Ladies and gentlemen, thank you for standing by, and welcome to the Lucid Group Second Quarter 2024 Earnings Conference Call. Please be advised that today's conference is being recorded. Later, we will conduct a question-and-answer session. [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 Second Quarter 2024 Earnings Call. Joining me today are Peter Rawlinson, our CEO and CTO; and Gagan Dhingra, our Interim CFO and Principal Accounting Officer. Before handing the call over to Peter, let me remind you that some of our statements on this call include forward-looking statements under federal securities laws. These include, without limitation, statements regarding the future financial performance of the company, production and delivery volumes, financial and operating outlook and guidance, macroeconomic and industry trends, company initiatives, and other future events. These statements are based on predictions and expectations as of today and actual events or results may differ due to a number of risks and uncertainties. We refer you to the cautionary language and the risk factors in our most recent filings with the SEC and the forward-looking statements on Page 2 of our investor deck available on the Investor Relations section of our website at ir.lucidmotors.com. 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. 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, and thank you, everyone, for joining us on our second quarter 2024 earnings call. Now before I get to my prepared remarks, I'd like to extend a heartfelt thank you to all Lucid employees as well as all our suppliers and partners. Our record deliveries in the second quarter were in no small part due to your hard work. We generated great momentum and progress in the first half of the year and we'll look to build upon this through the back half of the year and into the scheduled start of production of Lucid Gravity, which is of course highly anticipated. I'm also pleased to announce today that we executed financing agreements with an affiliate of the Public Investment Fund for additional commitments of $1.5 billion. Through its strategic investment in Lucid, the PIF is not only advancing the country's commitment to sustainable energy and innovation, but also propelling it towards achieving the ambitious goals of Vision 2030. This partnership underscores their dedication to fostering our diversified economy and positioning itself as a global leader in the electric vehicle industry. I'd like to thank them for their continued support. Now, turning to deliveries. We delivered a record 2,394 vehicles in the second quarter and that was up 21.7% sequentially and up 70.5% year-upon-year. The increase was driven by strength in North America, where deliveries were up sequentially. Now, turning to production, we produced 2,110 vehicles in the second quarter and we're on track to produce approximately 9,000 vehicles in 2024, as I've noticed previously, production is not our bottleneck and we are managing production to prudently optimize cash flow and to match deliveries. Lucid's brand awareness continues to grow, reaching an all-time high in June since we started tracking the metric. Now, we still have more…

Thank you, Peter, and thank you to those who are taking the time to join us today. Before I get to my prepared remarks, I would also like to start by thanking the entire Lucid team for their tireless work in achieving very solid results. Turning to our 2024 second quarter financial results. During the second quarter, we produced 2,110 vehicles and we reaffirm our guidance to produce approximately 9,000 vehicles this year. More importantly, deliveries of 2,394 vehicles were ahead of our expectations in the second quarter, up 70.5% year-over-year and up 21.7% sequentially. As Peter mentioned, we are pleased with the demand we have been experiencing thus far. Deliveries outpaced production in the quarter, which was according to plan. And we worked down inventory to much more manageable levels while still enabling a hub-and-spoke model to facilitate shorter customer delivery times. We reported revenue of approximately $200.6 million in the second quarter, up 32.9% year-over-year and up 16.1% sequentially driven primarily by higher deliveries. Cost of revenue in the second quarter was approximately $470.4 million. The LCNRV impairment was approximately $154.2 million. Gross margin was essentially flat from the first quarter, in line with what we guided to on the last earnings call, despite the full quarter impact of pricing actions taken in Q1. We continued to see improvements in our BOM cost, inbound freight, and labor cost per vehicle as part of our cost optimization initiatives, which were offset by a special provision related to a warranty campaign. Excluding this campaign, gross margin would have improved 800 basis points sequentially. Although we don't explicitly provide gross margin guidance, let me provide some direction to help with your modeling. We expect to build inventory of components for the Lucid Gravity, which will result in an increase in LCNRV…

Thanks, Gagan. We'll now start the Q&A portion of the call. Before we take questions from those on the phone, I want to post some questions from our retail investors sent in through the Say technology platform. Our first question comes from Paul C. Can you provide more information on what you're doing to cut costs? For example, Rivian recently announced a 35% reduction in costs and expect to have positive gross margin in Q4. Can you share your path to positive margins?

