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Tesla rival Lucid, halves target on quality issues and production delays, shares plunge 10%

American luxury electric vehicle startup Lucid may come from California’s Silicon Valley, but its future will or may not be in the arid plains of Arizona.

On Wednesday, chief executive Peter Rawlinson shocked investors with weak quarterly numbers and an unexpected cut in vehicle production forecasts in the face of serious problems at the plant. Casa Grande near Phoenix.

Rawlinson, former chief engineer of Tesla Model S, blamed mainly on the growing difficulties associated with ramping up production, where parts needed to arrive at the right time and on time depending on individual custom orders.

“Our revised outlook guide for the year reflects the logistical challenges as we begin to scale, which shows the immaturity of our logistics process,” Rawlinson told investors in one call.

The company’s shares fell more than 10% on Thursday, as Lucid is seen as one of the few EV startups outside of China. best position to survive The industry rocked with Amazon-backed Rivian.

That’s because the Lucid Air is arguably the most electrified vehicle currently on the market, easily beating anything Tesla has to offer.

Not only does it have the longest range with EPA-rated 517 miles, but it’s also the most efficient in terms of power reserve with 4.6 mph per kilowatt-hour of battery life. It also boasts the fastest recharge rates thanks to its 900-volt electrical architecture, which earned it the prestigious Motor Trend Car of the Year award. in november.

Quality issues

Realizing that investors would be confused by the news, Rawlinson tried to reassure his shareholders that he was getting the hang of the situation.

“I believe we have identified the key bottlenecks and have taken steps to begin to correct the situation,” he said, after posting quarterly revenue of $97 million. This unfortunately missed the consensus estimate of $145 million and came amid an even bolder $220 million net loss at the operating level.

But the problem doesn’t end with the slow pace of production due to the mismatched timing of parts arriving at the Casa Grande factory. They go much deeper.

Rawlinson admitted that some of the materials the vehicle was built had not shipped to customers due to a quality that he felt was not standard for a luxury vehicle like the Air, and pledged to stay in Arizona, taking Engage directly with store staff to resolve issues. .

These problems are mainly related to aesthetics such as unusually large or uneven gaps on the body panels or uneven surfaces with each other.

While Tesla has a reputation for shoving off poor build quality, the “fit and finish” style as it’s called in the industry remains a hallmark of German premium brands Mercedes-Benz and BMW. and expected by discriminating buyers to shell out $100,000. on a new car.

As a result, Rawlinson says many of the new changes will be overseen by experienced quality assurance and logistics managers he has learned from industry rivals Mercedes and Stellantis.

“Quality simply had to take precedence over quantity as we established our brand reputation,” he explains.

Unforeseen threat to Tesla

Lucid’s problems mimic the “production hell” months at Tesla that saw Elon Musk famously fall asleep at the factory, when Model 3 midsize sedans were being built outdoor assemblyAn absolute no-no for this industry.

Only this time, instead of having trouble with the first mass-produced car in the hundreds of thousands, Lucid is having a problem with his flagship model, a low-displacement luxury sedan designed positioned at the top of the market.

All told, only 679 Lucid Airs were delivered to customers in the second quarter, leading Rawlinson to predict only 6,000 to 7,000 units will be produced for the full year.

This number is only half promised before in May and fell sharply from the original target of 20,000 vehicles. That still means a strong ramp in the second half of the year as only about 1,400 Lucid cars have been built so far.

For Tesla, the news is further welcome proof of its advantage over its main competitors. Lucid has been seen as a threat by CEO Elon Musk, especially with an experienced Tesla engineer running the program.

Just a few days after Rawlinson unveiled the specifications of its mass-produced Air sedan in September 2020Musk then announced a Model S would have a range of more than 520 miles, at least three better than the competition from Lucid.

Famous The EV site Elektrek, long known for its Tesla-friendly coverage, even ran a story about “Musk’s new”disclosure“The model with improved range suggests a proof-of-concept model that has been built and tested ahead of a 2021 launch. Fans speculate a significant increase in operating range. The typical Plaid’s 348 miles must come from the use of 4680 next-generation cells designed to strengthen Tesla’s engineering leadership position.

In the end, the so-called Plaid Plus turned out to be nothing but steam software, and Tesla is still working on kinks with its 4680 cells.

Musk first accepts deposits from paying customers and then cancels immediately, automatically switching their orders to Regular Plaid that he argues well.

In the meantime, though, this tactic may have succeeded in keeping enough Model S owners from switching to Lucid.

Saudi Arabia help

Why is Musk worried? It may be related to the bottomless pockets of Lucid’s Saudi supporters.

As long as Rawlinson can keep the Kingdom believing he will deliver a return on their investment, up to and including build an assembly plant in the Arabian desert to fulfill his Saudi dream, he could then keep the company afloat while other rival startups like Lordstown Motors and Faraday Future flounder.

Lucid recently reached an agreement to sell up to 100,000 cars to the Kingdom in addition to the 37,000 existing reservations he already has on hand. This will help the company keep paying its bills through next year — even longer if management stretches the budget, as chief financial officer Sherry House announced on Wednesday.

In the meantime, Rawlinson gave a clear signal to another company in California, Appleand any other tech company, by saying he might be in need of a partner and ready to do business — perhaps to protect his bets in Saudi Arabia.

Air and its Gravity SUV sibling, due out in 2024, are large enough to fit all the sensors and computing power needed for a future fleet of autonomous robotaxi.

“Many of these characteristics and attributes [of our vehicles] potentially make us a great partner for one of these groups,” he said, with CFO House she is even “very open to discussing partnership options”.

Amid the poor results, Rawlinson made a concerted effort not to further undermine investor confidence in management, suggesting that the hiccups that are a perfectly normal development “became more apparent. when we started to scale.”

Instead of focusing on mistakes, he emphasizes his pride in what Lucid’s workforce and suppliers can achieve in the face of adversity and thinks the brand will last. a long time later thanks to a mid-size model coming out later in the decade.

“But I want to make it clear that right now, my unwavering focus is on this amazing team in Arizona,” said CEO Lucid. “I remain confident that we will overcome these short-term challenges with unwavering perseverance and a strong determination, and therefore, putting the right processes in place will serve us well in the future. future.”

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