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Lucid Group, Inc. (NASDAQ:LCID) Deutsche Bank Global Auto Industry Conference June 11, 2024 2:40 PM ET
Company Participants
Peter Rawlinson - CEO and CTO
Conference Call Participants
Emmanuel Rosner - Deutsche Bank
Emmanuel Rosner
Pleased to be joined today by Peter Rawlinson, who is the CEO and CTO of the company. As you probably all know, Lucid is a vehicle manufacturer specializing in luxury electric vehicles, as well as electric technology. The company is targeting production of 9,000 units for this year. I think you have delivered similar amounts last year and also recently raised a $1 billion in financing via a private placement.
So the format for today's session will be a presentation by you Peter. And then, after that we will jump into a few of our questions. So with all that, thanks for being with us. Over to you.
Peter Rawlinson
Thank you, Emmanuel. Thank you ladies and gentlemen. With that, I will dive straight in because I think there is probably a lack of awareness about what Lucid is about, why we exist, what our mission is, what our ambitions and goals are. So maybe it will be helpful for me to cover a few of these issues to put our discussion today into an appropriate context.
First of all, there are some forward-looking statements, legal stuff. So I will run through that in milliseconds and get to the meat of my presentation. So we founded Lucid in 2016 and with a clear vision to advance the state-of-the-art of electric vehicles and electric propulsion systems to a whole new level in order to truly accelerate that transition to sustainable mobility. And to that aim we actually engaged in the Formula E World Championship supplying all the batteries to that World Championship Motor Sports Series in 2018. And then in 2019 with the funding from the Public Investment Fund from Saudi Arabia, we actually started building our factory, the first purpose built electric vehicle factory in North America.
And during COVID in record time by summer of 2020, we were already building prototypes. And by late '21, we got the Lucid Air into production, the Motor Trend Car of the Year, our very first shot. This is 2.5 years from securing our funding. This is world record breaking time. Then we revealed the most incredible performance car on the planet, the Sapphire. We put that into production last year together with announcing an Aston Martin supply deal getting our pure, the base level version of air at $69,900 into production. And this year we're preparing for the launch of the Lucid Gravity which is scheduled for production late this year. Really going to be a landmark seminal product, best SUV on the planet.
So with various variations of Lucid Air behind us we look forward to the big steps which are going to really multiply our markets, total addressable market. Six times with the Gravity SUV program late this year and scheduled for production late '26. The big one. This is going to be our Tesla Model 3, Model Y competitor. This is going to be the platform that we're designing to make a million units a year of. This is a mid-size program scheduled for late '26.
And so key to this, central to this as a technology company we make all the technology in-house and it's truly world-class. The battery pack, the motor and transmission, the inverter, the Wunderbox charging system and central to all this is our software. And it's not enough just to make it in-house, design it in-house. We actually make it in-house in a vertically integrated factory in Arizona and even that's not enough. There's no point in doing any of that if it isn't truly differentiating. And it's going to be differentiated from anything you can buy off the shelf. And it's that technological leadership that we've created by redesigning all this from scratch, making it in-house, taking it to another level that really sets us apart.
And I think if you really want to distill what makes, what differentiates one EV company from another, it really is efficiency. And what do I mean by that? It means how far can I go with how little battery? Can I go further with less batteries? Because it's not range. Anyone can achieve range. Achieving dumb range is easy. You just stuff zillions of batteries in and you're seeing that from our competitors now, massive battery packs. That's not smart. Anyone can do that. It's how far can you go with how little? That's what really differentiates. And why? Because that gives us a profound commercial strategic advantage in the future.
With our technology, and this is a chart of the runners and riders of the EV space, and the green bars are the Lucid products. You can see we're not in a position of mere leadership. There's a step change before our products. There's one exception. This is the Sapphire. This is a hypercar. To have a hypercar at this end of the spectrum is extraordinary. We can leave this because we can go further with less battery. We can endow an electric vehicle with range. How much does it cost to endow a mile of range on an EV? And I'm using Bloomberg's figures, very conservative, 128 bucks per kilowatt hour. I think the real number is more like 150. Even at that rate, we're operating at 27 pence per mile of range. And some of these bad boys, this end, it's $58 per mile.
And what does this mean? And why is this so significant? Well, the reason is we're addressing the fundamental obstacle to widespread EV adoption, and that is really the cost of entry. And why is an EV so expensive to make? Because of the contribution of the battery cost to its manufacture. If I look at a relatively high-end EV, we see that a battery cost can represent as much as 37% of the total bill of materials manufacturing that EV. And actually, for a more affordable EV, that battery cost can be over 40%. It's that significant.
So when others are looking for saving maybe 130 bucks on a car through a giga-casting, I am going for the jugular. I'm going for thousands of dollars advantage. And let's put that into perspective. We've got Lucid Air with our technology, compared apples for apples with two competitors. And we see that if those competitors adopted Lucid'S technology, the technology we have in production today, not something pie in the sky 10 years from now, what we have today, normalized, those competitors would enjoy a cost saving of $2,000 or up to over $4,000 per car manufactured for the same range.
This is getting the same range for significantly less battery cost by using Lucid'S technology. That means that we are uniquely positioned in the future to take advantage of that. And that's what makes us, what positions us in a very differentiated position financially.
Our finances right now are dominated by long-term investments for the future. But do not let that fool you. This will come to bear in the future. This fundamental profound advantage we've got, whatever the range of electric car, we can make it with less battery than the competition. And the battery represents a vast proportion of the cost of making that car.
So to wrap up, I'd like to make a, what I think is a real seminal announcement in the history of sustainable transportation. We've been founded and formed as a company Lucid to really advance the state-of-the-art, to chase down how many miles per kilowatt hour we can achieve. And today, ladies and gentlemen, I'd like to announce that we have finally achieved a major objective.