Yeah. I mean, this is an absolute key activity and Gagan and his team are absolutely focused on this. We're doing a tremendous amount across the entire company, looking at cost-cutting as well as efficiencies. Direct vehicle costs, supplier partnerships, manufacturing efficiencies, quality assurance, logistics, transportation, inventory management, development strategies. We're looking at go-to-market models. We're looking at, internal policies, professional services and CapEx. I can't think of anything more. I mean, it's right across the Board. And we're also, of course, focused on using our technology to reduce cost and efficiency. This is a huge enabler. For example, we're testing service machinery that I think cannot only save us millions across our service centers, but it could also reduce our real-estate footprint. It could increase employee efficiencies, reduce repair times, and it could improve customer satisfaction. And I think we've made great progress, but we're really working, it's a work in progress. And in addition, we've taken a lot of the learnings from Air and of course, incorporated them into Lucid Gravity early on. And I think we'll see a significant benefit from that learning transition from the one product to the other. But, Gagan, you're right at the heart of this. Could you add to this, please?

Yeah. Thanks, Peter. Cost optimization has become an essential part of our life at Lucid. First, let me start with company-wide initiatives of cutting costs and path to improving margins and then I will cover similar focus around OpEx and CapEx. On cost of revenue, starting with bill of materials, we are able to bring the cost down by double-digit percentage since we launched Air and we have identified more cost action that we plan to implement in the second half of this year. On logistics, the cost is reduced by more than double-digit percentage year-over-year. On transportation, we have made meaningful improvements in reducing the cost since the beginning of this year. Further, we also reduced labor cost per vehicle this year through efficiency improvements. Looking at our journey over the last few quarters, our gross margin improved from negative 240% to negative 134%. We're also looking into the longer term, although we believe the best way to reduce battery costs is to reduce the number of batteries by increasing efficiency. We are also evaluating every opportunity to drive down cell cost. For example, we recently signed a supply agreement with Graphite One. In addition to BOM and logistics cost, I want to remind that a meaningful portion of our cost of goods sold is related to the depreciation of our factories and equipment. We made a very deliberate choice of making our long-term investments, including a leading in-house powertrain and battery technology, software and state-of-the-art manufacturing facilities. So as we start to ramp volumes, you will not only see improvement in gross margins, but will also have a significant cost advantage to our competition, which we are very proud of. On other areas on OpEx, we are looking each and every corner, whether it is headcount optimization, professional services or overhead. Each expense is monitored and challenged, which is evident from our results that the SG&A expense went down in the current quarter despite our increased footprint and higher number of deliveries. On CapEx, we updated our guidance today to reduce the annual spend by $200 million and a significant portion is related to savings and cost reduction.

Thanks, Gagan. Thanks, Peter. Question two is also from Paul C. There are companies working on axial radial flux motors and claiming highest torque and power density while using less materials. Some claim to be production-ready within one to two years. How does this compare to Lucid's Motors? And how are you staying ahead of the upcoming tech?

