that we've talked about on

[00:10:35] this show so I'm not going to go into that but I would imagine that rental car companies out there are

[00:10:45] are weighing their options carefully let's put it that way. And then he mentioned the partnership

[00:10:52] between Aston Martin and Lucid when it comes to licensing technology we're going to hear more about

[00:10:59] that or those agreements later about maybe some other potential licenses of technology.

[00:11:06] We don't get any solid information but we know I should say that we get some small details

[00:11:16] that we can talk about a little bit later I'll leave it at that it's nothing groundbreaking nothing

[00:11:21] revolutionary but I did think it was interesting let's go ahead and move on to our next clip of

[00:11:28] Peters Open in your marks which includes software updates. 2023 was also a year where we made

[00:11:36] significant progress with our in-house software capabilities. Software is more than just the user

[00:11:43] interface we have some of the best software engineers in the world working on everything from user

[00:11:50] interface to new features to power train to infrastructure. In fact we developed and have

[00:11:57] been transitioning to our own in-house over the air software infrastructure this not only helps

[00:12:05] our OTA functionality but it's also a source of cost savings. Now building an OTA software as a

[00:12:14] service platform is no small feat. One of the most car other car companies would simply not

[00:12:21] be able to do and it's another example of technology aiding costs and of course this is a platform

[00:12:29] that we could potentially monetize in the future. I just want to address the comment that most

[00:12:37] automakers would not be able to figure out how to do over-the-er updates over-the-er software updates

[00:12:44] that's not true. At this point we're pretty established and this is the wave of the future. They're

[00:12:52] going forward most modern cars in that with it we'll see the next 10 years I'll give myself a

[00:12:59] little leeway in this they're not you're not gonna have to go to the dealer to get a software

[00:13:03] update done that that's just not gonna happen there'll be over-the-er updates and that'll be fine

[00:13:09] as somebody who drives a fire truck that has a ton of sensors on it and those sensors frequently fail

[00:13:17] sounding alarms and you can't turn them off from my side I would love it if the manufacturers would

[00:13:26] recognize that hey we have this group of sensors that is bad so we're just gonna turn off all of

[00:13:32] the alarms sounding for those sensors because we know it's an issue. Why might bring this up?

[00:13:37] Because it happens all the time on the trucks that I drive I drive two trucks I drive an LT

[00:13:43] which looks like a fire engine except for it's got no pump it just carries ladders and I drive a

[00:13:49] ladder truck which has all the same equipment the LT has except for it's got that great big

[00:13:55] hundred foot ladder on the top and it's quite a bit longer. Anyway my point is I over-the-er updates

[00:14:06] are amazing it's not I'm sure it's not easy but it's not some revolutionary thing at this point

[00:14:14] we are all used to getting over-the-er updates on our computers on our I mean I get over-the-er updates

[00:14:21] for my alarm system like everybody gets over-the-er updates at this point what I'm trying to say is

[00:14:26] it's not the flex he thinks it is just leave it there. Next up we're going to hear about some

[00:14:32] challenges that lucid faced in 2023. Now I want to be transparent as well we also had some challenges

[00:14:41] firstly the macroeconomic and higher interest rate environment impacted many in this market

[00:14:49] and in new markets to us there's been some learning for example in Saudi Arabia we learned

[00:14:55] that there are different market dynamics and intricacies unique to that market and so we have

[00:15:02] to scale out business differently for growth but we've addressed the prime pain points

[00:15:08] we're scaling up and expect good growth in the region this year. Now we've also faced some

[00:15:15] technical challenges with commencing production of the rear-wheel drive pure in the fourth quarter

[00:15:22] this is normal when doing something so advanced and so efficient as I said a landmark

[00:15:28] achievement with a 4.74 miles range per kilowatt hour this is our most accessible car

[00:15:36] and we had challenges ramping it up but I'm delighted to say that we've now overcome these

[00:15:42] challenges and now fully ramped in pure production. We've heard many on earnings calls many CEOs

[00:15:51] complaining about high interest rates I don't really have anything to add in terms of the challenges

[00:15:57] in selling a vehicle in Saudi Arabia because I genuinely have no idea what those might be

[00:16:02] and they had some technical difficulties with the rear-wheel drive lucid air purers

[00:16:10] sounds like they're getting that worked out so that's great. I'm not going to play you the CFOs

[00:16:17] comments just because there wasn't much in there that would be considered interesting for this show