We've managed to achieve a certified five miles per kilowatt hour with one of our products. We're going to give an announcement of that very soon. But the EPA have validated our technology with a product that we have, which is going to achieve this landmark. When others are three miles per kilowatt hour or four miles per kilowatt hour, very best. We've managed to crack the five miles unit. This is a landmark.
And I've said many times, our objective as a company is to get to six miles per kilowatt hour, because nothing less than that is going to save the planet. Thank you.
Question-and-Answer Session
Q - Emmanuel Rosner
Thank you so much for this overview here. So if we start with the technology side, so one of Lucid's key differentiators is that much of the technology is designed and manufactured in-house. How much of a competitive advantage is it versus other players, but just as importantly, how do you preserve this mode?
Peter Rawlinson
It's very significant. It means that whatever journey one takes, even with the Lucid Air Pure we have today, which achieves 4.74 miles per kilowatt hour for the user, any journey you take, A to B, if it's from the home to the shops, to your commute to work on your vacation, you actually use less electricity than the competition. And because there's a need to use less energy, battery size is smaller.
So there's less impact upon minerals and the world's resources. So you're driving the most sustainable car on the planet. And this is quite significant. We have an advantage over some competitors, which is over 50%. And one of those benchmarks I just showed, we can actually go 50% further than the competition with the same battery size. Or you could have two-thirds of the battery size, to go the same distance.
Now, in terms of the gap we have, as you see with the five miles per kilowatt hour, the gap is growing. It's not shrinking. The gap between us and the nearest competition is growing. And there's a reason for that. Because we've committed as a company, we've structured the whole company as an engineering and science led company. I've got the most brilliant engineers in the world. And we're on a mission to grow this gap.
This is very important for the environment and for the planet. And also gives us a commercial advantage. Now, nothing that even a patent has a life expectancy. But this is a case of how far can we run, how fast we can run. And this is a tech race. And no one is staying still. And I believe we're running faster than anyone else.
Emmanuel Rosner
I think in the past, you've indicated openness to monetizing usage technology also through partnerships with other OEMs, licensing or supply agreement. Can you talk about your efforts there and initial indications of interest?
Peter Rawlinson
Yes well, we announced a landmark deal with Aston Martin last year, worth then at least $450 million to really provide world class electric powertrain, their next generation hypercars for the next decade. And I think it was appropriate that that sapphire technology, our top flight technology, ours are top flight supercar brands like Aston. If you look at the tech that we have today in mass production, that would suit a typical luxury car.
But it gets really exciting in the future, because the tech that we're developing for our midsize plant really would suit family car of the future. And so, it's a little wonder that we've attracted attention from other automakers. And we are in discussion with the number at the moment.
Emmanuel Rosner
Now, I guess one of Lucid's large challenges is the lack of volume scale so far, which is impacting unit economics. How much of your current losses per vehicle, is due to lack of scale, versus your bill of material?
Peter Rawlinson
It's dominated by battery actually. If we look at the amortization of the depreciation of our factory, we have a factory, which we're currently expanding in Arizona. We'll have a 90,000 per annum capacity into this year ready for Gravity. But we've announced that we will make, we plan to make 9,000 vehicles. So this amortization of depreciation, is quite a factor. It's all about scale.
But let me tell you, in Q1, we grew ourselves 40% year-on-year with Q1 of 2023. In '23, we grew - per annum 37% over '22. The world is spreading and far more people are adopting Lucid. The world is growing just how wonderful this product is.
Emmanuel Rosner
So what are the key milestones, or as well as challenges that you expect to face in basically reducing production costs and achieving scale, and positive gross margin?
Peter Rawlinson
Well, it's all about scale. It's all about scale. But we're assiduously chasing costs. We're taking appropriate measures with inventory control. And the impairment is a consequence of that. We're nicely bringing down our inventory numbers. We saw that through Q1. We're making steady progress in our logistics. But it is all about scale. And we have three steps to achieve that.
Our first step is relentlessly grow Lucid Air sales. We're working assiduously on that. Second step is to introduce Gravity SUV with a six times addressable market. And that is scheduled for production start later this year. And then the third step, the really big one, going for 30 times TAM, with a mid-sized product, late '26. And that's a product we're talking about 48 to 50 times.
Emmanuel Rosner
And on step two, which is the Gravity SUV, Edward, for later this year. Have you shared any volume goals there?
Peter Rawlinson
Well, I'd like to sell as many as I possibly can. We'll have a factory, which has got 90,000 capacity. So and I think we've got a product that really resonates with the American psyche. Everyone I'm speaking to, it's very interesting. A lot of people really love the Lucid Air when they saw it. But the constant - I'm getting from people who review the Gravity is one cannot buy one of them. So the sky's the limit. I want to sell as many as I can.
Emmanuel Rosner
Well, broadly, can you provide an update on the demand environment for EVs and for your EVs? Are you seeing the environment strengthen, weaken, stabilize, since I guess in the last few months?
Peter Rawlinson
Well, it's very interesting that the narrative, because we're experiencing the pull of opposites. In Q1, we saw a growth of our deliveries ourselves by 40% year-on-year. We're saying we're outselling Porsche Taycan, sorry EQS in North America? We're outselling BMW i7. We're outselling the Audi e-tron GT. We're seeing a growing steady demand for our product as the word sprints.
So, I think there is a narrative here, which may be born of too many people getting bad experiences from EVs, which is subpar. And I think people should take a serious look at a Lucid Air, which is an outstanding product and far superior to gasoline counterparts and far superior to hybrids, which really compound - the worst of both worlds.
Emmanuel Rosner
Can you share more details on your midsize vehicle, which is scheduled start production in late 2026? You talk a little bit about it during the presentation, but what would be the overall competitive landscape in that segment? What, volume ultimately envisioned for that product?
