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. 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. 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 Public Investment Fund is not only advancing the country's commitment to sustainable energy and innovation but is 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, which 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 noted 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 work to do, but the combination of our science-based, data-driven approach to marketing and increasing number of Lucid Airs on the road, along with the word-of-mouth advocacy of our loyal customers is building momentum. I think customers are also increasingly becoming aware of the tremendous value and technology in the Lucid Air. In many ways, we've reached parity or even surpassed gas cars in our class when it comes to range, performance, technology, and pricing. And this is especially true when compared to other electric vehicles. So it may come as no surprise that Lucid Air has once again been named the best luxury electric car by US News and World Report. This is the third year in a row that this award has been bestowed upon the Air and no other car has ever achieved this. But we're moving beyond being known as a luxury car maker, we're a technology company and people are recognizing that we have the most advanced electric vehicle. We announced in July that we achieved a landmark five miles per kilowatt hour with the Lucid Air Pure. A critical element in achieving this was our software and innovations in our advanced motor control mathematical algorithms. I'm pleased to announce that with an over-the-air software update coming soon, I expect all vehicles in the fleet will see further efficiency improvements, bringing greater value to the car well after a customer's initial purchase. 2025 Air Sedans will also have the Sapphire heat pump and of course the latest advancements in motor design. Now this collectively is how we were able to obtain a 512 miles of EPA estimated range for the Lucid Air Grand Touring under the more stringent EPA testing and achieved five miles per kilowatt hour with the new Air Pure. We'll continue to provide more features and value. We are planning an over-the-air software update that will significantly enhance our Advanced Driver Assistance System or ADAS, including the introduction of hands-free highway assist, lane change assist, curb rash assist and more. We also have plans for a comprehensive update to the user experience, with new interfaces, new functions, and further app enhancements. I think customers are going to be delighted. We're making a big push on many aspects of our user interface software. So, despite the market dynamics, we are making inroads, making constant improvements and gaining market share with Air. Yet again in Q2, in the US market, the Lucid Air outsold many of the largest and most storied brands in the industry within our competitive set of electric vehicles. In some cases, we outsold our competitors by more than double. And with the Lucid Gravity, I suspect we will find greater success in the large and growing SUV market. In late July, the first Lucid Gravity pre-production body shell dropped down from the roof conveyor and into the main production line at our factory in Casa Grande, Arizona. This marked the beginning of the Lucid Gravity pre-production run on our assembly line. Just last week, I had the honor of driving the first pre-production Lucid Gravity off the production line, a key milestone in the journey to the scheduled start of production later this year. Each unit will help us perfect the process and will be used for final validation testing to ensure top-tier build quality in full-scale production. We will be hosting a technology and manufacturing day at our factory on September 10th to showcase our technology and give you a closer look at the Lucid Gravity and the new advanced factory where the machines build the machines. We've made significant advances to the factory that will help drive our costs and I can't wait to show it to you. Now, I'd like to emphasize something that may still not be well appreciated by the market. While many may now understand the concept of efficiency, which means how many miles can one go with a given amount of battery, it may not be broadly known why energy efficiency is so critical. It's quite interesting. Some might believe that it's the engineer in me driving the narrative of the importance of efficiency, but actually it's the businessman in me that's driving the efficiency story. According to the database A2MAC1, nearly 40% of the bill of materials or the cost of the materials to make an electric vehicle is attributable to the battery pack. Almost 40% in cars above $60,000 and in lower-priced cars, the battery cost as a percentage of the bill of materials can be even higher than that 40%. This is why energy efficiency matters so much. Because the higher the energy efficiency, the smaller the battery needed for a given amount of range. And this is worth repeating. The higher the energy efficiency, the fewer battery cells we need for a given amount of range. This is an essential factor to lowering costs when it comes to making an EV and a key element in improving gross margins. It also means less battery raw materials, which is better for the environment. This is critically important. This is truly our life's mission and we can start having a greater impact through our technology because not all EVs are born equal. Our technology licensing and access business enables our partners to accelerate their EV transition and reduce emissions with a goal of achieving the mission of a cleaner environment. I've said this before, making good EV technology is really hard. In fact, using publicly available EPA data, we estimate that if the closest competitor were to continue at its rate of operational efficiency progress, it would take them many years to match where Lucid's core EV technology is today. By this measure, Lucid is many years ahead of the number two player. And of course, the traditional car brands are even further behind them. I think you're seeing this play out. Some are recognizing just how hard it is and I think it's a matter of time before car brands might look to enhance their know-how with Lucid's advanced technology. Because remember, product defines brand. I believe many of the products in the market are not yet commensurate with the heritage of their brands and I believe that our technology can be a key enabler. Whilst it's difficult to identify the exact timing of when we will reach a tipping point, we have been seeing increased interest in our technology. Now, there's been more questions of late about our ECU and general architecture. An ECU, or I should say an electronic control unit, is essentially a computer that controls certain specific functions of the car. Lucid has been at the forefront of this for quite some time and I'd really like to share my thoughts here because this is an element of our technology licensing and access business. We were very early on in bringing ethernet ring architectures to electric vehicles when we launched the Lucid Air back in 2021. We were also early with Air and Gravity programs incorporating aspects of zonal electrical architecture. We have 16 in-house ECUs, all of which are over-the-air updatable and a midsize platform will introduce our next zonal architecture. We will further reduce the number of ECUs down to single digits. These are only possible when you take a clean-sheet approach to vehicle design. It's interesting to note that others are just now getting to this place where we have taken the lead for quite some time. These are important because the architecture plays a role in helping costs and efficiency. But we've gone much further than that. We've been able to improve efficiency at a pace that's truly unheard of in the industry through innovations in our core powertrain technology. This isn't just hardware, but it's also the software. Indeed, we could not achieve the level of efficiency that we've been able to hit without advanced software developed in-house. So in closing, I'm very encouraged by the momentum that we're seeing in the market, the benefits we're realizing from our cost optimization programs, and the excitement that's been building into the Lucid Gravity launch. I believe our strategic initiatives and dedicated team position us well for continued growth, for momentum and innovation in the coming quarters and years. We look forward to updating you on our progress in the future. So, with that, I'd like to turn it over to Gagan Dhingra to provide an update on our financials. Gagan?