[00:16:22] again I encourage you to go back and listen to it if you're if you're wanting that kind of thing

[00:16:26] I will say that Fiskar from the CFOs comments we got an update that Fiskar produced 8,428 vehicles

[00:16:38] in 2023 they delivered 6,000 and 1 vehicles which is up 17% year over year and then they

[00:16:48] just in Q4 of 2023 they were able to produce 2,391 vehicles and they delivered 1,734 vehicles

[00:17:02] in Q4 of 2023. All right let's go ahead and move on to our retail investor questions

[00:17:10] I am going to be honest with you I did not think that Peter Robinson did a great job answering

[00:17:16] any of these questions in the detail that I think the retail investor's and the retail investors

[00:17:24] wanted. I think that Peter he definitely had on his marketing hat and yeah it was these aren't

[00:17:38] great answers but they're great questions so that's why we are going to include them and I did

[00:17:44] include every retail investor's questions just the ones that I thought were relevant so let's

[00:17:49] go ahead and start off I think we have two so we'll start with our first one. Our next question

[00:17:55] is from Paul do you plan to reduce time to market for new products gravity has delayed one year

[00:18:00] third model is now mooted as mid to late decade instead of 2025 as shareholders we're losing

[00:18:05] value due to failures and delays what happened to the all-star team improvement track record?

[00:18:10] Yeah that's a good point actually I mean we saw unprecedented external fallacies that impacted

[00:18:16] us with covid and the global supply chain disruption and that impacted many in the industry not

[00:18:22] just lose it but I would say this you know Tesla is the benchmark for engineering speed

[00:18:29] you know if you look at the time taken between the start of production of Tesla Model S and X it

[00:18:35] was just a bit over three years if you look at when you know I mean we're scheduled for production

[00:18:40] for gravity late this year that's going to be a very similar time period between production of

[00:18:47] air and gravity and that's despite it not been a derivative product there a whole new platform

[00:18:54] so I think that is a world-leading pace of engineering and for a small team to get gravity out

[00:19:00] a landmark product a completely differentiated product in just over three years now midsize

[00:19:08] what we've done is define a schedule for it we're scheduling for late 26 very similar in time

[00:19:14] scale you know it's right there I think this is world class execution frankly so I'm asking you

[00:19:21] did he answer that question I don't think he did he talked about the midsize platform a little bit

[00:19:29] which I think will be a big seller for lucid but here's the thing Peter Rollinson did say all of

[00:19:36] those things about how they had a world class team in place and maybe they do but he early on when

[00:19:44] lucid started making cars he made comments about how they're not going to run into these production

[00:19:51] problems because they have such a mature team and they have a better technology and all of these

[00:19:57] so I want to go back to his comparison with Tesla when the Model X came out it was roughly four years

[00:20:09] it was 2012 is when the Model S was released 2016 when the Model X came out now there could be

[00:20:17] a little less than that depending on when the Model S was released and the Model X was released

[00:20:22] you understand how that works but in the years 2012 2016 lucid delivered the first lucid air

[00:20:33] dream edition October 21 2021 so our October 30th 2021 and that which I thought it was a long time

[00:20:47] ago I can't believe that they it's it's taken them this long to to deliver the car because they

[00:20:51] started or we heard about the lucid air in December of 2016 and then five years later they finally

[00:21:00] released the lucid air dream edition in 2021 so Peter Rollinson's timeline is pretty accurate

[00:21:08] in what he's saying so I have no issue with that the difference is is that Tesla was selling about

[00:21:15] 50,000 Model S's a year in 2020 or in 2016 whereas right now based on a 2023 numbers lucid selling

[00:21:30] less than 9,000 lucids a year lucid airs a year so based on this earnings call lucid is saying that

[00:21:38] scale is an issue they need to scale production well they have been doing this since 2021

[00:21:45] or they've been doing it longer than that but they've been delivering cars since late 2021 and they

[00:21:50] still have not gotten to that point of scaling production and maybe yes maybe their supplier deals

[00:21:56] were terrible they got hit with covid got hit with supply chain issues maybe all of that stuff is

[00:22:04] true but they're still selling less than 10,000 cars a year which is a round 700 slightly more than

[00:22:11] 700 cars a month being sold not even being delivered I guess being produced we'll say being produced

[00:22:17] because they only delivered 6,000 so we're less than 700 cars a month being sold for lucid that's