Peter Rawlinson
So this is the huge project for us. This is the big one. This is really what's going to propel us into a volume player. And we need to be that to have a meaningful impact upon the environment. That is central to our sense of purpose and sense of mission. That's why I'm here. That's why the whole team's here. And central to that is you saw that although a relatively high-end EV, the battery can represent 37% of the bond costs.
When you go down market, then that percentage becomes even more significant. So we have a profound and inherent advantage as a company. This is where we will define our technological advantage for financial effect, because we will be able to make that car with a very competitive range, with a significantly smaller battery pack than anyone else.
That gives us a cost advantage on the bill of materials of a midsize. And remember, midsize is a world platform. We can have more than one type of vehicle off that platform. In fact, we're planning there will be at least two variants, different models based upon that common platform, which is being architected as a flexible platform, state-of-the-art, with absolutely embodying all our learnings, the cost down everything that we've accrued from Air and Gravity.
The target price is about $48,000 at today's prices. We've currently started construction of our AMP-2 factory in Saudi Arabia. The foundations have been poured for that. That will have a capacity of 150,000 units per annum. And we're also going to bring a model of midsize into our factory in Arizona. So this is very exciting. It really is the big project for us. And it's well underway. My advanced engineering team and design studio teams should be working on it as we speak.
Emmanuel Rosner
Do you need the volume from this midsize vehicle to get to the scale that enables you to be profitable?
Peter Rawlinson
Certainly, it's a profit enabler. I think I'm very optimistic with Gravity. Because I think Gravity is going to give us sufficient product definition to mitigate risk of cannibalization across from that. You've got something which is a true SUV, which is truly differentiated from a Lucid Air, much more different than say a Tesla Model X is from Model S. Those are more similar car-like products. So I think Gravity is a unique product. In its own right, can it give us that profitability? That is yet to be seen, because that will become volume dependent on that product. But certainly, the midsize is the key enabler for scale. And also, that works in a favorable manner with our purchasing power as well.
Because remember, you shouldn't think of the bond cost as a fixed. Bond cost is itself a variable, which is a function of volume as well. Because the suppliers in turn have to amortize their fixed cost against the volume of parts they supply you. So in short, very confident that midsize will give us that. And hopefully, we'll get very close with Gravity.
Emmanuel Rosner
Can you talk to us about Lucid's relationship with the PIF? How much ownership does it have? What is the plan for the new factory in Saudi Arabia?
Peter Rawlinson
Yes. Well, the PIF has been a wonderful part. It's really super committed. And we do truly operate in a sense of true partnership. Since we first met and committed to a contract in 2018, right through thick and thin. They've gone pro rata on every funding round until very recently. They own just over 60% of the company.
And I think what is really important to recognize here is that the relationship really transcends a mere financial investment. We are interwoven in our ambitions. There is a vision, Vision 2030 in Saudi Arabia, for their economy to transition away from fossil fuel dependency. It's a bold vision to a sustainable model. And we are undeniably a cornerstone of implementing that vision.
So we are bound by this common sense of purpose, and mission, and real desire. I mean, we want midsize housing late 26, as much as the PIF do. We're bound by this desire as much as the PIF do. We're bound by this desire. They want it as much as I do, because it's going to be a cornerstone of their economy. And it's a cornerstone of the future of this.
Emmanuel Rosner
In terms of the plans for the factory there, will this be the first place where midsize will be produced?
Peter Rawlinson
To start with, that's the plan, absolutely, yes.
Emmanuel Rosner
And that will be for global markets?
Peter Rawlinson
A global markets is our global platform, global car. As I say, I would like Lucid to be making over a million cars a year in the early 2030s. I know that sounds at all order because we only delivered 6,000 last year. But we're on an upward trajectory. And we're on a path to make more affordable, more attainable cars available to more people that are superior.
If you look at the work that we're doing on midsize right now, all the attributes, advanced aerodynamics, incredible performance, incredible spaciousness, and yet with real affordability, a great practical car for the family, and with very advanced software and user experience. That's the future products. And that's what the world wants, fully connected car, computer on wheels.
Emmanuel Rosner
Very just either finally for me. Can you talk to us about your cash position and runway? I think currently you have $2.2 billion in cash and cash equivalents. And then -- so how do you see free cash over the next few quarters and years? Do you need to raise more capital and when?
Peter Rawlinson
So we announced with our Q1 earnings that we had around $5 billion cash or cash equivalents. And we have enough financial runway to see us well into 2025. But we are a capital intensive business. There's no question about that. And so I take an entrepreneurial view of raising capital when the time is right. And we've made profound investments.
If you look at our plant in Arizona, how much vertical integration that we've embodied there? I was touring there just two weeks ago. We've put a big chunk of money into our in-house stamping line. That will reduce our OpEx. But of course it all represents more CapEx. Our robotic automated line for assembling the body structures of Gravity as huge investments. And also we've invested in what I think is the most advanced electric powertrain plant in the world. We had that just up the road a few miles away from our main plants running at a relatively modest volume. We've now brought that into the under the same roof as well as logistics.
So these are significant investments for the long-term that we've made. We've continued to make, because Lucid is a long investment play. That's what we're about. Not about a short-term grid win. We've only got to tour our plant. And then if you look what we're doing in Saudi Arabia, that's a very significant. So absolutely we will need to have further round of investments in the future in order to realize this very bold long-term vision.
Emmanuel Rosner
Make sense. We'll have a few minutes left for any questions in the room if there are any. Let's raise your hand and we'll bring a mic.
Unidentified Analyst
Hi, can you talk about some of the key steps between here and Gravity launch? Clearly this is not a simple thing, but you've also been working at it for a while. You've watched the Lucid now. Just talk about what are the key gates that you need to kind of get through between here and there to launch on time? Thank you.
