In Lucid Air, we have truly a technological tour de force, there's
nothing even close to it.
Lucid Motors is a California-based electric vehicle startup, and in
September, it revealed the air, its vision for an electric luxury sedan.
The company's first vehicle touts some impressive specs, such as an
estimated 517 miles of range, a quarter mile time of 9.9 seconds and DC
fast charging up to 20 miles per minute.
What Lucid has really been touting with all of this is a holistic view of
it being better than the model S.
And overall, I believe Rawlinson said that it's 17 percent more
efficient. But the company has a lot of challenges ahead.
Automotive companies are notoriously hard to start and EV startups have
typically been failing endeavors.
Starting an EV project and bringing that to fruition is a real, enormous
task. The auto industry is a tough business to get into, very capital
intensive. For a high volume model program to develop a vehicle and tool
up a factory and bring it to production.
I mean, that's usually, a billion to a billion and a half dollar effort.
It's funding, frankly, that's the biggest one.
And why you've had problems at Faraday, why you had problems at Fisker.
They ran out of funds through the development cycle of the vehicle.
Even in the case of Fisker, post-launch.
A good amount of the talent at Lucid also worked at Tesla, which may
give them a leg up. The CEO, Peter Rawlinson, was a VP of vehicle
engineering and chief engineer of the Model S.
The styling design, which was done by Franz von Holzhausen.
I took from Franz's design, the style of the car, and I was responsible
for leading the design engineering of the vehicle.
Prior to Tesla, h e spent several years with Jaguar and was chief
engineer of advanced engineering at Lotus.
All of that experience led him to a lofty goal, to become the next big
EV player in the industry.
This is about far more than just Lucid Air.
We're creating a brand, the Lucid brand, and we have to compete with
other brands which are very prestigious and have existed for many
instances over 100 years.
We have Tesla as the prime example of a startup that was successful.
We've also seen a lot of failures.
You're talking about 10 to 15 companies that have or are attempting to
launch with a vehicle and an EV company.
Some have already failed.
Even if it manages to bring the Air to market, competition in the space
is heating up. Last year, 143 new EVs launched around the globe, and by
2023, IHS predicts over 43 brands will offer an electric vehicle.
I think when you put specs up like that and you put features and content
and styling like they've done with the Air, I think it's going to be a
highly competitive vehicle.
Lucid is one of many electric vehicle startups that have popped up over
the last five, 10 years, but they're a little bit different from a lot
of them. Peter Rawlinson has been around the industry for quite some
time, including a stint at Tesla.
He's got the expertise that a lot of the other companies don't have who
are entering the space. The chief engineer was also a former Tesla
employee in addition to Peter.
Not only do they have automotive experience, but they have EV automotive
experience. Lucid was started in 2007 as Atieva with a focus on being an
EV supplier. Atieva had significant knowledge of cell technology and of
battery management software and the electronics that you need to manage
battery systems. We're the standard battery supplier for the World
Championship Electric Racing Series and that battery technology, which
is entirely done in-house, branded under our Atieva brand was really the
proof point which validated our technology.
Through that, Lucid has actually learned a lot about design and
performance of high-performance battery packs.
We put a lot of that knowledge into the Lucid Air, so that's why we are
claiming its race-proven because it really is.
In 2013, it recruited Peter Rawlinson as its chief technology officer.
I wanted to create the next generation electric car.
And the other condition was, you're going to have to change the name of
the company. In 2016, the company was renamed to Lucid Motors
and it started building its first vehicle.
Many of my engineers from what was the Model S program came across and
joined me. Peter rang me up, said, Hey, do you want to join me?
We're doing an electric vehicle.
Oh, that sounds familiar.
Peter told me his vision, he said, I want to take EVs to the next level,
2.0 of electrification.
While the company has been driven by a bold vision, financing it has been
a challenge. In 2018, Lucid raised one billion dollars from the Saudi
wealth fund. We were able to show the first prototype of Lucid Air
back in late 2016.
And then we had a hiatus securing the right funding.
Lucid did have some trouble finding funding and they've had a lot of
different ownership kind of investments and states.
They seem to be on the right track now with the wealth fund investment.
Might be enough to get them to market.
Lucid is going after the luxury market first, similar to what Tesla did
with the Roadster. If you look at the space for luxury sedans, it's
worth a hundred billion dollars worldwide.
If you wanted to buy an electric luxury car in that space, there isn't
wasn't one available. So we're going directly into that white space with
Lucid Air. One of the criticisms of Tesla has been while the Model S in
the Model X were certainly priced in competition with Mercedes-Benz and
BMW and Audi, they never really felt like luxury vehicles.
The Lucid Air, in contrast, they're at least targeting having a level of
luxury and premium feel that you would expect at a price point of over a
hundred thousand dollars.