[00:22:24] a problem if you can't scale up your current production on your car that you've been building

[00:22:30] building for close to three years now and it's really been more than that because there was the

[00:22:36] lead up time to this if you can't if you can't hit scale in that time what makes you think that

[00:22:43] you're going to hit scale on yet another product so their plan is to build the lucid gravity and

[00:22:53] the lucid air on the same line which may not be that bad of a plan considering they're building

[00:22:59] less than 700 or around 700 cars a month that's probably economical I don't know but how efficient

[00:23:08] is this I would imagine it's probably not very efficient because Peter Robinson will talk a little

[00:23:13] bit later about the differences and between the lucid air and the lucid gravity and there are quite

[00:23:21] a bit of things that are the same but there are some big differences and I don't know how exactly

[00:23:26] that is going to end up translating to manufacturing and how difficult that is but I'm

[00:23:32] going to guess that it's not an easy transition especially when you are maxed out around 700 vehicles

[00:23:40] a month if you can't produce more than that then that's a problem I predict that lucid's going

[00:23:47] to hit about 13,000 vehicles delivered in 2023 I really hope I'm wrong on that but I'll say 13,000

[00:23:56] vehicles delivered in 2023 and terms of lucid air gravity I don't have high hopes that they're

[00:24:06] going to hit their mark of delivering anything in late 2024 it might be one of those cases where

[00:24:12] they deliver like five or ten because that way they can say they did it I just I don't have high

[00:24:19] hopes and I like lucid and I like Peter Robinson a lot of people don't I like him I just don't see

[00:24:25] this as being I don't know there's so many I'm getting so many red flags but I don't know enough

[00:24:31] about manufacturing and business to adequately explain why I'm feeling these red flags but I am

[00:24:38] all right let's move on to the next and retail investor question which is is Peter Robinson going

[00:24:47] to take a pay cut it's a great question okay we'll take our last day question from Daniel do you

[00:24:53] plan to take a salary cut to reduce losses or plan to buy back shares to improve stock health

[00:24:59] well many may not be aware of my funding role in this company as we know it today you know I joined

[00:25:07] the company around 11 years ago with a clear goal of making the very best electric vehicle and

[00:25:14] to drive a revolution towards sustainable transportation which was going to benefit everyone

[00:25:21] around there we were called a tether and I guess we had around 19 employees so in 2021

[00:25:28] I received a one-time CEO stock grant and this was solely determined and approved by the board of

[00:25:37] directors and a significant portion of that vested due to the company achieving certain market

[00:25:44] capitalization milestones as we publicly disclosed in 2023 so I think there's a huge miscut

[00:25:53] perception but this one-time grant was received as a salary and somehow we replicate it as my

[00:26:01] salary in the future in fact in 2023 at my request I did not receive a bonus for 2022 nor did I

[00:26:10] receive any further equity grants in 22 or 23 and I just want to assure you my mission and

[00:26:17] my dedication is still unwavering I have not sold a single share of stock in all this time

[00:26:26] over 10 years except what was absolutely necessary for tax purposes and the company stock I receive

[00:26:34] from the grant remains in the form of company stock and so I am also directly tied,

[00:26:41] personally tied directly and hugely to the company's performance as a key shareholder

[00:26:49] and so I'm incentivized that way my promise is to continue to work tirelessly day and night

[00:26:57] to drive brand awareness, to deliver more cars, to find more technology licensing and access

[00:27:05] agreements, to drive down costs and to bring the gravity and mid-size platform to market.

[00:27:12] We have an incredible team we're driving forward and I'm incredibly excited about our product

[00:27:20] I'm all over our future. All right I don't know how much of this is true or not true

[00:27:27] but I do know that it is illegal to lie during these conference calls so I tend to believe

[00:27:38] that this is true but there are ways to phrase things that could be considered ambiguous or

[00:27:45] non-committal so I looked it up according to Fortune Peter Robinson received a $379 million

[00:27:52] compensation package in 2022 which I'm guessing this was for 2021 for his role as CEO

[00:28:01] which is quite a bit of money. He also has $5.5 million in stock options so he has $379

[00:28:10] million in stock or right around that with $5.5 million in stock options

[00:28:18] that's a lot of money no matter how you look at it that's a lot of money but his actual base

[00:28:23] salary is only $500 and I say only but this is quite low for his CEO is $575,000 a year so

[00:28:33] it's not nothing for sure and people can go back and look to see if he sold any of this stock

[00:28:41] more than what he's saying to cover tax purposes and I don't know how the tax stuff works but

[00:28:47] if he did sell more stock than he's letting on that's easy for folks who know how to do it to

[00:28:54] look up. All right let's move on to our analyst question which is roughly you know which is

[00:29:03] more important the lucid gravity or the midsize platform which is going to come in 2026.