Oh, man, don't get me started here. So there's two sort of categories of permanent magnet motors and there's the axial flux motor, which is larger diameter and it's short, it's more like a pancake shape. And then Lucid's Motors are radial flux, they're more like a drum shape. And it's quite fascinating. I mean really I think there's a fundamental lack of understanding just how technically advanced Lucid's radial flux motors are. The axial flux motors stack up reasonably well against other people's radial flux, but compared with what the level of technology that we got at Lucid for any battery EV and axial flux motor really sucks. Now because they are large diameter, relatively low revs and quite flat, they've got a great application in a gasoline hybrid. And you see these in super sports cars and they're great for that because they rev about 8,000 RPM like a fast internal combustion engine. But really the problem they've got is there are very-high thrust forces and they are effectively because they're large diameter, they can't spin very fast. And if you want to get the speed up to maybe 10,000 RPM, you really need to resort to carbon wrapping. And believe you me, anyone who has to resort to carbon wrapping doesn't really know what they're doing with electric motors because it's super-high cost, it's super difficult to manufacture. You do not want to do carbon wrapping. It is a last resort. And also actual flux motors are super difficult to manufacture. They've got these segmented laminations and they're radial layered. So each lamination is a different size. They are a nightmare to put together. And so here's the thing that you can for a similar power-to-weight ratio get more torque out of an axial flux. But it's about 23% more, something like that, a really good example compared with where a lucid radial flux is, but the Lucid radial flux will spin about 20,000 RPM compared with the axial flux of 8,000 RPM. And what I said in one of my tech talks and motors is what really matters is not just not even gravimetric power density, it's this bandwidth between maximum spin speed and bottom-end torque. And we are just so far ahead of an axial flux motor. And as I say, I think there's a fundamental lack of understanding just how far advanced we are. We're not going to get to five miles per kilowatt hour anywhere close if we went axial flux, I'm sorry.

Thanks, Peter. And we'll take our last Say question. Can you give an update on the progress for a retail ESS product? Are you still running prototypes? And can you provide information on their performance?

Okay. Well, yes, we are. I mean, first of all, I'd like to say we're closely engaged in this energy sector. At the end of last year, we launched our range exchange feature and it's innovative feature it gives enabled by the Lucid's bidirectional Wunderbox and the software and that enables Lucid Air to directly charge other electric vehicles. But that's beside the point in many ways. Specifically related to energy storage, I've got all my engineering teams absolutely laser-focused on three things. We're further enhancing Lucid Air. We're looking for further advancements. We've got the launch of Lucid Gravity coming imminently and there's a whole advanced team working on the development of our mid-sized vehicle. We have to have that laser-focus on our products have that take priority. Now that said, technology leadership is core to our business and it's a bigger strength. And I believe our core competency in the future in battery tech will allow us to develop engineer in energy storage solutions. But right now, our main focus is the vehicles, not ESS.

Great. Thanks, Peter. Now we'd like to take some questions from the phone lines. Towanda, can we move to the instructions and first question?

Thank you. [Operator Instructions] Please standby while we compile the Q&A roster. Our first question comes from the line of John Murphy with Bank of America. Your line is open.

Hi. This is actually John Babcock on the line for John Murphy. Just quickly for the first question. I did want to ask, I mean, are you going to be able to reach free cash flow positive with the small/mid SUV. I mean, ultimately, we've been calling into space, but I'm not sure if it's going to come out with a different product name or that and/or should we expect that you might get to free cash flow positive before that?

Well, I certainly plan to. I mean that is the vision. Our whole business model is a long-term model of successive growth through a successive period and the phasing of product. We move now with Lucid Air off the bank of two record quarters for deliveries to six times the TAM with Lucid Gravity to potentially 30 times the TAM with our mid-sized platform and it's that scale that's going to lead us to cash flow positive.

Gagan, would you like to add anything?

Yeah. I think, Peter, well said, we are a high-growth technology company and we are operating in a capital-intensive space, and at the same time, we have in-house, the way we made our investments, we are like leading in-house powertrain and battery technologies. So that will give us a competitive advantage when our volume increases and we are very proud of that one.

And I'd really like to add something here, John, as well. I think the key USP of us as a company when we get to scale is this efficiency story because we will not rest, we're advancing the technology. We're significantly ahead of the competition, all competition. We have leadership with five miles per kilowatt hour and this is going to play. That means we can make a car of a given range with a smaller battery pack than other people. And that is really going to play to our midsize. We'll be able to make it more cost effectively and that will lead directly to help us to become free cash flow positive?

Okay, that's helpful. And then next question, I was wondering if you might be able to talk about price elasticity of demand for the year? And also does it -- whether it makes any sense to reduce prices or go down on trend to drive volume or if ultimately the goal would be to protect the brand for future vehicles?

Well, what we've done is we've introduced the Lucid Air Pure, which is a rear-wheel drive car at just $69,900. A lot of people think Lucid is much more expensive than that. But we did actually promise that back in 2020 when we launched the product in our 2020 reveal that we would hit $69,900. So think of this really as us introducing successively more accessible versions of the car rather than price cuts. But clearly there is a degree of price sensitivity in the marketplace.

