Lucid Group Inc., an electric vehicle manufacturer, announced layoffs this year. The layoffs in various sectors, including tech and non-tech, have been significant. It is noted that more than 236,800 employees lost their jobs in tech sectors, as reported by layoffs.fyi. The industry is experiencing a period of reckoning. Besides the tech sectors, many strong companies like Lucid aren’t immune to the challenges it presents.
In March 2023, Lucid Motors laid off around 1,300 employees, which accounts for about 18% of its workforce.
Despite forecasting 2023 production, Lucid fell short of analysts’ expectations. It has experienced a significant decrease in orders during the fourth quarter.
Moreover, competition in the EV market and traditional automakers offering cheaper EV models. It has also affected demand for new vehicles from startups like Lucid and Rivian. Not only Lucid but Rivian also announced a 6% reduction in its workforce to control costs.
Interestingly, Lucid’s major investor is the government of Saudi Arabia. It is one of the biggest oil producers in the world. The Saudi sovereign wealth fund invested $1 billion initially. It enables Lucid to begin production.
Additionally, Saudi Arabia has committed to purchasing up to 100,000 Lucid vehicles. Those vehicles are manufactured in Arizona or a future plant in the Middle East.
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CEO Peter Rawlinson stated
This matter will be discussed with all employees over the next three days. These job cuts will affect nearly every part of the organization, including executives. Lucid had approximately 7,200 employees at the end of 2022. Due to these layoffs, it anticipated incurring charges between $24 million and $30 million. The restructuring plan is expected to be completed by the end of the second quarter of this year.
Rawlinson also mentioned, “In order to manage costs, they are observing non-essential spending. In response to the challenging economic environment, Lucid is examining all non-essential spending.”
Why Is Lucid Motors Laying Off Employees?
Lucid started making its high-end Air sedan last year. It had big plans to expand production with Saudi Arabia’s backing. But now, the company is laying off its workforce. This move is expected to cost Lucid between $24 million and $30 million.
The question arises – What is the reason behind these layoffs? Lucid wants to lower its operating costs. It has seen improvements in productivity since it began production. They’re calling this a “restructuring plan.” CEO Peter Rawlinson explained. “It’s in line with their cost-saving efforts announced in February. Now they’re also reviewing non-essential spending.”
While the layoffs are a sudden step, Lucid had a challenging first year of production and faced more difficulties ahead. In 2022, they made 7,180 vehicles but delivered only 4,369, all of which were the Air sedan.
For 2023, they plan to produce 10,000 to 14,000 vehicles. These numbers are far from their goal of producing 500,000 EVs annually by the middle of the decade. This goal was set partly with a Saudi production facility.
One reason for the cuts is the limited market for luxury EV sedans priced around $100,000. More competitors are entering this space. At the same time, Lucid’s initial Air models were well above this price point. They do plan to introduce more affordable versions. Besides, a Gravity SUV that will start in 2024 is expected to be around $90,000.
Despite supply chain challenges, there are questions about the demand for six-figure luxury electric sedans. Even Saudi Arabia has committed to buying 100,000 Lucid EVs over a decade. Given such a large commitment, it might seem illogical for Lucid.
In short, Lucid’s decision to reduce its workforce comes forward. Many U.S. companies are tightening their budgets. All these companies are struggling because of an impending economic downturn caused by central banks raising interest rates.
The History Of Lucid Motors
Lucid Group, Inc. is an American company that makes luxury electric sports cars and grand tourers. They’re based in Newark, California. Their vehicles are designed there but built in Arizona. The company was founded in 2007.
Their first car, the Lucid Air, comes in different versions, with the cheapest starting at $87,400. They have more premium options like the Lucid Air Touring and Grand Touring models. They can also be equipped with Performance features.
Their second model, the Lucid Gravity SUV EV, is set to launch in 2024. Originally, Lucid was called Atieva when it started in 2007. It focuses on making electric vehicle batteries and powertrains for other car companies.
The big names at Lucid include CEO and CTO Peter Rawlinson. They used to work on Tesla’s Model S and Vice President Derek Jenkins, who was the head of design at Mazda.
In 2016, it changed its name to Lucid Motors. Besides, it announced plans to make high-end electric cars. They also revealed a $700 million manufacturing plant in Casa Grande, Arizona. This plant started production in 2021.
In 2018, Lucid Motors secured over $1 billion in funding. This money was secured to support their car production and retail plans.
Then, in 2021, Lucid Motors joined forces with a special-purpose acquisition company (SPAC). It named Churchill Capital Corp IV in a massive $11.75 billion deal. They have ambitious goals. They aim to launch their Project Gravity SUV by 2023. Also, they compete head-on with Tesla’s Model 3 by either 2024 or 2025.
When Lucid Motors eventually goes public. The Public Investment Fund will own more than 60 percent of the company. It indicates a significant return on their 2018 investment.
In September 2021, Lucid started producing their Lucid Air sedans in Arizona. They began delivering them just a month later. They faced some challenges along the way. That led to a reduction in their 2022 production expectations, all due to supply chain issues.
Fast forward to June 2023, Lucid partnered with Aston Martin. They’re set to provide vehicles such as:
Electric motors, powertrains, and battery systems for Aston Martin’s upcoming electric cars. In exchange for their services, Lucid will receive cash. It is noted that a 3.7 percent stake in Aston Martin is valued at a substantial $232 million.
What Are The Signs That Company Is About To Layoff?
Certain signs are the indicators that show a company is about to conduct layoffs:
Hiring, Payroll, or Promotion Freeze:
When a company freezes hiring, promotions, or pay raises, it means it’s often a cost-containment strategy. This move aims to cut down on substantial payroll expenses.