[00:29:11] Our first question comes from the line of John Murphy with Bank of America, Yalan is open.

[00:29:17] Good morning everybody good morning I'm good afternoon sorry long that here Peter as you think

[00:29:24] about the gravity you know it's really kind of showcasing your technology not just on the power

[00:29:30] train but also in the body and structures of the vehicle meaning just you have maximum

[00:29:36] interior space for the footprint it's pretty impressive. As we think about the gravity it seems

[00:29:42] like it's going to be a game changer for you in the market however it does seem like the midsize

[00:29:48] platform may be even more important. As we think about the launch of these two programs late

[00:29:54] this year and then the midsize in 2026 you know in relative importance which is more important

[00:30:02] for lucid for for mid to long-term success and how do you kind of gauge that that relative size

[00:30:08] of importance to the company? Thank you John I mean if you ask the question the year or two ago

[00:30:14] people would question our technology today it's a given the world's most we've got the very best

[00:30:19] technology what we haven't got is scale and an economy of scale and that is going to take place

[00:30:26] in three critical steps and the first step happened last week we launched our pure stealth

[00:30:33] initiative. Lucid Air is now available at 69 from 69,900 dollars the best EV on the planet

[00:30:41] at that price that puts us into three times the tam the total addressable markets because now we

[00:30:48] go into e-class Mercedes territory rather than s-class so step one pure from 69,900 three times

[00:30:57] the total addressable market and then schedule for production late this year we have gravity

[00:31:03] the SUV we're talking about six times the tam with gravity and then schedule for production

[00:31:10] late 26th the third step on this this journey midsize 20 times the tam it's all about a scale

[00:31:19] we've got the tech the tech is designed for scale it's about achieving scale and with that we'll

[00:31:25] get the economies of scale and the margins and the profitability. So ultimately just to

[00:31:32] interpret that I mean we're fighting to the position of getting to that even greater scale

[00:31:37] with a midsize and that probably is sort of the the falcon point and where you get to escape

[00:31:43] velocity on profitability and cash flows is that a fairly good way to do we're competing

[00:31:48] with Mercedes and Porsche with midsize we compete directly with Tesla Model Y Model 3

[00:31:56] that's the best sun in car in the world saying you have the best technology hands down does not

[00:32:02] make it true I do believe that lucid has some great tech in their cars they're beautiful vehicles

[00:32:09] I've not seen many people have negative things to say about the lucids however that's a subjective

[00:32:17] statement I wish he would stop doing that like I get it there's some of this stuff that you have

[00:32:22] to say is a CEO but continuously saying that you have the best tech in the world it doesn't make

[00:32:29] it true it's subjective it's your opinion there's lots of great technology out there and what are

[00:32:36] you speaking on you know specifically can't just make this grandiose statement if you say we

[00:32:42] have the best motors in the world and that can be tested great and you do think great and say it

[00:32:49] but I'm just like that's wearing on me like this technology or not technology these

[00:32:54] grandiose statements that without any backing of them all right we talked about this a little bit

[00:33:01] earlier you they need scale I agree you can't scale however without demand I don't think lucid has

[00:33:10] the demand issue but they they they just need to figure out this whole manufacturing thing they need

[00:33:18] to build more than 700 cars a month you know which is you know about 175 cars a week it's not

[00:33:26] it's not a lot it's not a lot all right let's move on to our next clip which talks about lucid

[00:33:31] licensing their technology out to be used on hybrids in hybrid cars maybe even in hydrogen fuel cell

[00:33:41] vehicle cars let's let's learn a little bit more about that you mentioned the potential for hybrid

[00:33:46] technology or or joining obviously and I and I's engine to be part of a hybrid powertrain

[00:33:54] I mean what kind of discussions are going on there and two you know I mean you know in layman's

[00:34:01] terms you know there's all these positions in electric motor to be put or placed in the ice

[00:34:08] you know powertrain from p0 all the way back to p4 and you have various positions in the middle

[00:34:14] as you kind of envision you know what you could bring to the table in a potential positioning