Thanks. Towanda, let's go to our next question.

Please standby for our next question. Our next question comes from the line of Stephen Gengaro with Stifel. Your line is open.

Thanks, and good afternoon, everybody.

Hi.

Two questions from me. The first, just quickly, where do you think you'll start opening reservations for the Gravity?

Okay. Well, we haven't disclosed that yet. I would say that we will do so at an appropriate time. What we feel is that some companies have really done their customer base a disservice by prematurely opening a reservation list. It becomes very speculative and almost meaningless to a certain degree. What we are thinking of is opening a pre-order list and we'll let you know as soon as we're in a position to do so.

Thanks. Thank you. And the other picture -- the other question from a bigger picture perspective is, as we think about the mid-priced vehicle, and I think you said by the end of 2026.

Yes.

How do you -- I'm not sure exactly how to ask this, but how do you calibrate or reconfigure the engine based on your phenomenal technology at a lower price point to sort of help bring the cost of materials down on that vehicle along with the battery?

Yes. So we're using all our considerable experience now. We're creating the most advanced systems in the world to create a much more cost-effective variant for our midsize. And that work is well underway already. I think what we've done is achieved remarkable efficiency. I think we've achieved remarkable compactness. I don't think going further compact is the way. We can use all our expertise to reduce the cost, the cost of the bearings, the cost of the amount of copper that we're using, the cost of the materials, the heat treatment in the gears. And this is a laser focus for us now. But I want to be clear, there is this misunderstanding that our current technology is so esoteric, so expensive that's driving our losses. And the truth is so far from this, our current technology is imminently manufacturable and cost-effective for its level of performance. What I'm trying to do now is take all that knowledge and go for even more cost-effectiveness for a lower-performance unit, which imminently suits our midsize and would suit licensing for a family car from a traditional OE as well.

Thank you. Please standby for our next question. Our next question comes from the line of Itay Michaeli with Citi. Your line is open.

Great. Thanks. Hi, everyone. Just two financial questions for me. First, on the capital raise announced today, can you just talk about your intentions to actually draw down on the delayed term loan? Do we expect that to happen this year or just given your cash position, should that be maybe more of a next year expectation? And then secondly, hoping you could talk a little bit more about the drivers of the CapEx outlook reduction for this year. Thank you.

Yeah, sure. Thank you. So we ended the quarter with $4.28 billion of liquidity. And, yes, we announced $1.5 billion today. Coming to specifically when we take out the money from the facility, so we have enough liquidity today. And also with $750 million convertible, this adds to our liquidity as well. So at this stage, we don't have intention to withdraw $750 million from term loan in the near future. We will do in the due course of time.

Yeah, I think there was a misunderstanding, Itay, that I've seen it out there that we had $1.28 billion of cash. But of course, we should be looking at the $4.28 billion liquidity because of course, we're investing prudently some of that. And remember, though we're investing heavily in a few areas, we're looking, we're currently building out, we just put the full steel work up in our new factory in Saudi Arabia. I just got the pictures in this morning. And so we're putting a significant chunk of money into that. Then we're completing a major investment in an additional 3 million square feet close to 3 million in our factory in Arizona, bringing stamping in-house, bringing our logistics center in-house under the same roof to reduce OpEx and bring our state-of-the-art powertrain plant actually under that same roof and expanding its capability massively. So there's a huge chunk of investment there. Then we've got the Gravity or the tooling and R&D cost, the launch cost for Gravity and on top of that, we're building out our sales and service network internationally. And look, we've got to think of this as a long-term play. This is where the money is going in these crucial investments for the long-term.

And part of your second question on the CapEx, this $200 million revising the guidance, a significant amount of that is based on the cost reduction efforts, which basically looking at challenging each and every item, the negotiation, how we want to build our -- the factory, how we want to procure our machinery equipment, the number of units, a very thorough process looking each dollar carefully and we are able to bring down our CapEx cost. Yes, as part of revising guidance, there is also some CapEx deferral, but savings and reduction have played a bigger part, a significant part.