Financial Performance Red Flags:
Companies face challenges such as declining revenue or not meeting growth expectations. These companies are more inclined to resort to layoffs and cost-cutting measures.
Team or Department Restructuring:
Streamlining operations and reducing costs may lead companies to merge or consolidate teams. It results in redundancies and eventual layoffs.
Increased Internal Communication:
Frequent management communication about financial difficulties. Workforce optimization, expense reduction, or increased productivity expectations may hint at impending layoffs.
Unexpected Policy Changes:
When a company suddenly insists that remote workers return to the physical office. It may be preparing for layoffs, using non-compliance as a reason to trim the workforce.
Other Cost-Cutting Measures:
Companies often begin with minor cost-saving measures before conducting layoffs. Decreased workload or Project Cancellations are also the main indicators.
Support Services For Laid-Off Employees
Lucid’s presence in Arizona has increased growth in the electric vehicle industry as it attracts suppliers, manufacturers, and job opportunities.
This is good news for Lucid employees affected by layoffs. Departing employees would receive a minimum of 10 weeks of severance pay. Besides, they get Full third-quarter commissions and healthcare benefits throughout 2023.
There are plenty of job prospects. Moreover, there’s confidence that they will find new employment. To help fill some of Lucid’s workforce needs. They’ve partnered with Drive48. It is a job-training center for high-tech workers at Central Arizona College, Coolidge.
The demand for high-tech manufacturing workers is permanent. It is noted that nearly 2,200 students trained at Drive48 in the past two years.
Lucid Motors is committed to supporting laid-off employees by offering a severance package. The severance package includes continued healthcare coverage.
For the affected employees, support services are available. It is available through the Pinal County Business and Career Center in Casa Grande. It is located at 820 East Cottonwood Lane, Building E. For assistance, you can contact them at (520) 509-3555.
Lucid’s Incentive Package
When Lucid Motors came to Arizona in late 2016, or even before, they had a working car or complete funding. The state’s Republican Governor, Doug Ducey, offered an incentive package worth $47 million.
However, Lucid has so far. It only received a small portion of these incentives. Specifically, job-training grants totaling $560,013.81 for creating 674 jobs. Patrick Ptak, the senior vice president responsible for managing these incentives. He mentioned that there’s still about $46.5 million available for Lucid.
Ptak explained that all these incentives are based on performance. It means Lucid must meet specific hiring and investment goals so that they can request reimbursement.
In their recent layoff announcement, Lucid mentioned their plans. They have plans to expand in Casa Grande to support the launch of their first SUV in 2024.
Why Is No One Buying Lucid?
The Lucid Air EV may seem like a dream car for many drivers, but the problem is its high prices. In 2022, Lucid did show an increase in sales compared to the previous year, which is promising.
Two years ago, they had only sold 125 vehicles. In 2022, sales improved, gradually climbing, with a total of about 4,369 cars sold, especially when considering their production capacity, which exceeds 7,000 units.
Suppose we compare these figures to Rivian, a competitor that entered the market around the same time as Lucid. Then, the contrast is stark. Rivian boasts over 24,000 cars produced and approximately 20,000 cars sold. So, why the difference?
The primary reasons for Lucid’s low sales performance are:
- Supply chain disruptions
- Quality issues
- High prices
These factors have been persistent problems that have hindered their sales efforts. Despite the potential of the Lucid Air EV, these obstacles have held back its market penetration.
Does Lucid Motors Have A Future?
Lucid was once a promising electric vehicle company. But is currently facing major challenges. They’re struggling to boost production and sales, aiming for just 10,000 units this year. Cash is running out quickly, and competition is increasing. It is because of particularly Tesla’s competitive pricing.
A significant problem for Lucid is its cash flow issue despite its vehicles carrying high price tags. They’re currently selling them at a loss. This is combined with substantial expenses in administration, marketing, and sales. It is causing a significant drain on their available cash.
However, the future of Lucid is on track for substantial growth. The estimated annual increases of 30.1% in earnings and 46.9% in revenue. Additionally, earnings per share (EPS) is expected to grow by 33.5%. However, the forecast for return on equity in three years stands at -45.9%. It indicates potential challenges in this area.
Analysts’ predictions regarding Lucid Group Inc’s stock price over the next 12 months. The median target is set at 7.25. This forecast includes a high estimate of 10.00 and a low estimate of 5.00. Notably, the median estimate suggests a substantial 38.10% increase from the current price of 5.25.
Is Lucid Motors Better Than Tesla?
Lucid Motors and Tesla are both luxury electric vehicle companies. Both are well known for their speed and comfort. If we compare Lucid’s Lucid Air and Tesla’s Tesla Model S. Both are amazing productions.
In terms of speed, the Lucid Air Sapphire is a bit faster than the Tesla Model S Plaid. But real-world tests are needed for confirmation.
When it comes to range on a single charge, the Lucid Air wins. The Air Sapphire can go up to 427 miles, while the Model S Plaid reaches about 396 miles. Even the Lucid Air’s Grand Touring version surpasses the Model S.
Both cars aim to redefine luxury, speed, and innovation in high-performance electric vehicles. They prioritize quick acceleration, large batteries, and comfortable rides. However, these two differ in performance, range, design, batteries, and prices. Comparing these exceptional EV manufacturers isn’t really fair. They’re both the best, and the choice depends on what suits your preferences and needs.
Final Verdict
Lucid Motors recently announced layoffs. The recent round of layoffs trimmed around 18% of their workforce. It was a cost-cutting measure essential for restructuring. The company faced production, expense, and market competitiveness challenges. Due to these challenges, Lucid made this layoff announcement. Lucid’s ability to overcome these obstacles and enhance production efficiency is important for its future success in the evolving electric vehicle market.