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. 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 impairments from an accounting standpoint. We also expect to incur incremental depreciation in the back half of the year from Phase 2 activations in our Arizona factory. We expect this will impact gross margin in Q3. However, we expect to see meaningful benefits from vertical integration and lowering our bill of materials as we move forward. Longer term, I would echo Peter's comments that our technology and increased scale will be key enablers of our gross margin. As we ramp volume, you will see improving gross margins with efficiency being the key enabler to driving a lower bill of materials. Now, moving to operating expenses. R&D expense in Q2 totaled approximately $287.2 million, up less than 1% sequentially. We expect R&D to increase in the back half of the year, which is typical in the run-up to startup production of new vehicle programs. SG&A expense in Q2 was approximately $210.2 million, down 1.4% from Q1. The sequential decrease was primarily due to lower professional services and other cost optimization initiatives, although we have identified further cost reduction opportunities to execute this year. We expect SG&A to increase in the second half, primarily due to higher stock-based compensation expenses and continued investments into strategic growth initiatives. We ended the second quarter with 53 studio and service centers, excluding our temporary and satellite service locations up from 50 in Q1. On the service side, we ended Q2 with 64 mobile vans in the fleet and 113 approved body shops worldwide. We plan to continue to strategically expand our studio and service center footprint as well as satellite service centers, which will cost-effectively provide additional locations as well as ensure high customer satisfaction as we continue to grow. We recorded restructuring charges of $20.2 million related to the recent reduction in force announcement. Our stock-based compensation expense in the quarter was $58.5 million. We expect this expansion to grow substantially in the second half due to the timing of new grants. In Q2, we recorded a gain of $103 million in other income from a change in fair value of derivative liability and a corresponding total accretion of $146.9 million associated with our redeemable convertible preferred stock under a line item below net loss. The adjusted EBITDA loss was $647.6 million. GAAP net loss per share in Q2 was $0.34 and non-GAAP net loss per share was $0.29. Moving to the balance sheet, we ended the quarter with approximately $3.9 billion in cash, cash equivalents, and investments and total liquidity of approximately $4.28 billion. We remain committed to maintaining a healthy balance sheet to execute on our strategic vision and will continue to be opportunistic in exploring financing. We also announced after market close today that Lucid executed financing agreements with an affiliate of the Public Investment Fund for an additional capital commitment of $1.5 billion. This is made up of $750 million of convertible preferred stock via private placement and a $750 million unsecured delayed draw term loan facility. Turning to inventory, total inventory decreased 9.9% sequentially, consistent with the decrease over the last few quarters and driven primarily by higher vehicle deliveries. CapEx in Q2 was $234.3 million up from $198.2 million in Q1. Moving to the outlook for 2024, we reiterate our 2024 production guidance of approximately 9,000 vehicles and we will continue to prudently manage and adjust our production to meet our sales and delivery needs. As Peter mentioned, I would also remind you that Q3 is typically a seasonally down quarter for the industry given summer holidays and then ramps up in Q4, so something to consider in your modeling. Turning to our liquidity outlook, we expect total liquidity inclusive of the $1.5 billion commitment from an affiliate of the PIF to give us sufficient runway at least into the fourth quarter of 2025. Moving to CapEx, we are updating our 2024 CapEx guidance to approximately $1.3 billion from our prior guidance of $1.5 billion. This reflects a meaningful reduction as a part of our cost optimization efforts as well as certain deferrals in our capital outlay into 2025. From a product perspective, the Lucid Gravity start of production is scheduled for late 2024, and the start of production of our high-volume, midsized platform is scheduled for late 2026. I want to close by sharing my experience with the Lucid Gravity and why I'm very excited about the future. I recently had the opportunity to drive a Lucid Gravity beta vehicle and I have to tell you, the ride was stunning, the way the car handled, the performance, I don't think there's any other electric SUV like this in the market today. With new products on the horizon, the strong financial commitment by the PIF, and progress on cost optimization, I feel we are well-positioned for the future. With that, let me turn it back to Maynard to get to your questions.