Lucid's first product is supposed to be the Lucid Air sedan.
We have seen a lot of prototypes of it and concepts.
There's a 35-inch curved display.
So there's a lot of really nice packaging things that they've done
inside this to make it both more functional but also more aesthetically
attractive. The company's lineage is a battery supplier to Formula E no
doubt played a role in the development of its battery tech.
We've got over 900 volts architecture.
We link that with our inverter technology, which is silicon carbide,
with a very special cooling system which we developed entirely in-house,
which keeps these chips super cool before they can always generate any
heat. So we're buying our cells from LG Chem, t hey're our supply
partner. But we're making the battery packs entirely in-house because
that pack technology is one hundred percent Lucids.
We're going for a Lego brick, modular system.
This architecture is designed the way it is because it's super, super
mass-producible. To have a long range you've got to have a lot of
battery. One way that you can start to overcome that is to improve the
efficiency, maximizing the number of miles you get out of every
kilowatt-hour of energy in that battery.
If Lucid lives up to the claims that they've made of over a five hundred
mile range for the top version of the Air, then they'll be at least 14
percent better energy efficiency than the best Tesla Model S today.
Range is one of the standout features of the Air.
Tesla's Model S leads the industry with a range of 402 miles.
While other manufacturers can be anywhere from 100 to 250 miles per
charge. The Lucid Air is expected to have a range of 517 miles.
And Elon Musk recently unveiled the Model S plaid, which Tesla claims
has a range of over 520 miles per charge.
In the electric vehicle space t he name of the game is efficiency and
range. That efficiency race will lead to the $25,000 dollar EV.
Recently at Tesla's 2020 Battery Day event, Elon Musk revealed the
company would produce a $25,000 EV in 2023, citing developments in
battery tech. This would finally make electric car prices competitive
with gas powered vehicles.
One of the things that the Rawlinson has emphasized is this idea of
taking a holistic approach to the entire propulsion system, the entire
powertrain. Trying to optimize every single component in there.
Lucid is entering the market as a premium brand with the intention of
producing more affordable vehicles down the road.
The company's starting at the high end of the spectrum, kind of how Tesla
did with the Model S and promising a future affordable vehicle down the
line. We're starting with the Dream Edition Lucid Air at a $169,000.
We'll bring Air down to a price point below $80,000 in 2022.
I would love to be making a more affordable car right now, we just
can't do that as a new company.
But we can start with a high-end product with a modest factory and
gradually move to a more affordable segment of the market.
The challenge is you actually have to execute and make those initial
vehicles profitable enough to generate enough cash flow so you can
introduce new models.
And that's where Tesla really struggled over the last 10 years.
Focusing on the higher end does offer some advantages when trying to get
off the ground. You're going to be focused on a lower volume.
You're not trying to push four hundred thousand of these out the door.
We saw the trouble that Tesla had with the ramp up of their Model 3 and
just trying to get production smooth and get the bugs worked out of the
system. It takes time. The luxury car market was valued at $497.8
billion in 2019 and is projected to reach $ 735.8 billion by
2027. There's definitely a market for premium vehicles.
BMW and Mercedes sell about two million vehicles a year each.
However, the luxury sedan will be released at a time when the market is
moving towards SUVs and crossovers.
As the market is moving towards SUVs and crossovers, they chose to go out
with a sedan, which is a very traditional luxury vehicle.
That can either be a positive for Lucid because there aren't as many
competitors entering that segment, or it can mean that it's just trying
to slice the pie too thin when people are looking for crossovers and
SUVs. The company does have plans to develop an SUV.
During the Lucid Air unveil event, it revealed Project Gravity, its SUV
concept built on the same platform as the sedan.
It's slated to come out in 2023.
Electric vehicle maker Rivian also is targeting the SUV market in
addition to releasing a truck.
Rivian is backed by both Amazon and Ford.
The Gravity project is going to feed off of a huge amount of the
technologies and the platform and the tooling that we've already
invested. Once you've gone through the development of the skateboard
itself, you have a much faster ability to launch the next vehicle off of
that. And costs is down as well because the development costs already
went into the skateboard platforms.
Any electric vehicle company trying to come to market right now, there
are a lot of challenges.
One of the biggest is charging.
83 percent of consumers who would not consider buying an EV said it was
because of battery life and range anxiety.
One of the advantages that Tesla had was building out that Supercharger
network early on. Unlike Tesla, Lucid will leverage the Electrify
America charging network that is being built out by Volkswagen of
America. They've incorporated a 900 volt electrical system in the car so
they can do 350 kilowatt charging, which is even faster than even the
latest version t hree Superchargers.
Lucid is following Tesla with retail spaces to sell directly to
consumers, as opposed to a franchise dealer model.
