Ladies and gentlemen, thank you for standing by and welcome to the Lucid Group First Quarter 2022 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to your speaker for today, Maynard Um, Senior Director of Investor Relations. Please go ahead, sir.

Thank you and welcome to Lucid Group’s first quarter 2022 earnings call. Joining me today are Peter Rawlinson, our CEO and CTO and Sherry House, our CFO. Before handing the call over to Peter, let me remind you that some of the statements on this call, particularly those regarding the future financial performance of the company, production and delivery volumes, macroeconomic and industry trends, company initiatives, supply chain dynamics, expansion of our studios and manufacturing facilities, and other future events are based on the information that we have as of today and constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to numerous risks, uncertainties and other factors that could cause actual results to differ from expectations and we refer you to the cautionary language included in risk factors in our quarterly report on Form 10-Q for the quarter ended March 31, 2022 as well as other documents filed or to be filed with the SEC for a full discussion of such risks, uncertainties and other factors. Forward-looking statements made during today’s call speak only as of the time they are made and we are under no obligation and expressly disclaim any obligation to update, alter or otherwise revise any forward-looking statements either as a result of new information, future events or otherwise except as required by law. You are cautioned not to place undue reliance on these forward-looking statements. In addition, management will make reference to non-GAAP financial measures during this call. A discussion of why we use non-GAAP financial measures and information regarding reconciliation of our GAAP versus non-GAAP results is available in our earnings press release issued earlier this afternoon as well as in the investor deck available on the Investor Relations section of our website at ir.lucidmotors.com. With that, I’d like to turn the call over to Lucid’s CEO and CTO, Peter Rawlinson. Peter, please go ahead.

Thank you, Maynard. In Q1, we delivered 360 vehicles to customers, nearly tripling the 125 cars delivered in Q4 of 2021. Furthermore, in April alone, we delivered well over 300 vehicles demonstrating our accelerated production ramp. And this growth progression keeps us nicely on track for our 12,000 to 14,000 production targets as Sherry will tell us more about shortly. We are pleased with the demand we are seeing and now we have more than 30,000 reservations as of today. Note that this 30,000 figure does not include the recent up to 100,000 car deal with the Government of Saudi Arabia, which is entirely incremental. I’d like to thank the entire Lucid team for their dedication and hard work. We are off to a great start. And we are only just beginning. We have a lot of hard work ahead of us. But we are up for the challenge. And we are on track for some great milestones this year. In just two short quarters since we started deliveries, we have garnered many industry accolades reaching out some very well established luxury car brands. Lucid Air is now used in the same breadth as some of the best known luxury car luminaries in the market. And that’s truly amazing if you think about it. In the first quarter, Lucid was named the Best Luxury Electric Car by U.S. News & World Report. It was named Luxury Electric Vehicle of the Year by Cars.com and Best Car to Buy 2022 by Green Car Reports. Edmunds very recently reported an unprecedented 505 miles in their real world EV range test of the Lucid Air Dream R, a new record. But most importantly, it’s our customers who are truly delighted with Lucid Air. I believe as we get more of our vehicles into…

Thank you, Peter. Despite ongoing supply chain disruptions, we continue to see terrific progress in the business. This is largely due to the perseverance and astute problem-solving capabilities of the Lucid team across manufacturing, logistics, supply chain and engineering. We are also grateful to our global supply base who worked tirelessly with us to find real-time solutions to a very complicated and fluid supply chain situation. We are very pleased with the reservation momentum we are experiencing. We are seeing excellent increasing traffic to our Lucid Studios as well as visits to our website in our award winning vehicle configurator, all indicating accelerating interest in the Lucid brand. I’d now like to turn our attention to our first quarter financial results. Our Q1 revenue was $57.7 million, which represents a quarter-by-quarter increase of 113%. We remain committed to scaling your business and expect to see significant growth in revenue as our delivery volumes ramp across GT, touring and pure models. Cost of revenue in the first quarter was approximately $246 million. This expected increase was primarily related to personnel and overhead costs as we ramp up production as well as higher logistic costs and expedited freight due to ongoing supply chain disruption. As a result of these increased costs, we recorded an impairment charge of $96.4 million in the first quarter to reduce inventories to their net realizable value. If noted last quarter, we expect increased freight in overhead will result in impairment charges, which will negatively impact cost of revenue in 2022. So we expect this impact to lessen over time. R&D expense was $186.1 million in line with our expectations. Peter talks about how our efficiency is driven by the in-house design, development and manufacturing of our own proprietary technology and we continue to focus on pushing the…