Peter Rawlinson
So the question is what are the key steps to Gravity launch? So I would ask all of you to follow the Road to Gravity Center videos that we're posting on social media on almost weekly basis and putting on our website, where you can follow the course of Gravity's readiness for production. And there are three key pillars to getting Gravity into production. It's getting the product right, getting the factory ready, and getting the supply base right around the world spooled up. We have several hundred suppliers, several thousand parts that we have to have the right quality at the right time.
So right now we've just completed our build of about 80 beta prototypes. And we're in the heart of the testing of those. We've had some very successful crash tests of betas, but those don't count for our moligation. You have to test pre-production vehicles for that. Right now we've got the robotic line in the factory fully assembled.
The robots are training, they're making the initial movements to rivet sheets of aluminum together. We're feeding some of the initial sheets of aluminum and fine tuning the positions of those robots. Our paint shop is almost there. The spray booths I visited just two weeks ago, we were spraying Gravity's, albeit prototypes, very successfully.
Some of the - parts for the sealant are still to be fine-tuned. Our general assembly line, is actually pretty well operational in readiness for Gravity, and we're going to be building our first Gravity battery packs somewhere around this week for pre-production. So the factory is getting ready for pre-production, and we plan to build our very first our pre-production body shells later this month, the next few weeks, actually.
So the pre-production phase will take us through the summer, and those cars will be used for crash testing, for homologation, and for EPA testing to get the range, and also for training of all the associates, our brilliant associates, the team in Arizona who are going to build the cars with a huge dose of Arizona pride, I must say, so that they can dial in their quality and the fit and finish of these vehicles.
And so, it's scheduled to roll off the production line late this year, and I'm really excited, because I think it's going to be a seminal product. There's nothing close to it. We're targeting around 440 miles range, seven-seat, three-row SUV, and it drives like a sports car. You can drive this thing really fast. It's a real Lamborghini Urus killer.
Emmanuel Rosner
I exaggerate not. Congrats on the five miles per kilowatt hour achievement. My question is on your ability to continue to improve miles per kilowatt hour, decrease battery size. What's it going to take for you to get to your goal of six, you think? Is it going to be a mix of weight saving from smaller and smaller batteries, or battery chemistry improvements, or powertrain efficiency? How do you get to that six?
Peter Rawlinson
Yes, it's a combination of all those things. We've got some new motor control switching technology, which we're going to over the air to the whole fleet very soon. So, we've got a software OTA-able advance in motor control. We've got some very exciting advancements in electromagnetism in the motor, because what you're chasing is minimizing heat, minimizing the number of electrons that from the battery are wasted in generating heat.
You want all the electrons to turn the wheels. That's what it's all about. So it's every step in that journey. We've gone to ultra-high voltage, with the highest voltage car in the world, 924 volts. I'd like to go more like a thousand volts, because each of these tiny incremental steps takes - its place. I think advances in tire technology are key. Even wheel bearing type and wheel bearing choice has a huge impact upon getting to that six.
So, but there are trades there in terms of the steering feel back with the different wheel bearing types. So all of these attributes combined, but remember we're achieving five with a relatively large luxurious car, a Lucid Air. Imagine if I said to you, I've just broken the world record for gas mileage. And by the way, it's with an S-class Mercedes. Because that's what I've just done.
If I can get five today with a Lucid Air, maybe we're really close to six, with something like a Volkswagen bolt type vehicle today. And my science team, we've commissioned and I've just approved a program to get us to six. And I'm going to be releasing information on mission, that vision later this summer.
Emmanuel Rosner
Thank you, Peter, for very insightful explanations, including the technology. Two questions, how will you ensure to maintain the innovation advantage as your competitors, and you showed two of them in a sanitized manner, are truly also in a catch-up mode. They're working on the same issues, whether it's the battery pack density, next generation of power electronics, converters, et cetera. And then number two, consumers buy not only on the classic electric vehicle features. There are other aspects by consumers in the luxury domain, indeed deciding for a vehicle of one competitor versus the other. So brand design and congrats to the Lucid Air as fantastic vehicles, so no question. Thank you.
Peter Rawlinson
So I think there was a historical analogy to your first question about [indiscernible]. When I joined Tesla in 2000, it was February 2009 as Chief Engineer and Model S. It wasn't - the company just wasn't taken seriously at all. When I left in January 2012, the narrative had switched to the advantage that Tesla was temporary. Just wait till the Germans come. The advantage will be wiped out.
That hasn't been the case what probably has owned now. And Germans haven't. They've actually has been singular failure in catching Tesla. And why is that? And how did how did Lucid get into this position? How were we able to leapfrog not just everybody else the Germans? And we're about three or four years ahead of Tesla right now on this, if you extrapolate where Tesla is. Tesla is not even close to us. And believe you me they're trying like crazy. I know they're trying like crazy to do this. We are significantly ahead. It's all about hand picking the most brilliant team, motivating them, getting them totally geared up, that this is the mission, the sense of mission from the very top of the company.
And Lucid is not distracted. I think Tesla is distracted right now. And I think this is the difference. I think there are many distractions there with social media and the likes. And Lucid has laser focus. We've taken the mantle and we're leading the technology. This is something no one else has done. And while I'm in this position, we'll keep driving ahead. We'll get to six before everyone else. I'm very confident. And then brand. I think the product defines brand. You know, we outsell the mighty Porsche, Taycan, this Q1. Why is it the mighty Porsche? It's the built-in brand on technical innovation and excellence. You go back to Le Mans wins with the 917 in the Pierre era. What drove that Pierre was an engineer who drove that company and that brand. We're going to do the same.
Emmanuel Rosner
I think we're right out of time. So Peter, thank you so much for your time and insight to that. Thank you.