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 pose 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 expects 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 examining go-to-market models. We're looking at internal policies, professional services, and CapEx. I can't think of anything more. It's right across the board. And we're also, of course, focused on using our technology to reduce cost and improve 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, increase employee efficiencies, reduce repair times, and improve customer satisfaction. I think we've made great progress, but we're really working. It's a work in progress. In addition, we've taken a lot of the learnings from Air and, of course, incorporated them into Lucid Gravity early on. I think we'll see a significant benefit from that learning transition from 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 a 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 percentages since we launched Air and we have identified more cost actions that we plan to implement in the second half of this year. On logistics, costs have reduced by more than double-digit percentages year-over-year. On transportation, we have made meaningful improvements in reducing costs since the beginning of this year. Further, we also reduced labor costs 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 costs. For example, we recently signed a supply agreement with Graphite One. In addition to BOM and logistics costs, 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 deliberate choice to make our long-term investments, including leading in-house powertrain and battery technology, software, and state-of-the-art manufacturing facilities. As we start to ramp volumes, you will not only see improvement in gross margins, but will also have a significant cost advantage over our competition, which we are very proud of. On other areas related to OpEx, we are examining 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, a significant portion of which 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 the highest torque and power density while using fewer 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 categories of permanent magnet motors: the axial flux motor, which is larger diameter and short, it's more like a pancake shape; and then Lucid's Motors are radial flux, they're more like a drum shape. It's quite fascinating. 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 the level of technology that we have at Lucid, an axial flux motor really falls short. Now because they are large diameter, relatively low revs and quite flat, they've got a great application in a gasoline hybrid. They are seen in super sports cars and they're great for that because they rev about 8,000 RPM like a fast internal combustion engine. But the problem they've got is there are very high thrust forces and they are effectively, because they're large diameter, unable to spin very fast. If you want to increase 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 and super difficult to manufacture. You do not want to do carbon wrapping. It is a last resort. Actual flux motors are also difficult to manufacture. They've got these segmented laminations and they are radially layered, so each lamination is a different size. They are a nightmare to put together. Here's the thing: you can get more torque out of an axial flux for a similar power-to-weight ratio, about 23% more, but the Lucid radial flux will spin about 20,000 RPM compared to the axial flux of 8,000 RPM. What matters is not just gravimetric power density; it's the bandwidth between maximum spin speed and bottom-end torque. We are so far ahead of an axial flux motor. I think there's a fundamental lack of understanding just how 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 energy storage product? Are you still running prototypes? Can you provide information on their performance?