Thank you, Sherry. We are intently focused on ramping production this year to get more of our award winning vehicles into customers’ hands. And this is a top priority and we are pushing hard. Our geographic expansion plans are progressing as planned. And I believe our product roadmap is second to none with the Grand Touring Performance, Grand Touring Pure and Project Gravity on schedule for their respective timelines and we will have more to share with you in the future. And with that, let me turn it back to Maynard to get to your questions. Maynard?

Thank you, Peter. We will now start the Q&A portion of the call. [Operator Instructions] Our first question is how do you intend to compete with both Tesla and Rivian given current supply chain and market constraints?

Well, we are highly confident that we can compete against the very best based upon our EV technology leadership. I mean, we compete on our technology differentiation, on our unprecedented efficiency and in our in-house vertical integration. And I talked about our unprecedented efficiency in my prepared remarks and how this is only possible because we design, develop and manufacture our own technology in-house, we truly vertically integrated and you cannot achieve this just by buying off-the-shelf components. We also differentiate ourselves by having a luxury brand mindset. We are focused on quality and having a customer-centric approach to our direct-to-consumer experience. We want our brand to reflect not only the best EV in the market, but also the experience of that to our customers. But the EV market is not a zero sum game today. I mean, we compete in a global car market and unless not forget our primary competition is gasoline cars, not other EVs. I have said before I don’t believe there is such a thing as just the market for EVs. There is a market for cars. And the EV market penetration is very low today. We believe the EV share will come at the expense of gasoline cars. So I am incredibly optimistic as we have tremendous amount of runway ahead of us. Sherry?

Yes, I’d also add that in my prepared remarks, I spoke about the supply chain challenges that are impacting the entire automotive industry. Now, we have been able to mitigate some of these issues because of our vertical integration and our in-house design capabilities. When you design your own tech, it just allows you an increased level of flexibility and control. For example, because we design many of our own printed circuit boards, we have been able to redesign, qualify, and even source a different ship directly from our existing semiconductor supply base that we have direct relationships with. In other situations, as I mentioned last quarter, we have been buying ahead in the spot market and we continue to work really closely with our supply base to mitigate impact and look at risks ahead of time. But in some cases, we have had to switch suppliers and we have even in-sourced where it made engineering and financial sense.

Our next question is the investor presentation in July 2021 mentioned the prototype energy storage system progressing well. How is the Lucid energy storage system progressing now and when do you expect production for the Lucid ESS to begin?

Yes. Well, we are primarily focused on vehicles today, but we do fully recognize that our tank is extensible to other growth markets that we can help drive our sustainability mission. We analyzed different markets to understand where our tech could give us the unique advantage to compete with and one of the most promising ones we pulled out was with energy storage or EFS. Now, our first prototype has validated the capability of our technology. It’s running and it’s here at our headquarters here in Silicon Valley. It’s attached to our solar field array and it’s working well. And we have installed a significant solar array at our AMP1 factory in Arizona and that is in readiness to connect and integrate our second prototype there at the factory and this is currently in the development phase.

Yes. And to put this in context, it’s a small amount of our people and financial resources today. But we see a lot of future potential here. We have been examining and we are examining multiple end markets, including residential, commercial, industrial and utility to see where it might be best for us to play today. But right now, we are focused firstly and laser focused on the vehicle market, but we will be sure to keep you apprised since we have anymore to say on this topic as developments come forth.