Lucid Group, Inc. (LCID) Deutsche Bank Global Auto Industry Conference (Transcript)
Lucid Group, Inc. (NASDAQ:NASDAQ:LCID) Deutsche Bank Global Auto Industry Conference June 11, 2024 2:40 PM ETCompany ParticipantsPeter Rawlinson - CEO and...
seekingalpha.com
Lucid Group, Inc. (LCID) Deutsche Bank Global Auto Industry Conference (Transcript)
SA TranscriptsLucid Group, Inc. (NASDAQ:LCID) Deutsche Bank Global Auto Industry Conference June 11, 2024 2:40 PM ET
Company Participants
Peter Rawlinson - CEO and CTO
Conference Call Participants
Emmanuel Rosner - Deutsche Bank
Emmanuel Rosner
Pleased to be joined today by Peter Rawlinson, who is the CEO and CTO of the company. As you probably all know, Lucid is a vehicle manufacturer specializing in luxury electric vehicles, as well as electric technology. The company is targeting production of 9,000 units for this year. I think you have delivered similar amounts last year and also recently raised a $1 billion in financing via a private placement.
So the format for today's session will be a presentation by you Peter. And then, after that we will jump into a few of our questions. So with all that, thanks for being with us. Over to you.
Peter Rawlinson
Thank you, Emmanuel. Thank you ladies and gentlemen. With that, I will dive straight in because I think there is probably a lack of awareness about what Lucid is about, why we exist, what our mission is, what our ambitions and goals are. So maybe it will be helpful for me to cover a few of these issues to put our discussion today into an appropriate context.
First of all, there are some forward-looking statements, legal stuff. So I will run through that in milliseconds and get to the meat of my presentation. So we founded Lucid in 2016 and with a clear vision to advance the state-of-the-art of electric vehicles and electric propulsion systems to a whole new level in order to truly accelerate that transition to sustainable mobility. And to that aim we actually engaged in the Formula E World Championship supplying all the batteries to that World Championship Motor Sports Series in 2018. And then in 2019 with the funding from the Public Investment Fund from Saudi Arabia, we actually started building our factory, the first purpose built electric vehicle factory in North America.
And during COVID in record time by summer of 2020, we were already building prototypes. And by late '21, we got the Lucid Air into production, the Motor Trend Car of the Year, our very first shot. This is 2.5 years from securing our funding. This is world record breaking time. Then we revealed the most incredible performance car on the planet, the Sapphire. We put that into production last year together with announcing an Aston Martin supply deal getting our pure, the base level version of air at $69,900 into production. And this year we're preparing for the launch of the Lucid Gravity which is scheduled for production late this year. Really going to be a landmark seminal product, best SUV on the planet.
So with various variations of Lucid Air behind us we look forward to the big steps which are going to really multiply our markets, total addressable market. Six times with the Gravity SUV program late this year and scheduled for production late '26. The big one. This is going to be our Tesla Model 3, Model Y competitor. This is going to be the platform that we're designing to make a million units a year of. This is a mid-size program scheduled for late '26.
And so key to this, central to this as a technology company we make all the technology in-house and it's truly world-class. The battery pack, the motor and transmission, the inverter, the Wunderbox charging system and central to all this is our software. And it's not enough just to make it in-house, design it in-house. We actually make it in-house in a vertically integrated factory in Arizona and even that's not enough. There's no point in doing any of that if it isn't truly differentiating. And it's going to be differentiated from anything you can buy off the shelf. And it's that technological leadership that we've created by redesigning all this from scratch, making it in-house, taking it to another level that really sets us apart.
And I think if you really want to distill what makes, what differentiates one EV company from another, it really is efficiency. And what do I mean by that? It means how far can I go with how little battery? Can I go further with less batteries? Because it's not range. Anyone can achieve range. Achieving dumb range is easy. You just stuff zillions of batteries in and you're seeing that from our competitors now, massive battery packs. That's not smart. Anyone can do that. It's how far can you go with how little? That's what really differentiates. And why? Because that gives us a profound commercial strategic advantage in the future.
With our technology, and this is a chart of the runners and riders of the EV space, and the green bars are the Lucid products. You can see we're not in a position of mere leadership. There's a step change before our products. There's one exception. This is the Sapphire. This is a hypercar. To have a hypercar at this end of the spectrum is extraordinary. We can leave this because we can go further with less battery. We can endow an electric vehicle with range. How much does it cost to endow a mile of range on an EV? And I'm using Bloomberg's figures, very conservative, 128 bucks per kilowatt hour. I think the real number is more like 150. Even at that rate, we're operating at 27 pence per mile of range. And some of these bad boys, this end, it's $58 per mile.
And what does this mean? And why is this so significant? Well, the reason is we're addressing the fundamental obstacle to widespread EV adoption, and that is really the cost of entry. And why is an EV so expensive to make? Because of the contribution of the battery cost to its manufacture. If I look at a relatively high-end EV, we see that a battery cost can represent as much as 37% of the total bill of materials manufacturing that EV. And actually, for a more affordable EV, that battery cost can be over 40%. It's that significant.
So when others are looking for saving maybe 130 bucks on a car through a giga-casting, I am going for the jugular. I'm going for thousands of dollars advantage. And let's put that into perspective. We've got Lucid Air with our technology, compared apples for apples with two competitors. And we see that if those competitors adopted Lucid'S technology, the technology we have in production today, not something pie in the sky 10 years from now, what we have today, normalized, those competitors would enjoy a cost saving of $2,000 or up to over $4,000 per car manufactured for the same range.
This is getting the same range for significantly less battery cost by using Lucid'S technology. That means that we are uniquely positioned in the future to take advantage of that. And that's what makes us, what positions us in a very differentiated position financially.
Our finances right now are dominated by long-term investments for the future. But do not let that fool you. This will come to bear in the future. This fundamental profound advantage we've got, whatever the range of electric car, we can make it with less battery than the competition. And the battery represents a vast proportion of the cost of making that car.