That's very helpful. Thank you.

Thank you, Itay.

Please standby for our next question. Our next question comes from the line of Steven Fox with Fox Advisors. Your line is open.

Hi. Good afternoon. I have two questions. First of all, when I'm looking at Chart 7, it looks like you're back on your efficiency improvement curve with the latest model here. Can you just talk about, say, over the next two to three years of improvement? How should we think of the mix between coming from software versus electrical versus battery et cetera? And then I had a follow-up.

It's actually, you're right, Steven, it's a fusion software and hardware. I mean, we recently announced the most efficient car in production ever with five miles per kilowatt hour and 146 MPGe. And I think it's just to be good in context because the new way of assessing cars by the EPA here in the USA has become more stringent. And you see actually some, we saw some today, I got a close competitor actually recording worse numbers because it's having to face a more stringent test. So I think that's absolutely key. But this is a technology race. It's yet to play out. And I recently was delighted to commission what we called internally Project Chwech, which is the Welsh word for six as we move towards the aspirational six miles per kilowatt hour. So Project Chwech is officially go here and you heard it first and you might have to look that up in the dictionary, but it's an aspirational how much better than 5.0 can we go? And I've got a brilliant team of scientists and research engineers on that.

That's helpful. And I just learned some Welsh for the first time in a while. And then just as a follow-up, can you just talk about the importance you're finding initially with customers in terms of your ADAS features that you have in place and are rolling out to?

Right, right, right. So we're having a big, big push on software. I've personally taken a leading role in driving software. I was reviewing ADAS this morning with the team. There is a new vigor in the company and we're going to introduce a hands-free lane assist before the year is out. We've got a whole range of improvements that I am personally driving and that isn't just ADAS, that's the whole infotainment stack in the car. And I want to roll a lot of that out this year on Air in the run up to Gravity. So people will see what's due on Gravity, how awesome it's going to be and there'll be incremental evidence of improvement on Air as we roll towards Gravity.

Thank you. Please standby for our next question. Our next question comes from the line of Andres Sheppard with Cantor Fitzgerald. Your line is open.

Hey, good afternoon, everyone. Thanks for taking our questions and congratulations on the quarter. A lot of our questions have been asked, but maybe to touch on the capital raise again. Peter, what is the best way we should be viewing this announcement? Obviously, on the near-term, it extends the cash runway into Q4 of '25, which helps to address any near-term liquidity issues. But should we see this as a final straw from the PIF or is this or is it more accurate to view it as kind of re-strengthening that relationship and then being more focused on the medium to long-term as well? Thank you.

Thank you, Andres. I describe it as a resounding further endorsement of their long-term commitment of a long-term relationship and they are the perfect partners. I couldn't ask for anymore. And we are so aligned, this transcends a mere financial arrangement. We are a cornerstone of the Saudi Arabia's ambitious Vision 2030 to transition their company to a sustainable economy. And we are proud to participate in this and that's why we're currently putting up steelwork in our factory in Saudi Arabia. This isn't the case. It's often portrayed. How long is it before Saudi is going to get fed up with Peter playing with his cars? It's not that. We have regular dialogues. I have with my Chairman and we are absolutely both committed. The dialog is much more of, Peter, keep things on track. We want this mid-size. We want these products, is Gravity on track? This is the commitment that we have together. This is the sense of enduring partnership that Lucid has with the PIF. And also it's non-dilutionary. So I think this is an ideal manner of raising capital and the significance of this to take us through well into Q4 next year. This means that we go through the critical launch period of Gravity through a large part of its production ramp-up. And remember, Gravity is just the product that everybody wants. And remember what Gagan has said over and over, our economics are driven by scale and Gravity is going to be scale. There's going to be full steps to scale, sell more Airs, and that's about brand awareness. Get Gravity ramped up, get the mid-size running and see if we can get technical partnerships with other OEs. Those are the four steps and efficiency is going to play absolutely into all of those. Right now with Pure getting the five miles per kilowatt-hour, we're getting 420 miles, we're just 84 kilowatt hours of energy, nobody is even close. That's why we can make it at $69,000. That's why it makes sense at $69,900. And it's going to make even more sense we're going to have a Gravity with the sort of range with half the battery size of some other players out. They're just half the battery size. No one else is even close and it really is going to come this whole chess game is going to play out. We get to mid-size, we'll be able to have a competitive range with a relatively tiny battery pack and much less cost than anyone else.