Okay. Well, yes, we are. 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. It's an innovative feature enabled by Lucid's bidirectional Wunderbox and the software that enables Lucid Air to directly charge other electric vehicles. Specifically related to energy storage, I've got all my engineering teams laser-focused on three things. We're further enhancing Lucid Air while looking for 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 a laser focus on our products, which must take priority. Now that said, technology leadership is core to our business, and it's a bigger strength. I believe our core competency in battery technology will allow us to develop engineer 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 the first question?

Thank you. 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, are you going to be able to reach free cash flow positive with the small/mid SUV? 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. 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 back of two record quarters for deliveries to six times the total addressable market with Lucid Gravity to potentially 30 times the total addressable market with our mid-sized platform. It's that scale that's going to lead us to cash flow positive.

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 leading in-house powertrain and battery technologies. That will give us a competitive advantage when our volume increases, and we are very proud of that.

I'd really like to add something here, John, as well. I think the key unique selling proposition of us as a company when we get to scale is the efficiency story because we will not rest, we're advancing the technology. We're significantly ahead of all competition. We have leadership with five miles per kilowatt hour, and this is going to play. That means we can make a car with a given range with a smaller battery pack than other people. That is going to really benefit our midsize, allowing us to make it more cost-effectively, which will lead directly to help us 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? Whether it makes sense to reduce prices or go down on trend to drive volume, or ultimately if the goal would be to protect the brand for future vehicles?

What we've done is 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 promise that back in 2020 when we launched the product that we would hit $69,900. Think of this really as us introducing successively more accessible versions of the car rather than price cuts. 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?

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 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 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 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?

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. That work is well underway already. We've achieved remarkable efficiency and compactness. What we can do, we can use all our expertise to reduce the costs of the bearings, the cost of the amount of copper that we're using, the costs associated with heat treatment in the gears. This is a laser focus for us now. I want to clarify that there is this misunderstanding that our current technology is so esoteric and expensive that it's driving our losses. The truth is our current technology is imminently manufacturable and cost-effective for its level of performance. We are aiming to leverage all that knowledge and find even more cost-effectiveness for the lower-performance unit, which suits our midsize and would be suitable for licensing for a family car from a traditional OEM 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 more of a next year expectation? 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. We ended the quarter with $4.28 billion of liquidity. We announced $1.5 billion today. Coming to specifically when we take out the money from the facility, we have enough liquidity today. We do not intend to withdraw $750 million from term loan in the near future. We'll do so in due course of time.

I think there was a misunderstanding, Itay, that I've seen out there that we had $1.28 billion of cash. We should consider the $4.28 billion liquidity because we're investing prudently some of that. Although we're investing heavily, we are currently building out. We just put the full steelwork up in our new factory in Saudi Arabia. There's a significant chunk of money going into that. We are completing a major investment in our factory in Arizona, bringing stamping in-house, bringing our logistics center in-house under the same roof to reduce OpEx, and bringing our state-of-the-art powertrain plant under that same roof and massively expanding its capability. There are significant investments there. The Gravity tooling and R&D costs, the launch costs for Gravity alongside building out our international sales and service network, they're all long-term strategic investments. This is where the money is going.

As part of your second question on the CapEx, this $200 million revision to guidance, a significant amount of that is based on the cost reduction efforts, looking at challenging each and every item, the negotiations on how we want to build our factory, how we want to procure machinery equipment, the number of units, a very thorough process looking at each dollar carefully and we're able to bring down our CapEx cost. Yes, as part of revising guidance, there is also some CapEx deferral, but savings and reductions have played a bigger 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 look at Chart 7, it looks like you're back on the efficiency improvement curve with the latest model here. Can you just talk about how we should think of the mix between improvements coming from software versus electrical versus battery, etc. over the next two to three years? Then I had a follow-up.