So to wrap up, I'd like to make a, what I think is a real seminal announcement in the history of sustainable transportation. We've been founded and formed as a company Lucid to really advance the state-of-the-art, to chase down how many miles per kilowatt hour we can achieve. And today, ladies and gentlemen, I'd like to announce that we have finally achieved a major objective.
We've managed to achieve a certified five miles per kilowatt hour with one of our products. We're going to give an announcement of that very soon. But the EPA have validated our technology with a product that we have, which is going to achieve this landmark. When others are three miles per kilowatt hour or four miles per kilowatt hour, very best. We've managed to crack the five miles unit. This is a landmark.
And I've said many times, our objective as a company is to get to six miles per kilowatt hour, because nothing less than that is going to save the planet. Thank you.
Question-and-Answer Session
Q - Emmanuel Rosner
Thank you so much for this overview here. So if we start with the technology side, so one of Lucid's key differentiators is that much of the technology is designed and manufactured in-house. How much of a competitive advantage is it versus other players, but just as importantly, how do you preserve this mode?
Peter Rawlinson
It's very significant. It means that whatever journey one takes, even with the Lucid Air Pure we have today, which achieves 4.74 miles per kilowatt hour for the user, any journey you take, A to B, if it's from the home to the shops, to your commute to work on your vacation, you actually use less electricity than the competition. And because there's a need to use less energy, battery size is smaller.
So there's less impact upon minerals and the world's resources. So you're driving the most sustainable car on the planet. And this is quite significant. We have an advantage over some competitors, which is over 50%. And one of those benchmarks I just showed, we can actually go 50% further than the competition with the same battery size. Or you could have two-thirds of the battery size, to go the same distance.
Now, in terms of the gap we have, as you see with the five miles per kilowatt hour, the gap is growing. It's not shrinking. The gap between us and the nearest competition is growing. And there's a reason for that. Because we've committed as a company, we've structured the whole company as an engineering and science led company. I've got the most brilliant engineers in the world. And we're on a mission to grow this gap.
This is very important for the environment and for the planet. And also gives us a commercial advantage. Now, nothing that even a patent has a life expectancy. But this is a case of how far can we run, how fast we can run. And this is a tech race. And no one is staying still. And I believe we're running faster than anyone else.
Emmanuel Rosner
I think in the past, you've indicated openness to monetizing usage technology also through partnerships with other OEMs, licensing or supply agreement. Can you talk about your efforts there and initial indications of interest?
Peter Rawlinson
Yes well, we announced a landmark deal with Aston Martin last year, worth then at least $450 million to really provide world class electric powertrain, their next generation hypercars for the next decade. And I think it was appropriate that that sapphire technology, our top flight technology, ours are top flight supercar brands like Aston. If you look at the tech that we have today in mass production, that would suit a typical luxury car.
But it gets really exciting in the future, because the tech that we're developing for our midsize plant really would suit family car of the future. And so, it's a little wonder that we've attracted attention from other automakers. And we are in discussion with the number at the moment.
Emmanuel Rosner
Now, I guess one of Lucid's large challenges is the lack of volume scale so far, which is impacting unit economics. How much of your current losses per vehicle, is due to lack of scale, versus your bill of material?
Peter Rawlinson
It's dominated by battery actually. If we look at the amortization of the depreciation of our factory, we have a factory, which we're currently expanding in Arizona. We'll have a 90,000 per annum capacity into this year ready for Gravity. But we've announced that we will make, we plan to make 9,000 vehicles. So this amortization of depreciation, is quite a factor. It's all about scale.
But let me tell you, in Q1, we grew ourselves 40% year-on-year with Q1 of 2023. In '23, we grew - per annum 37% over '22. The world is spreading and far more people are adopting Lucid. The world is growing just how wonderful this product is.
Emmanuel Rosner
So what are the key milestones, or as well as challenges that you expect to face in basically reducing production costs and achieving scale, and positive gross margin?
Peter Rawlinson
Well, it's all about scale. It's all about scale. But we're assiduously chasing costs. We're taking appropriate measures with inventory control. And the impairment is a consequence of that. We're nicely bringing down our inventory numbers. We saw that through Q1. We're making steady progress in our logistics. But it is all about scale. And we have three steps to achieve that.
Our first step is relentlessly grow Lucid Air sales. We're working assiduously on that. Second step is to introduce Gravity SUV with a six times addressable market. And that is scheduled for production start later this year. And then the third step, the really big one, going for 30 times TAM, with a mid-sized product, late '26. And that's a product we're talking about 48 to 50 times.
Emmanuel Rosner
And on step two, which is the Gravity SUV, Edward, for later this year. Have you shared any volume goals there?
Peter Rawlinson
Well, I'd like to sell as many as I possibly can. We'll have a factory, which has got 90,000 capacity. So and I think we've got a product that really resonates with the American psyche. Everyone I'm speaking to, it's very interesting. A lot of people really love the Lucid Air when they saw it. But the constant - I'm getting from people who review the Gravity is one cannot buy one of them. So the sky's the limit. I want to sell as many as I can.
Emmanuel Rosner
Well, broadly, can you provide an update on the demand environment for EVs and for your EVs? Are you seeing the environment strengthen, weaken, stabilize, since I guess in the last few months?
Peter Rawlinson
Well, it's very interesting that the narrative, because we're experiencing the pull of opposites. In Q1, we saw a growth of our deliveries ourselves by 40% year-on-year. We're saying we're outselling Porsche Taycan, sorry EQS in North America? We're outselling BMW i7. We're outselling the Audi e-tron GT. We're seeing a growing steady demand for our product as the word sprints.
So, I think there is a narrative here, which may be born of too many people getting bad experiences from EVs, which is subpar. And I think people should take a serious look at a Lucid Air, which is an outstanding product and far superior to gasoline counterparts and far superior to hybrids, which really compound - the worst of both worlds.
