Lucid Motors tries to tackle conversion concerns

“We have noted in the past that production is not our bottleneck, but we are being prudent in managing vehicle inventory.” So says Sherry House, CFO of US EV pure play Lucid.

Her comments come in response to analyst concern that the start-up’s ability to sell cars is not keeping pace with its ability to make them. Lucid’s conversion factor has been in a 55-65pc range for several quarters.

The firm’s production outlook remains for more than 10,000 vehicles in 2023, which would mean a minimum of 5513 vehicles produced in the second half of the year after it made 4487 in H1. By comparison, it actually produced 5775 in the second half of 2022.

But it is hopeful of better sales to absorb this production and eat into any inventories it has built up. Order volumes of its existing Lucid Air increased towards the end of July, says House, while price cuts announced in early August have had an immediate impact.

“We aim to capitalise on [our] brand awareness momentum by taking actions to improve vehicle affordability for customers,” says House. “The early reception has been very strong with a 3x increase in orders in the first full day of the programme as compared to the end of July.

“The return on investment that we are now seeing gives us more confidence in the next steps of our plan to further improve brand awareness and importantly, conversion,” she continues. Nor does the firm seem to be ruling out additional price adjustments if necessary.

“We are always willing to adjust to market conditions,” says Lucid CEO Peter Rawlinson. “I think it is very important to retain that flexibility. The key is to get product out into the wild in customers' hands. That is the best marketing tool we have got.”

Packed calendar

But further non-price catalysts for improved sales are, House hopes, in the pipeline. “We expect deliveries to be up in the back half of the year, and we expect Q4 to be our largest quarter of the year as we ramp sales to customers in Saudi Arabia, ramp [Air] Pure all-wheel drive and introduce our most affordable variant, Pure rear-wheel drive in September,” House predicts.

The firm has signed a deal with Saudi Arabia for the delivery of 50,000 cars and the option for doubling that over the next ten years. At the end of Q2, a “significant number of vehicles” were in transit to the Kingdom and Rawlinson foresees “beginning ramping deliveries to customers both in Q3 and Q4”. The Saudi sovereign wealth fund the PIF is Lucid’s largest shareholder with a 60pc+ stake.

It will also open a manufacturing facility in Saudi Arabia in September, which may actually also help in improving Lucid’s worrying conversion factor. “I want to point out that the vehicles that are partially assembled in Arizona and completed in KSA will not be counted as a production unit until they are finished in KSA,” says House, suggesting that production numbers may no longer rise as rapidly — particularly as an “increasing amount of our production volume will be coming from KSA as we finish out the year”, she notes.

But there are other, more genuine potential sales boosts to come, too. As well the two new Pure trims, of which the RWD option — scheduled for production start in September — is the “most affordable and most obtainable variant of the car”, according to Rawlinson, Lucid will start deliveries of the Air Sapphire in October.

And in November, it plans a “big unveil” of the new Lucid Gravity. There is “a lot to be excited about in the two quarters ahead”, promises House.

No clear answers

The only fly in the ointment might be Lucid’s reluctance to offer more clarity on to what extent the production/sales ration might improve. Twice on its Q2 earnings call it was asked direct questions on how conversion factor might get better. Twice it offered no straight reply.