Our next question is with the report of Saudi Arabia buying upwards of 100,000 cars from the company, do you think that will drive more buyers from other areas of the world or are there other big orders such as that that aren’t just – that just aren’t public?

Thanks, Maynard. Yes, we are seeing many [Technical Difficulty] legislation from a number of other countries towards achieving a goal of zero emission and it aligns with the mission of our company to bring sustainable technologies to the world. We are thrilled that Saudi Arabia shown such vision and commitment to our company. The government undertook to purchase up to 100,000 Lucid vehicles. And we believe they are buying very best EV tech there is. The purchase price of the vehicles will be based on our standard retail prices as we shared in our earlier announcement. Just to put this in context, this is one of the single largest electric vehicle purchases that we are aware of and we are delighted to be – to support Saudi Arabia and achieving its sustainability goals and net-zero ambition. I also want to highlight that in connection with the King Abdullah Economic City, the SIDF and the Mesa agreements that we signed in February, we expect to receive up to $3.4 billion in financing and incentives with respect to CapEx and operations for manufacturing factory in KSA. This includes financing provided by the SIDF loan and that’s disclosed in our 10-Q. In addition, we recently secured a revolver facility from Gulf International Bank, which is also disclosed in our subsequent events section if you want more detail. We also expected the unprecedented efficiency that we have, aligns very strongly with what fleet operators care about. And there is many benefits also to our bidirectional technology. So we have anything to announce [Technical Difficulty] to-date, we think our efficiency and our bidirectional technology are going to be a really important part of the value proposition to the set of potential customers.

Our next question is what is Lucid’s plan for a charging network? Tesla obviously has the advantage over the EV market right now with their network of chargers. Will Lucid be mirroring a similar solution or will there be an adapter to utilize other charging networks?

Yes. Well, I mean, first of all, the remarkable efficiency and range of Lucid Air, I mean, you can replace range anxiety or the range confidence, you can go further in the first place. And we also have an advantage, because we have the fastest charging car in the world. We have demonstrated up to 300 miles range in about 22 minutes. It’s a profound commercial and technology advantage. You simply charge less when you have greater efficiency and the longest usable range. And also, I believe that we have a significant second mover advantage. We have got a 900 volt vehicle, others are at 400 volts and we have a much faster charging vehicle. And when you need to charge, you can charge your Lucid Air virtually anywhere in North America using an open source combined charging system, the CCS plug, the current standard, that’s super important that we have open source. And then we combined the Air’s wonder box boost charger cannot automatically recognize your Air, adjust the incoming voltage and boost voltage for the quickest possible charge. So, it’s got boost voltage capability. And this means makes charging easy at home or at any public station. And you can also charge up by plugging the included Lucid mobile charging cable into a typical household outlets or a NEMA 14-50 for a faster rate of charge. Now, that said along with Air’s astonishing range, you can also benefit from our partnership with Electrify America and the most extensive network of ultra-fast public charging stations nationwide and they have over 750 stations and over 3,300 chargers I believe across the U.S. and plan to have more by the end of the year. And don’t forget, when you reserve an Air by June 30, 2022, you get complimentary access to up to 350 kilowatt charging for 3 full years in the USA.

Next question, are you planning on releasing a new vehicle this year? If so, when do you think it would come out?

Thanks, Maynard. Yes, so the answer to that is yes, in our outlook section of the shareholder presentation, also in my prepared remarks, we said we would have the Air Grand Touring Performance in June and then that’s going to be sequentially followed by the Air Touring and the Air Pure later this year and of course, we still have the production of the Project Gravity SUV starting in the first half of 2024.

Thank you. We will now take some questions from the phone lines. David, can we take the first question, please?

[Operator Instructions] And we will take our first question from the line of Itay Michaeli with Citi. Please go ahead. Your line is open.

Great. Thanks. Hi, everybody. Just I was hoping you could share the production numbers in Q1, I apologies if I missed it earlier to and also where you were in April. I know you talked about deliveries for the quarter and production for the full year, but hoping to get a sense of where you are on the production ramp?