Emmanuel Rosner
Can you share more details on your midsize vehicle, which is scheduled start production in late 2026? You talk a little bit about it during the presentation, but what would be the overall competitive landscape in that segment? What, volume ultimately envisioned for that product?
Peter Rawlinson
So this is the huge project for us. This is the big one. This is really what's going to propel us into a volume player. And we need to be that to have a meaningful impact upon the environment. That is central to our sense of purpose and sense of mission. That's why I'm here. That's why the whole team's here. And central to that is you saw that although a relatively high-end EV, the battery can represent 37% of the bond costs.
When you go down market, then that percentage becomes even more significant. So we have a profound and inherent advantage as a company. This is where we will define our technological advantage for financial effect, because we will be able to make that car with a very competitive range, with a significantly smaller battery pack than anyone else.
That gives us a cost advantage on the bill of materials of a midsize. And remember, midsize is a world platform. We can have more than one type of vehicle off that platform. In fact, we're planning there will be at least two variants, different models based upon that common platform, which is being architected as a flexible platform, state-of-the-art, with absolutely embodying all our learnings, the cost down everything that we've accrued from Air and Gravity.
The target price is about $48,000 at today's prices. We've currently started construction of our AMP-2 factory in Saudi Arabia. The foundations have been poured for that. That will have a capacity of 150,000 units per annum. And we're also going to bring a model of midsize into our factory in Arizona. So this is very exciting. It really is the big project for us. And it's well underway. My advanced engineering team and design studio teams should be working on it as we speak.
Emmanuel Rosner
Do you need the volume from this midsize vehicle to get to the scale that enables you to be profitable?
Peter Rawlinson
Certainly, it's a profit enabler. I think I'm very optimistic with Gravity. Because I think Gravity is going to give us sufficient product definition to mitigate risk of cannibalization across from that. You've got something which is a true SUV, which is truly differentiated from a Lucid Air, much more different than say a Tesla Model X is from Model S. Those are more similar car-like products. So I think Gravity is a unique product. In its own right, can it give us that profitability? That is yet to be seen, because that will become volume dependent on that product. But certainly, the midsize is the key enabler for scale. And also, that works in a favorable manner with our purchasing power as well.
Because remember, you shouldn't think of the bond cost as a fixed. Bond cost is itself a variable, which is a function of volume as well. Because the suppliers in turn have to amortize their fixed cost against the volume of parts they supply you. So in short, very confident that midsize will give us that. And hopefully, we'll get very close with Gravity.
Emmanuel Rosner
Can you talk to us about Lucid's relationship with the PIF? How much ownership does it have? What is the plan for the new factory in Saudi Arabia?
Peter Rawlinson
Yes. Well, the PIF has been a wonderful part. It's really super committed. And we do truly operate in a sense of true partnership. Since we first met and committed to a contract in 2018, right through thick and thin. They've gone pro rata on every funding round until very recently. They own just over 60% of the company.
And I think what is really important to recognize here is that the relationship really transcends a mere financial investment. We are interwoven in our ambitions. There is a vision, Vision 2030 in Saudi Arabia, for their economy to transition away from fossil fuel dependency. It's a bold vision to a sustainable model. And we are undeniably a cornerstone of implementing that vision.
So we are bound by this common sense of purpose, and mission, and real desire. I mean, we want midsize housing late 26, as much as the PIF do. We're bound by this desire as much as the PIF do. We're bound by this desire. They want it as much as I do, because it's going to be a cornerstone of their economy. And it's a cornerstone of the future of this.
Emmanuel Rosner
In terms of the plans for the factory there, will this be the first place where midsize will be produced?
Peter Rawlinson
To start with, that's the plan, absolutely, yes.
Emmanuel Rosner
And that will be for global markets?
Peter Rawlinson
A global markets is our global platform, global car. As I say, I would like Lucid to be making over a million cars a year in the early 2030s. I know that sounds at all order because we only delivered 6,000 last year. But we're on an upward trajectory. And we're on a path to make more affordable, more attainable cars available to more people that are superior.
If you look at the work that we're doing on midsize right now, all the attributes, advanced aerodynamics, incredible performance, incredible spaciousness, and yet with real affordability, a great practical car for the family, and with very advanced software and user experience. That's the future products. And that's what the world wants, fully connected car, computer on wheels.
Emmanuel Rosner
Very just either finally for me. Can you talk to us about your cash position and runway? I think currently you have $2.2 billion in cash and cash equivalents. And then -- so how do you see free cash over the next few quarters and years? Do you need to raise more capital and when?
Peter Rawlinson
So we announced with our Q1 earnings that we had around $5 billion cash or cash equivalents. And we have enough financial runway to see us well into 2025. But we are a capital intensive business. There's no question about that. And so I take an entrepreneurial view of raising capital when the time is right. And we've made profound investments.
If you look at our plant in Arizona, how much vertical integration that we've embodied there? I was touring there just two weeks ago. We've put a big chunk of money into our in-house stamping line. That will reduce our OpEx. But of course it all represents more CapEx. Our robotic automated line for assembling the body structures of Gravity as huge investments. And also we've invested in what I think is the most advanced electric powertrain plant in the world. We had that just up the road a few miles away from our main plants running at a relatively modest volume. We've now brought that into the under the same roof as well as logistics.
So these are significant investments for the long-term that we've made. We've continued to make, because Lucid is a long investment play. That's what we're about. Not about a short-term grid win. We've only got to tour our plant. And then if you look what we're doing in Saudi Arabia, that's a very significant. So absolutely we will need to have further round of investments in the future in order to realize this very bold long-term vision.
Emmanuel Rosner
Make sense. We'll have a few minutes left for any questions in the room if there are any. Let's raise your hand and we'll bring a mic.
Unidentified Analyst
Hi, can you talk about some of the key steps between here and Gravity launch? Clearly this is not a simple thing, but you've also been working at it for a while. You've watched the Lucid now. Just talk about what are the key gates that you need to kind of get through between here and there to launch on time? Thank you.