You're right, Steven. It's a fusion of software and hardware. We recently announced the most efficient car ever with five miles per kilowatt hour and 146 MPGe. To give context, the new way of assessing cars by the EPA here in the USA has become more stringent. Some close competitors are recording worse numbers as they have to face a more stringent test. This is a technology race, and it's still evolving. I recently commissioned what we internally call Project Chwech, the Welsh word for six, as we move toward the aspirational six miles per kilowatt hour. Project Chwech is officially underway, looking to see how much better than 5.0 we can go. I have a brilliant team of scientists and research engineers working on that.

That's helpful. As a follow-up, can you discuss the importance of your ADAS features that you have in place and are rolling out to customers initially?

Right. We are making a big push on software. I've personally taken a leading role in driving software. I reviewed ADAS this morning with the team. There is new vigor in the company, and we plan to introduce hands-free lane assist before the year is out. We have a whole range of improvements coming. I am personally driving that initiative, not just for ADAS but the whole infotainment experience in the car. I intend to roll a lot of that out this year on Air in the run-up to Gravity. Customers will see what’s to come for Gravity, and there will be incremental evidence of improvement on Air as we move toward 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, how should we view this announcement? Obviously, on the near-term, it extends the cash runway into Q4 of '25, which helps address any near-term liquidity issues. Should we see this as a final straw from the Public Investment Fund, or is it more accurate to view it as re-strengthening that relationship and focusing 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 and partnership. They're the perfect partners. I couldn't ask for more. We are so aligned, and this transcends a mere financial arrangement. We are a cornerstone of Saudi Arabia's ambitious Vision 2030 to transition to a sustainable economy. We're proud to participate in this. There’s regular dialogue about keeping things on track, including the launch of Gravity and our broader product plans. This is the commitment we have together. It’s not the narrative portrayed out there about having a timeline to get fed up with our cars. We are on a long-term journey together. This funding is non-dilutive, which is an ideal manner of raising capital to support us through the critical launch period of Gravity and its production ramp-up. Gravity is the product that everybody wants, and I believe our economics will be driven by that scale. We're striving to sell more Lucid Airs as we create brand awareness, ramp up Gravity, and launch our midsize platform. All these elements correspond with our focus on efficiency and innovation.

Got it. Thanks, Peter. That's super helpful. I appreciate all that color. One last quick question. I wanted to touch on the licensing agreement with Aston Martin. Can you expand on how that relationship is going and when you expect that to ramp up in terms of revenue? Thank you.

There was an announcement that there's a delay on their end, which is disappointing. Disappointing that any EV is delayed, but I completely empathize with where they are concerning their customer requirements. It doesn't change the long-term nature of our relationship. We're solid as a rock. Aston is fully committed, and there's no cannibalization in price structure because they start where we finish. There's absolute synergy, and we have 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. Peter, I noticed the stated capacity of the 2025 Lucid Air Pure is four kilowatt-hours smaller than its predecessor. It seems too small to reflect the removal of a battery module from the pack, suggesting that the cells themselves could be slightly different and vehicle weights may have been reduced. Are you able to comment on this logic and perhaps provide more information on other improvements made to achieve the five miles per kilowatt-hour threshold?

Yes, absolutely. The Pure runs at a 16-module pack and is, I think, 672 volts. If you look at the Grand Touring and Sapphire, they have a 22-module pack that runs at 924 volts. The Touring has a 16-module pack that runs at 756 volts. I believe we've reduced the Pure down to a 16-module pack at 84 kilowatt-hours, running at 672 volts with 42 volts per module open-circuit voltage. We've got the most efficient car ever at 146 miles per gallon E, and it has reached the magic five miles per kilowatt hour. No one else is even close. To clarify, if we were to opt for less range, we could achieve even better efficiency with less battery weight. What you need to remember is that we achieved 5.0 miles per kilowatt hour at 420 miles range, which is more range than any other competitive car out there, except for Lucid. We're still holding the world record for efficiency. If we drop down to 360 miles range, we would be likely above five miles per kilowatt hour. Absolute efficiency levels are easier to achieve on lower range cars.