Yes, Sherry. Hey, great to have you with us, by the way. We had 360 deliveries in Q1, and then asked for production vehicles in Q1, we have nearly 700.

Perfect, any kind of early update on Q2, maybe an April number?

Itay, we actually delivered over 300 vehicles to customers in April. And this is a very interesting progression, on this a geometric progression we are seeing, yes. Because in Q1 of this year, we delivered 360 to the customers, very nearly tripled what we delivered to customers 125 in Q4 of last year. And then we say over 300 customer deliveries in April. And it’s so easy to do sort of invalid math here, people take a quarter they multiply with four and come to the wrong answer for the year. This is a progression. It’s almost a geometric progression that we are seeing unfolding.

So, Itay, as we said in our prepared remarks, we are reiterating our 12,000 to 14,000 guidance for the balance of the year. So, as long as the supply chain logistics disruptions aren’t material and our mitigation plans are effective, we have been watching the China lockdown situation really closely. We have had a little bit of impact there. We had a couple of days that we did shutdown. And we did have a little bit of slowing for about a week and a half in April. But we have mitigation plans in place. We are able to get access to some warehouses. We are able to move production to another area of China in one case. And so as long as things continue to progress and really resolve through the course of May, we are feeling comfortable with what we have stated.

We will reiterate saying, we are reiterating our 12,000 to 14,000 vehicle production forecast for ‘22. And that’s based on the information we have at this point combined with our current mitigation plans.

Great. That’s very helpful. Just a quick follow-up. On the price increase, I think you alluded to a bit before, is that all reflective of higher input costs. And if you can maybe talk a little more detail about specific cost increases, you are seeing kind of what’s sort of in there that you are trying to kind of cover for?

Yes. Sure. Let me provide some context there. Well, first of all, the pricing actions that will be effective June 1sr won’t start to impact our financials in a meaningful way, likely until 2023. There might be some slight positive impacts in 2022. Our raw material exposures have been ranching, call at 5% to 10% of our bond costs depending on the vehicle variant. And these actions will help to offset those inflationary pressures throughout this year, which are typically delay to the way the contracts are written. Usually the indices move and then we pay either the quarter or semi-annually following that. We do have other exposures though including expedites, which had been very high due to the supply chain disruptions and record freight prices. We also have a little bit of exposure on steel and construction costs, a lot of that’s locked in for our Phase 2. But we do have a little bit of exposure on the back end with respect to steel. So, looking ahead, I would say our current belief is that costs will stay elevated or slightly higher than they are today for the next couple of quarters. And then we are expecting some stabilization might occur.

Great. That’s very helpful. Thank you.

Sure.

David, we will take our next question, please.

Of course. We will take our next question from Charles Coldicott with Redburn. Please go ahead. Your line is open.

Hi. Thanks for taking my questions. My first one, again, just on the price rises that you have announced today. So, I think it’s, the price rises are between 8% to 13%. And if I look at some of your competition, I note that Rivian raised its prices, on average by 18% back in March, Tesla has raised the price for Model S by 25%, over the last 12 months. So, do you think that there is further room for raising the prices that you have on the Lucid Air, especially given the quality of the product, as you mentioned?

Let’s say- I would say about that, good to have you with us here today. I think we don’t know for certain the situation is very fluid. We are actively monitoring it. And we will act as required. We are pushing ahead also, though, with many engineering changes and cost reduction initiatives that are aimed at lowering our cost basis for the vehicles. So, that is helping to offset some of this as well. But if we do have to raise further, one of the things that we are comforted by is we know that we offer a very unique value proposition to customers. And we believe there is no other vehicle on the market that offers the same combination of efficiency, performance, range, space and design that we have. So, like other companies, we are experiencing these real increases in commodities. And you were just going to have to balance the benefits that we provide to all our stakeholders, whether it would be our customers, or suppliers or investors. But we believe that the action we are taking right now best optimizes. And then as for future, we are just going to have to watch and see.