Peter Rawlinson
So the question is what are the key steps to Gravity launch? So I would ask all of you to follow the Road to Gravity Center videos that we're posting on social media on almost weekly basis and putting on our website, where you can follow the course of Gravity's readiness for production. And there are three key pillars to getting Gravity into production. It's getting the product right, getting the factory ready, and getting the supply base right around the world spooled up. We have several hundred suppliers, several thousand parts that we have to have the right quality at the right time.
So right now we've just completed our build of about 80 beta prototypes. And we're in the heart of the testing of those. We've had some very successful crash tests of betas, but those don't count for our moligation. You have to test pre-production vehicles for that. Right now we've got the robotic line in the factory fully assembled.
The robots are training, they're making the initial movements to rivet sheets of aluminum together. We're feeding some of the initial sheets of aluminum and fine tuning the positions of those robots. Our paint shop is almost there. The spray booths I visited just two weeks ago, we were spraying Gravity's, albeit prototypes, very successfully.
Some of the - parts for the sealant are still to be fine-tuned. Our general assembly line, is actually pretty well operational in readiness for Gravity, and we're going to be building our first Gravity battery packs somewhere around this week for pre-production. So the factory is getting ready for pre-production, and we plan to build our very first our pre-production body shells later this month, the next few weeks, actually.
So the pre-production phase will take us through the summer, and those cars will be used for crash testing, for homologation, and for EPA testing to get the range, and also for training of all the associates, our brilliant associates, the team in Arizona who are going to build the cars with a huge dose of Arizona pride, I must say, so that they can dial in their quality and the fit and finish of these vehicles.
And so, it's scheduled to roll off the production line late this year, and I'm really excited, because I think it's going to be a seminal product. There's nothing close to it. We're targeting around 440 miles range, seven-seat, three-row SUV, and it drives like a sports car. You can drive this thing really fast. It's a real Lamborghini Urus killer.
Emmanuel Rosner
I exaggerate not. Congrats on the five miles per kilowatt hour achievement. My question is on your ability to continue to improve miles per kilowatt hour, decrease battery size. What's it going to take for you to get to your goal of six, you think? Is it going to be a mix of weight saving from smaller and smaller batteries, or battery chemistry improvements, or powertrain efficiency? How do you get to that six?
Peter Rawlinson
Yes, it's a combination of all those things. We've got some new motor control switching technology, which we're going to over the air to the whole fleet very soon. So, we've got a software OTA-able advance in motor control. We've got some very exciting advancements in electromagnetism in the motor, because what you're chasing is minimizing heat, minimizing the number of electrons that from the battery are wasted in generating heat.
You want all the electrons to turn the wheels. That's what it's all about. So it's every step in that journey. We've gone to ultra-high voltage, with the highest voltage car in the world, 924 volts. I'd like to go more like a thousand volts, because each of these tiny incremental steps takes - its place. I think advances in tire technology are key. Even wheel bearing type and wheel bearing choice has a huge impact upon getting to that six.
So, but there are trades there in terms of the steering feel back with the different wheel bearing types. So all of these attributes combined, but remember we're achieving five with a relatively large luxurious car, a Lucid Air. Imagine if I said to you, I've just broken the world record for gas mileage. And by the way, it's with an S-class Mercedes. Because that's what I've just done.
If I can get five today with a Lucid Air, maybe we're really close to six, with something like a Volkswagen bolt type vehicle today. And my science team, we've commissioned and I've just approved a program to get us to six. And I'm going to be releasing information on mission, that vision later this summer.
Emmanuel Rosner
Thank you, Peter, for very insightful explanations, including the technology. Two questions, how will you ensure to maintain the innovation advantage as your competitors, and you showed two of them in a sanitized manner, are truly also in a catch-up mode. They're working on the same issues, whether it's the battery pack density, next generation of power electronics, converters, et cetera. And then number two, consumers buy not only on the classic electric vehicle features. There are other aspects by consumers in the luxury domain, indeed deciding for a vehicle of one competitor versus the other. So brand design and congrats to the Lucid Air as fantastic vehicles, so no question. Thank you.
Peter Rawlinson
So I think there was a historical analogy to your first question about [indiscernible]. When I joined Tesla in 2000, it was February 2009 as Chief Engineer and Model S. It wasn't - the company just wasn't taken seriously at all. When I left in January 2012, the narrative had switched to the advantage that Tesla was temporary. Just wait till the Germans come. The advantage will be wiped out.
That hasn't been the case what probably has owned now. And Germans haven't. They've actually has been singular failure in catching Tesla. And why is that? And how did how did Lucid get into this position? How were we able to leapfrog not just everybody else the Germans? And we're about three or four years ahead of Tesla right now on this, if you extrapolate where Tesla is. Tesla is not even close to us. And believe you me they're trying like crazy. I know they're trying like crazy to do this. We are significantly ahead. It's all about hand picking the most brilliant team, motivating them, getting them totally geared up, that this is the mission, the sense of mission from the very top of the company.
And Lucid is not distracted. I think Tesla is distracted right now. And I think this is the difference. I think there are many distractions there with social media and the likes. And Lucid has laser focus. We've taken the mantle and we're leading the technology. This is something no one else has done. And while I'm in this position, we'll keep driving ahead. We'll get to six before everyone else. I'm very confident. And then brand. I think the product defines brand. You know, we outsell the mighty Porsche, Taycan, this Q1. Why is it the mighty Porsche? It's the built-in brand on technical innovation and excellence. You go back to Le Mans wins with the 917 in the Pierre era. What drove that Pierre was an engineer who drove that company and that brand. We're going to do the same.
Emmanuel Rosner
I think we're right out of time. So Peter, thank you so much for your time and insight to that. Thank you.