[00:34:20] or integration with an with an ice engine to make a presumably pretty efficient powertrain for

[00:34:25] a hybrid you know where would you land in that in that positioning and have you even thought of

[00:34:31] that at this point so if you just talk about discussions are going on and then sort of your

[00:34:35] your thought process about how you would integrate into an ice engine yes so we're always

[00:34:40] envisaged a key pillar of our business being the technology licensing and supply wing we've got

[00:34:46] the best technology and that's recognised our arrangement with astronauti last year has

[00:34:53] triggered an increase in in our technology we're also growing our own internal

[00:35:03] team so that we'll be able to not just be receiving passively inquiries but actually become

[00:35:09] a little bit more proactive in the future and actually the application for hybrid has come as an

[00:35:16] external inquiry because if you look at the core capabilities of our powertrain the unique selling

[00:35:23] price of it but proposition of it is its efficiency well that applies equally to say a hydrogen fuel

[00:35:31] cell vehicle or gasoline electric hybrid and also its compactness with power and that is very

[00:35:40] relevant to the hybrid because in a hybrid you've got to stuff in a gasoline engine and exhaust

[00:35:46] and all that stuff and that paraphernalia and electric motors and battery and it's really becomes

[00:35:52] a packaging puzzle plus and because we've got the most compact technology that ideally lends

[00:36:01] itself to that now loose it's not going to do hybrids we're ready to battery electric we believe

[00:36:05] purebeth is the solution but certainly the hybrid opportunity opens up a whole new market arena

[00:36:14] technology i don't think he's saying that it's going to be easy to use lucid technology on

[00:36:25] or in hydrogen fuel cell vehicles or in hybrid vehicles but

[00:36:32] i'm not an engineer but i think this is going to cause engineering challenges

[00:36:45] more let's say this i think it's going to cause more engineering challenges for these companies if

[00:36:51] they're going to do this the license it for hybrids or fuel cell cars then it's probably worth

[00:36:58] like lucid has their products designed for electric vehicles i don't know what it's going to look

[00:37:06] like on the hardware side the software side the electrical engineering side to add this technology

[00:37:11] to those other vehicles but it seems like from a third-party manufacturer standpoint it might be

[00:37:20] more difficult than it's worth from a lucid side it makes total sense because they're just like

[00:37:26] yeah here license or technology right as a check here you go but from

[00:37:31] an a manufacturer side it would seem like it's not a plug-and-play solution

[00:37:39] let's go ahead and move on to our final clip which is all about manufacturing advancements

[00:37:46] to drive down cost which i am a big fan of so let's listen to that

[00:37:51] our next question comes from the line of the debtors with evacore isi the line is open

[00:37:58] hey Peter so you mentioned a few manufacturing advancements coming to further

[00:38:03] drive down cost in 2024 this is curious if you can quantify those or give us a couple examples

[00:38:08] on initiatives that you have in progress right now to help on that cost side of the business

[00:38:12] right so we're really looking at further vertical integration particularly in our factory in our

[00:38:20] isona we're bringing stamping in-house and that is going to be right alongside the new body shop

[00:38:28] for our gravity so we will reduce the operational cost we'll reduce op-hicks we'll reduce inbound

[00:38:36] logistics costs we will actually reduce scrap as well and there's an internal efficiency as

[00:38:42] well by having an integrated state-of-the-art hydraulic transfer stamping line with laser-blanking

[00:38:50] facility fully integrated then we're actually moving our our frame which is already vertically

[00:38:58] integrated our wheel class motors inverters drive units all in-house at the moment but that's

[00:39:04] in a separate factory up the road to save those logistics costs by actually putting under the

[00:39:10] same roof as our main factory in Arizona so we will save operational and will be efficiencies

[00:39:17] the other thing we're integrating into that factory is a logistics and we've been able to draw down

[00:39:22] some of the cross-docs I think all the cross-docs now virtually have been drawn down upon so we've

[00:39:26] got an inbound logistics cost savings and then the other thing we're doing is we've re-I really

[00:39:34] revised the organization so that quality reports directly into me were really driving down

[00:39:42] man hours per vehicle perhaps Gankin you could provide a little bit more color on some of

[00:39:48] the initiatives you're driving leading to drive down cost. Yeah thank you Peter so we have

[00:39:55] identified three initiators one scale scale will help us improve our margin this is technology

[00:40:03] and volume race bomb we took some initiatives in 2023 and we are seeing the results but more