And then Charles, I think Sherry raises a really salient point here. It’s not recognized sufficiently. Efficiency advantage becomes a commercial advantage. We can provide a car with competitive range for a smaller battery pack, and that helps in our cost structure.

Great. Thank you. And my second question is on the batteries. And can you just remind us what your current battery cell supplier relationships are, how they are structured, and the extent to which higher raw material input costs will hit you in 2022, or whether or not it’s sort of delayed to 2023 and beyond. And finally, how much battery capacity is already locked in with your suppliers and until when?

Sure. So, we have long-term contracts with two of the major global suppliers at LG and Samsung. Those are multi-year in nature. We also have some state side production that’s going to be coming on board as well. On the raw materials side, we are exposed, like most companies are to the raw materials in the batteries. But we are fortunate and that we can leverage the buying power of LG and Samsung, their access to these raw materials going forward. Now, as per our availability, we are covered fully through this year. And we also have most of our coverage for the next couple of years. But we are working with both LG and Samsung as well as another company that we are in the process of validating this fall that we expect will come on board with them either later this year or early next year. And we are working with these three groups in order to supply the balance of what we need. But right now things are looking promising at this point.

Right. Thank you.

David, we will take our next question, please.

[Operator Instructions] We will take our next question from John Murphy with Bank of America. Please go ahead. Your line is open.

Good afternoon, everybody. First question on Lucid Air facilities, I think if I heard it right that the price was $179,000 and this is indeed as far as I can tell amidst the level it’s been announced, so not just in addition to the pricing [Technical Difficulty]. So is that number correct? And two, how much opportunity in the Air [Technical Difficulty] to product performance versions of your product [Technical Difficulty] very strong mix and how this took place?

Okay. There was a lot of static in the line John. I think we got some of that. I think you were asking about the GTP, the GT Performance pricing. You are right, that is $179,000. That does sit above the new pricing that we have just launched for the GT, which will be $154,000 effective June 1st. The base was $139,000. It will stay on the GT and will stay that through May 31st. Now, I think you were asking a little bit about like our revenue generation capability and maybe the ability of this product, Peter if you would talk maybe a bit about how you see, customers desire for this product?

Indeed, Sherry, I mean what happened was that we were oversubscribed, very significantly oversubscribed, for Dream Edition. And customers were asking, well hey, we want – we have 1,000 horsepower car, people are going crazy here. Where is the 1,000 horsepower car, we want 1,000 horsepower car. So, we quickly turned around, and we are very responsive. We are a tech company, we put this and we created the GT-Performance, 1,050 horsepower. Now, that price reflects our commitment to Dream Addition customers. They put commitment and faith in us. And I think they got it.

So maybe to follow-up if you can hear me better now picked up my handset. I would say it helps. How much opportunity could be potentially be in your performance versus [indiscernible] and took advantage of mix not just raising price?

Very difficult, it’s same here John.

He is asking about on the ability to do more of these in the future.

I think there is always an opportunity. I think some, well, I mean this is this is showing the power of the brand. And it’s showing that the product defines the brand. We are being considered as a brand that can command this sort of position in the market against the traditional Grand already, because of the premise of our product.

And the other thing, I think you may have touched on this just mix generally. Let me give you a little bit of context there. Similar to last quarter, we continue to see the demand for the GT product exceeding the Touring and we are building the GT products now. We will then be building the Touring, then the Pure as we are exiting the year. You are going to continue to see very strong mix throughout this year, slightly decreasing as you sequentially bring on these other products that are priced slightly lower.

And that’s really healthy position for us. Because as we are ramping up, carefully maintaining the quality, it’s great for us that we can sell higher end products through that ramp up and don’t have to transition to more affordable products quite yet.

It’s absolutely right, Peter, because the absorption costs will start to improve over time as the volume increases as we get through the next couple of quarters and into next year. So, you are going to start to see some relief on what you are seeing happening right now in the negative gross margin, as that greater level of production comes on board.