Got it. Thanks, Peter. That's super helpful. I appreciate all that color. Maybe just one last quick question. I wanted to touch on something we haven't maybe spoken about in a couple of quarters. But just on the licensing agreement with Aston Martin, I'm curious if you could maybe expand on how that relationship is going and particularly when and how that might -- that you expect that to ramp up in terms of revenue? Thank you.

Yeah, look, there was an announcement that there's a little delay on their end, which is disappointing because it's disappointing that any EV is delayed. But I completely empathize with where they are in terms of their customer requirements. I don't think it makes any long-term difference to the relationship. We're solid as a rock. Aston is fully committed. We're all in to ensure that Aston creates the best electric hypercars in the world. And what's great about that is our price range from $69,900, we go up to $249,000 with Sapphire. We're not going to go above that and Aston starts where we finish. So, there's no cannibalization. There's absolute synergy and a great working relationship.

Thank you. Please standby for our next question. Our next question comes from the line of Tobias Beith with Redburn Atlantic. Your line is open.

Hi. Good evening. Thanks for taking my questions. I have three, please, and I'll ask them individually. And Peter I noticed the stated capacity of the 2025 Lucid Air Pure is four kilowatt hours smaller than its predecessor. And this seems to me, too small to reflect the removal of one battery module from the pack suggesting that the cells themselves could be slightly different and the vehicle weights may have been reduced. Are you able to comment on this logic and perhaps provide more information on other improvements that were made to breach the five miles per kilowatt-hour threshold?

Yeah, absolutely. It runs at 16-module pack and which is, I think, 672 volts. And if you look at Grand Touring and Sapphire have a 22-module pack, which runs at 924 volts. And then a Touring has a 16-module pack, which runs at 756 volts and we've reduced that down to a 16-module pack for Pure at 84 kilowatt hours and that runs at 672 volts. It's 42 volts per module open circuit voltage. So we've got the most efficient car ever, 146 miles per gallon E, and it's the magic five miles per kilowatt-hour, no one's even closer. And let me tell you, if we were to choose less range, we get even more efficiency and because there's even less battery weight. So what you got to remember is we're achieving that 5.0 miles per kilowatt hour with 420 miles range, which has got more range, then there's no other competitive car out there from any other manufacturer other than Lucid that's close to the 420 and we still got the world record for efficiency. If we drop that down to 360, we'd be above five miles per kilowatt hour. Lower range cars, it's easy to get to these efficiency levels, well relatively.

Okay. And what is the end game to Lucid's theoretical advantage on the bill of material costs for an electric vehicle, assuming that the lead can be maintained whilst volumes scale. Is it to achieve superior profitability?

Yeah. Absolutely. The end game is why we exist. There is a misunderstanding, a misinterpretation that we're some niche luxury car company and nothing could be further from the truth. We're here to make -- to advance the state-of-art of the electric car in order to find ways of driving the cost down, so that it can be attained by far more people to have a meaningful impact upon the planet. If you look at even the Bloomberg numbers of $128 per kilowatt hour at park level. I mean, if we can save with 15, 16 kilowatt hours less than the competition. This is multi-thousand dollar-cost saving today and that's going to make all the difference when we look at mid-size products and if we license our tech to another car company that maybe wants to do a $25,000, $30,000 car. This is just like where every dollar counts, we can suddenly start saving beyond thousands of dollars. And in fact, if you look at the agony that some of the other OEs have put with the wrong product trying to do electric pickup and electricity and electric propulsion isn't the right solution for a usable affordable pickup, believe you, me. But our technology would save those OEs thousands if it was applied to those pickups because their pickups would require so much smaller battery pack with our high-tech solution.