[00:40:10] importantly we have identified additional opportunities that will look to operationalize in 2024

[00:40:18] on operational efficiency which is number three and as Peter mentioned we are looking multiple

[00:40:24] areas one freight we made significant improvements in 23 and looking more in 2024

[00:40:32] logistics specifically as we moved from our LSE warehouse to amp 1 phase to general assembly

[00:40:41] this has really helped us in reducing the cost you know this is a consistent exercise

[00:40:49] and we are looking this very carefully this is my number one goal having the cost optimization

[00:40:56] but again it is not easy it's a we're looking at consistently and also we have initiated a team

[00:41:04] under being specifically looking each area very carefully looking at each dollar and bring the

[00:41:11] efficiencies but as we grow as we scale it will bring us efficiencies this is a technology and volume

[00:41:18] race. Yes, tell me it's critical because I you know to drive down the cobs you've got that

[00:41:25] fixed cost components and it's the amortization of your fixed costs overhead depreciation

[00:41:32] for a vehicle so this is well this is you know would be the initiative to start at $69,000

[00:41:38] is three step hitting our total addressable markets the scale will drive down the cost.

[00:41:45] I don't have anything to add to this I just think that it's I think the manufacturing process

[00:41:51] is fascinating and how they improve companies improve efficiencies and their processes to make it

[00:42:01] more economical to build these vehicles I think that's really interesting so I thought this clip

[00:42:07] was really interesting but I don't have anything to add to it. So with that we're going to go ahead

[00:42:14] and call this our show for today I hope you enjoyed it on Friday's show we're back to

[00:42:22] EV news so I hope you all enjoyed the interviews and and special episodes that we had

[00:42:29] if you want to email me you can it's bodibio di at 918 digital.com you can also find me on Twitter

[00:42:37] or x at 918 digital I hope you all have a wonderful week and I will talk to you on Friday

[00:42:44] Oops you know what I forgot I forgot one clip and we'll just play it here at the end and then

[00:43:13] we'll let it go this one has to do with how many parts the air and the gravity share I mentioned

[00:43:20] this earlier when we talked about lucid using the same line to produce the gravity in the air

[00:43:26] it was a whole long diatribe on my part so it'd be irresponsible of me for not to not include it

[00:43:32] so let's go ahead and listen and then I will talk to you on Friday. My second question

[00:43:37] was related to the air and the gravity if I put aside the distances and the interior and exterior

[00:43:45] of the vehicles are you able to share roughly what proportion of parts and componentry are shared

[00:43:51] I guess the fact that these vehicles are using different platforms may impact the variable cost

[00:43:58] and assumptions that was previously communicated that both vehicles would leverage leap.

[00:44:03] Okay let me cover that if you look at the battery pack which is the core core part of the

[00:44:10] bill of materials of both vehicles it is about 95% the same it's that both got the same number

[00:44:18] of modules the same number of cells they're made exactly on the same line it's just that the two

[00:44:23] of the top modules are in a different location we move them from underneath the rear seating air

[00:44:28] to underneath the front seating gravity this has a transformative effect upon the nature of the

[00:44:34] vehicle which in turn leads to much bigger tam we can only capture that tam by having a degree

[00:44:43] of differentiation now if you look at the core powertrain the drive units and the inverters

[00:44:50] they're very very high proportionary over slightly different gear ratios because the wheels

[00:44:55] are bigger and you need more correct abilities you have slightly lower gear ratios now the rest

[00:45:01] of the platform if very similar which has meant that it's saved on our R&D cost because we've got

[00:45:07] all the learning and the process knowledge of how we rivet and glue the sheets of

[00:45:13] settings the castings and the extrusion together but there is a degree of difference in that

[00:45:21] platform which I think makes a whole bunch of sense because it makes the gravity a true SUV

[00:45:29] not some sort of soft SUV derivative and that means we go into whole new tam six times

[00:45:38] we would not be able to capture that tam and also you'd need to double the tools anyway

[00:45:44] because of the extra volume so then we look at the upper body shell of the car they're always

[00:45:50] going to be different anyway so we're talking about a very slight imprecrisse in tooling costs

[00:45:59] but in in return for that we truly enter a massively bigger tam six times and this is all

[00:46:07] about economy of scale we've got the technology it's designed for scale we just haven't achieved

[00:46:12] that scale yet and so then if it's not showing on our P&L