Yes. And we are seeing it reflected in the 30,000 orders that we have now got the reservation, that it’s 30,000 reservations, a very healthy mix between the GT touring NPO.

[Technical Difficulty]

Sure. So, the revolver is from Gulf International Bank, that is in addition to the $3.4 billion of financing and incentives that we had mentioned. Now, in the 10-Q and the notes, you can go to Note 6, you go to Note 19 and 20, you are going to see some detail in there, about the GIB of loan, how its structured. You also also see mentioned to the GIB in there, the Gulf International Bank revolver, the $267 million that you just referenced. You will also see in there information about our lease that we are getting through the King Abdullah Economic City. And you will be able to see some of the dollars associated with that as well. So, they asked giving you some of the tools, you need to be able to understand the financing that is available to us. And then additionally, there is incentives. Now, we did decide to proactively adopt a new government assistance standard, a disclosure standard as of January 1st of this year. So, as any of these incentives, or any of these loan items come on board on our balance sheet in impact, we will be showing them in the financial statements through notes and disclosures. So, you will be able to get information fairly real-time with respect to that. You were breaking up a little bit, I think you were asking about the $5.4 billion of cash on hand, we continue to feel really good about our ability to be well into 2023. And the addition of some of these financing packages has continued to strengthen our liquidity situation and their access to financing. We did have some of that baked into our forward model. But this continues to de-risk that for us.

Right. David, we will take the next question.

And there are no further questions on the phone at this time. I will turn the call back to you Maynard.

Thank you. So, we will now take our last retail investor question before concluding the call. And the last question is what is Lucid’s 5-year plan?

Oh Maynard, I think this is my favorite question. I think we didn’t pose this ourselves. It’s about product, product, product. I am an engineer, product is king. And a great brand is built by having the best products, and it’s actually defined by those products. And I am so excited, we are going to do Pure project Gravity SUV, and further drive technology innovation. We have a roadmap and a tech roadmap to keep on advancing. Now, really what we have done so far. Step one, was to establish Lucid as a global luxury brand and create a vehicle with incredible range through efficiency. We have done that. Now, step two is even more interesting, because that is to scale globally into the premium segment, and to commercialize vehicles that use smaller battery packs with competitive range versus other vehicles in the market. And I have already noted that ramping production is my top priority. We are making really good strides here. Again, efficiency is our key USP. Now beyond that, I am aiming for a mid-size platform in a decade. I am really enthusiastic about that. We could only do this by starting off by creating a technology flagships and Gravity first, by advancing the technical efficiency and setting a new EV benchmarks and then my making more affordable products. Remember, we design all our EV powertrain in a sense, we develop it or we manufacture it all in our special factory in Arizona. And we think we can become even more efficient over time. And that will translate well into our product roadmap. Sherry?

Sure. And if you look at our current manufacturing plans, we expect a capacity for 500,000 vehicles annually as we crossed the mid-decade mark. So, to break it down, we are going from 34,000 capacity in Arizona to 90,000 with our Phase 2 expansion. If we complete the ample on Phase 2 expansion, we will move directly into Phase 3. And we believe that can get us to about 350,000 annual vehicle capacity in Arizona. Then you add the 150,000 vehicle capacity from Saudi Arabia. And that gets you to about 500,000 by just after mid-decade. And then to remind investors we do we have the $5.4 billion on the balance sheet as we just spoke with John Murphy. We do also have access to this finance staying in the kingdom. And we believe that this funds to flow into 2023.

Exactly, Sherry. So and we are very focused on product, product, product in our long-term plan. Near-term, we are focused on ramping production and getting more vehicles into customers’ hands. And I have to say in closing, I have never been more excited I am today about our tech, our products, our team and our future. The electric vehicle market is still in its very early days of secular growth. And I believe our focus on product, technology, quality and service will put us in an enviable market position.

Thank you, Peter. This concludes Lucid’s first quarter 2022 earnings conference call. Thank you all for joining us today. And you may now disconnect.