And to add to this, we made a choice of our long-term investment of having in-house powertrain technology and battery technology. So as we get to scale, we expect long-term investments to pay dividends many times over. This also translates to significant cost advantage compared to our competition, better margin profiles than where traditional OEM are today. It's just a matter of scale and we are getting there. We already have narrowed down our losses and with scale, we'll be in a better position than competition.

And that's a really good point, Gagan, because we're going to hold this technology and manufacturing day on September 10th. And, Tobias, I hope you'll be able to join us there because I think you're seeing is believing, we really got the world-leading state-of-the-art in-house advanced power EV powertrain manufacturing plant like I doubt if anyone's got anything to compete with.

Thank you. Please standby for our next question. Our next question comes from the line of James Picariello with BNP Paribas. Your line is open.

Hi, everybody.

Hi.

I just have a question on deliveries for this year. You obviously have the production guide of 9,000 units. You saw a nice uptick in North America, demand in North American deliveries in the second quarter. We could see that in the sequentially lower Saudi revenue in the second quarter. But I think the, right, the indication was for lower third quarter deliveries. So just curious what's in play there and what the expectation is for the full year.

Sure. So what we haven't guided on deliveries. What we have guided upon is that we plan to make approximately 9,000 cars this year and we've just reaffirmed that today that we're on track for that. Now, of course, regarding deliveries, we're on the back of two record quarters, 70% up from Q2 this year over last year. But clearly what we're trying to do is prudently manage the business, manage the efficiency of our inventory. We need some inventory. We need a buffer and we need to be able to supply to customers directly out of inventory. So, we don't want no inventory, but we want a managed amount of inventory. We don't want that inventory to grow. So therefore, implicitly that implies that we want to be delivering a very similar number or more than the number we manufacture, although we haven't guided upon that.

Yeah. And right now we believe our inventory is manageable. And it also couple of benefits that bring managing our cash flow better, reducing the risk of obsolescence, also reducing the storage cost. So we believe we're in a good position from that perspective.

And regarding, I think, we were just -- we were cautioning about Q3 because of the summer months. I think we've just been prudent about that.

Okay. Yeah, that was just ultimately on the deliveries and the demand side, just seems as though it's more cautionary.

More traditionally you tend to see a bit of a shutdown with people on their long summer vacation and then an upturn in Q4, but we will see.

Got it. And then just my quick follow-up. Well, one, is there any discernible difference in ASP between your general deliveries and those to the Saudi government? And then on the quarterly cash burn rate that's implied, we've got the $4.3 billion in liquidity plus the $1.5 billion that you just raised and announced today, right, and then that gets you into the fourth quarter as you state, right? So that implied quarterly cash burn rate still is in that $900 million to $1 billion. Just curious what goes into that? Is that just loose math and not necessarily your expectation, which is ultimately of critical importance in terms of the cash burn rate through next year and how that corresponds with your profitability expectation on gross margin. Thanks.

So a couple of things here. First of all, from a CapEx perspective, we spent around $243 million this quarter, nearly $200 million last quarter, we guided $1.3 billion for CapEx. So significant amount of CapEx is going to come remaining part of the year, plus we are working on Gravity as well as midsize where significant investment is going to be there, plus we are building a factory in Saudi Arabia. So our CapEx and the R&D programs where we are going to spend significant amount of capital for us to be ready for the future to take us to the next journey.

I mean please come and join us, please visit us in the factory on September 10th. We're holding the Technology and Manufacturing Day. I think anyone visiting will realize that the sheer level of investment we've made, we've got a state-of-the-art facility, this puts us in incredible position for the future. We're continuing this. This is a long-term play. This is where the money is going. The money is going to a new factory in Saudi Arabia, the completing of our state-of-the-art facility in Arizona on the tooling to get the best SUV in the world in Gravity into production. We're spending money now investing in the design of our mid-sized and on the service network around the world. So these are long-term strategic investments. That's where the money is going. This is a long-term play and it will come to pass.

Thanks. Look forward to September. Thanks.

Thank you.

Thanks, everyone. So this concludes Lucid's second quarter 2024 earnings conference call. I appreciate everyone joining us today. Thank you.

Thanks, everyone.

Ladies and gentlemen you may now disconnect.