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

Absolutely. The end game is why we exist. There is a misunderstanding that we are some niche luxury car company, and nothing could be further from the truth. We are here to advance the state-of-art of the electric car in order to find ways to drive costs down, making it attainable for far more people and allowing for a meaningful impact on the planet. If you look at Bloomberg numbers of $128 per kilowatt hour at park level, if we can save 15-16 kilowatt hours less than the competition, this translates to multi-thousand dollar cost savings. That's crucial when looking at mid-size products. If we license our technology to another car company wanting a $25,000 or $30,000 vehicle, that’s how every dollar counts; we will start saving thousands beyond measure. Some traditional OEs have struggled with electric propulsion in certain vehicle types, but with our technology, we can save them thousands by using much smaller battery packs than otherwise required.

We made a choice for our long-term investment in in-house powertrain and battery technology. As we scale, we expect these long-term investments to pay dividends multiple times over, translating to a significant cost advantage compared to our competition and a better margin profile than traditional OEMs today. It's all about scale, and we are getting there.

That's a great point, Gagan. We're hosting a Technology and Manufacturing Day on September 10th, and I hope you can join us. Seeing is believing; we have a state-of-the-art in-house advanced power EV powertrain manufacturing plant that no one else likely competes 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. I just have a question on deliveries for this year. You have the production guidance of 9,000 units. You saw an uptick in demand in North American deliveries in the second quarter. We could see that reflected in the sequentially lower Saudi revenue in the second quarter. The implication was for lower third-quarter deliveries. So I'm curious what's in play there and what the expectation is for the full year.

Sure. We haven't guided on deliveries precisely. What we've guided upon is that we plan to make approximately 9,000 cars this year, and we've just reaffirmed that today. Regarding deliveries, we are on the back of two record quarters, achieving 70% growth from Q2 this year over last year. What we're trying to do is prudently manage the business, managing our inventory efficiency. We need some inventory; we need a buffer available for direct supply to customers. So, we don't want no inventory, but we want a managed amount of inventory; we don't want that inventory to grow. Implicitly, we aim to deliver a very similar number or more than what we manufacture, although we haven't explicitly guided on that.

Currently, we believe our inventory is manageable. It helps us better manage cash flow while reducing risks of obsolescence and also cutting storage costs. We feel like we are in a solid position from that perspective.

About cautioning for Q3, it's because of the summer months. It's prudent to express that because traditionally you often see a downturn during longer summer vacations, followed by an uptick in Q4, but we’ll see.

That was just ultimately on the deliveries and the demand side, which seems more cautionary.

More traditionally, there tends to be a shutdown with people on summer breaks. We want to keep our business steadiness and grow as much as possible during that time while still managing expectations.

Got it. Just my quick follow-up. Is there any discernible difference in average selling price between your general deliveries and those to the Saudi government? On the quarterly cash burn rate that's implied, with $4.3 billion in liquidity plus the $1.5 billion raised and announced today, it seems that the implied quarterly cash burn rate still is in the $900 million to $1 billion range. Just curious what goes into that? Is that just loose math and not necessarily your expectations on cash burn rate through next year, which is critical concerning your profitability expectation on gross margin? Thanks.

On the CapEx, we spent about $234 million this quarter, $198 million the previous quarter. We guided CapEx at $1.3 billion. A significant amount of CapEx is in our Gravity and the costs for launching Gravity. We are also building out the factory in Saudi Arabia. Our CapEx and R&D programs will significantly require capital to prepare for the future.

Please join us in the factory on September 10th. We’re hosting a Technology and Manufacturing Day. Seeing is believing; the sheer level of our investments shows our incredible position for the future. We are continuing this as a long-term play, and the money is going toward our new factory in Saudi Arabia, completing our advanced facility in Arizona, and the tooling needed to start producing the best SUV in the world, Gravity. We’re also heavily investing in R&D for our mid-size and expanding our service networks globally. Long-term strategic investments are essential, and that’s where the money is going.

Thanks. I look forward to September.

Thank you.

Thanks, everyone. 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.