We've signed leases on 14 stores.
We'll have seven up and running before the end of this year.
And we'll have in the high 20s by the end of twenty one.
The challenge is the manufacturer that's setting up this retail network
has to make all that investment in those physical properties.
They also have to directly support those vehicles with service when they
need service. This is an area that Tesla has really struggled with over
the last several years since they launched the Model 3.
As their volumes have grown substantially, they've struggled to keep up
with the pace of providing service to their customers.
And Lucid intends to manage service in-house as well.
Service is an important aspect of the connection with the consumer.
It can make or break a decision or a brand, essentially.
Hopefully, I would assume Lucid will learn from some of the mistakes
Tesla made in that space.
If you bring a prototype of something to life that is better than
anything that had been done before.
That's an enormous task.
Now, being able to replicate that and being able to bring the cost of
that one prototype, and prototypes, into mass market is a whole 'nother
animal. You've got this massive factory that you're building, which
includes battery components, you've got the vehicle itself, the
manufacturing of all this.
That's a major cost.
That's on top of all the development that's already taken place.
There's a strong potential that they're going to burn through the billion
dollar investment that they got from the Saudi sovereign-wealth fund.
Tesla is the best reference in the market and it took a while for it to
become profitable. If you look at Tesla's ramp up curve for production,
it's not easy and things have gone wrong.
Things have not been on time.
They've been off by months, if not years.
If lucid can actually execute better as a business, then there is a
strong potential for them to succeed w here Tesla struggled with that.
Some other EV startups have partnered with legacy automakers, a move
which may alleviate some of the stress of manufacturing.
They don't have the advantage of something like Rivian does, and that is
the backing of Ford Motor Company as well as Amazon.
The next six months are going to be super challenging a nd that's why I
approach this with humility.
We start production proper in spring of twenty one and then we
build the SUV, Project Gravity, and I hope to get back into Casa Grande
in twenty three. To bring the Air and its other vehicles to market Lucid
is building a factory in Casa Grande, Arizona.
The impressive and almost unique thing is that Lucid's actually building
a factory. You need a lot of backing and you need a lot of talent to
know how to actually build and assemble the factory to be most
efficient. In a few years time, it will be good for nearly 400,000 units
a year. This is a four-phase plan to get there, and we're just about
close to completing the first phase now, which will get us to a factory
which is good for 34,000 units a year.
Lucid plans to deliver to the North America market first, but the biggest
demand may be outside it.
Analysts predict record growth of sales in 2021, especially in Europe
and China. When you look at the markets and look at where EVs are
expected to grow the most, you're looking at Western Europe, Europe in
general and China.
Majority of that reason is because it's a regulatory driven push from
government agencies.
And then we go to Europe right at the end of 2021, into early 2022.
And then we hit China in 2022, because that's the big prize, the largest
market in the world. Some of the vehicle configurations Lucid has
planned may appeal to the customers there.
A lot of customers there, during the week when they're going to the
office, they'll hire a driver to drive them around.
And then on the weekends they'll drive it themselves.
And so what you find in the Chinese market is a lot of manufacturers will
actually offer special versions of their premium vehicles, specifically
for China that have a longer wheelbase and more rear-seat leg room.
I think China is going to be absolutely huge for Lucid.
Traditionally, it's been very much more about the chauffeur driven
rear-seat experience, but Lucid Air is a great driver's car as well.
So we cover both bases.
Policy shifts may also start to stir up the auto industry.
Just recently, the governor of California signed an executive order that
all new vehicles sold in the state must be zero emissions by 2035.
But even if EV adoption continues to grow, competition in the space is
ramping up. Lucid is coming into a very competitive market, the auto
industry has always been very competitive anyway.
Especially now in the EV market, we're seeing a lot of new entrants
coming in. And then the incumbent automakers are also introducing dozens
of new EVs over the next several years.
No doubt Lucid will have to contend with Tesla.
Elon Musk has cemented the brand and a loyal fan base in the world of
electric vehicles.
And in the U.S., Tesla made up about 80 percent of electric car sales in
2020 so far. It's going to be interesting to see how this vehicle comes
to market for the air and whether or not they can attract the Tesla
Model S buyer. Because the thing is, people aren't buying EVs, they're
buying Teslas. And while EV sales are just 2.6 percent of vehicle sales,
there's an opportunity to grow.
Investor interest seems extremely high in electric vehicle startups like
Lucid. A lot of that has been the Tesla effect and also the fear of
missing out. They're definitely going to be able to take advantage of
growing interest in EVs.
We're achieving incredible performance from our cars, not for humongous
battery packs, not from low-tech solutions, but through high tech
endeavors. That's what's really going to change the world.
And this needs to be a true technology race and Lucid is in
it.