The Scene
The electric-vehicle market is sputtering. Mercedes delayed its goal of being all-electric by five years and reassured investors it will keep classing up its gas-engine cars. Ford scrapped a $1.3 billion plan to convert a Canadian factory into an EV manufacturing hub; it will churn out the company’s flagship gas-powered pickup trucks instead. GM is going back to hybrids.
Peter Rawlinson is betting they’re wrong. The CEO of Lucid Group is convinced he can sell consumers on all-electric luxury vehicles. its current model, Air, starts at $70,000 and its next one, Gravity, will be even pricier. He’s armed with a seemingly bottomless supply of cash from Saudi Arabia, whose sovereign wealth fund doubled down again this week on its investment in Lucid.
But Lucid is on track to make just 9,000 cars this year, a fraction of the 90,000 it once projected. Its profit margins got worse the more cars it made and are only now stabilizing at levels far below those of rival Rivian. There’s a reason startups build software, not cars.
I spoke to Rawlinson from his office off the floor of Lucid’s giant Arizona factory. Our conversation, edited and condensed, is below.
The View From Peter Rawlinson
Liz Hoffman: People say they want these cars but they’re not buying them.
Peter Rawlinson: People don’t realize how good an electric vehicle can be. It’s unimaginably better than a gasoline driving experience, even if you take away the argument for sustainability. People have been ill-served by underwhelming offerings from traditional automakers that haven’t gone all-in on electric, and they’ve not been able to because they’ve not got the technology, and they’ve not got the long-term commitment.
How many of your marginal buyers are doing it to save the planet? It can’t be that many.
But it’s not just that. Look, I’m very environmentally aware. I also like driving fast cars. There’s more space [in EVs] because there’s no exhaust pipe, no big gasoline engine. If you like driving fast cars, it’s a must. If you like lots of legroom and comfort, it’s a must. If you like a nice, quiet and comfortable ride, it’s a must. And if you want to save the planet, it’s a must.
You’re aiming for 9,000 cars this year. There was a time that you thought by 2024, you’d be at 90,000. What happened?
The market is tough. The actual sales numbers of EVs are increasing. It’s just that the rate of increase was not what we anticipated. It’s like saying there’s inflation, but the rate of inflation is less.
But we’re outselling the Mercedes EQS. We’re outselling the Porsche Taycan. We’re outselling the [Audi] eTron. We’re out selling BMW Ice. And in some markets now, Lucid Air is outselling Tesla Model S.
If you got the word out and everyone wanted a Lucid, would you be able to produce enough?
We made over 100 cars in a day in Q4 2022. Manufacturing is not a problem. Our problem is market demand, and that is very much a function of brand awareness. If you’re not very interested in cars, you won’t bother to find out that Lucid exists. You’ll just go to your Mercedes dealer every three years, because you can’t beat the three-pointed star as a brand.
What do you make of the politics around electric vehicles? They’ve become a bit of a boogeyman for the keep-your-hands-off-my-gas-stove crowd, but on the other hand, you have Elon Musk.
I fail to see the political relevance of something which is going to help mankind. So I’m fiercely agnostic politically in my role.
But given how important government subsidies are for EV buyers, do you have a point of view on the election?
I am very grateful for the [Inflation Reduction Act]. I don’t want to have this be misinterpreted; thank you very much. But not all EVs are born equal. Just as we’ve got gas-guzzling internal combustion engine cars, we’ve got electron-guzzling EVs. The IRA incentivizes how many batteries you put in an electric car. We should not be incentivizing ‘how big is your gas tank?’ If Lucid made worse cars, I’d get a lot more money from the IRA.
You worked for Elon Musk for three years. Are you surprised by his turn over the past year?
I know him very well. Not really.
You think he was this political all along?
I don’t really want to comment on that. It’s quite a situation.
But a lot of what Elon says today doesn’t seem to align with the politics of traditional EV buyers. Is that an opportunity for you?
He’s become distracted with politics. His mind is not where it was, and you see the result now. We’re the new leader, and many of my team from Tesla have come and joined me.
That’s interesting, you’re talking about tech and recruiting. I was asking a slightly different question, which is whether customers are looking for an alternative car without the political baggage.
I actually had a very nice letter from a long-time Tesla owner, and they said ‘We’ve got a confession to make. What prompted us to switch from Tesla to Lucid wasn’t any knowledge of how good your car was. We just couldn’t drive around in a Tesla anymore. We bought a Lucid out of disdain for Elon, but now we’ve got it, we can’t believe what we’ve got.’
I wonder, though, if the reverse is also true. Can Elon bring over people who never would have bought an EV before because they associate them with liberals?
That would truly be a dark cloud with a slim silver lining.
Let’s talk about the tech for a minute. You do all or a lot of your tech in-house, rather than partnering, perhaps with a Waymo or Mobileye. Why?
We’ve got the best car in the world from a mechanical standpoint, and for most of its underlying software. What we know we struggled with a little bit has been the autonomous driving features and the user interface, and we’ve made sweeping changes to leadership. I’m personally taking charge of this, and we’re really advancing this now at an accelerated pace.
There’s a reason a lot of the pilot programs have been in suburbs in Arizona. I live in New York City, and I wonder whether technical people are underestimating how hard it’s going to be to solve that last 5% of utter chaos?
Significantly underestimating. It’s like refining gold to 99.9999% — the first few nines are easy, but it’s that last 0.01%. I can’t see it really happening till the 2030s.
Let’s talk about your partnership with Saudi Arabia, which has invested $2.5 billion in Lucid. You opened a big factory there last year. What have you learned?
There’s this perception that there’s this pot of gold and it’s easy money if you can tap into it. Nothing could be further from the truth. They are not stupid. They are very savvy investors, and they are looking for multipliers that can help their transition.
I didn’t go out and try to seek Saudi money specifically. But I needed billions of dollars. And to get that, we needed a proof point, because there was a whole phalanx of EV startups just trying to ride the coattails of Tesla’s market cap.
So we partnered with McLaren and we developed the most advanced electric motorsport battery pack. And guess what happened? Saudi Arabia said we’d like to host a Grand Prix event for electric motorsport. That Saudi race was the first race where our battery pack featured and that was the proof point for the Saudis.
So these talks were happening with His Excellency, Yasir [Al-Rumayyan], in the summer of 2018. He’s quite an accomplished racing driver, and I decided that none of my test drivers were driving our cars fast enough to impress. So I took him out. I think I scared the devil out of him, flat out around the block. And they were in.
The SPAC boom let companies like Lucid, which probably wouldn’t have been able to do a traditional IPO, go public anyway. The track record has been pretty bad. What do you make of that boom?
That was a fast-track to going public through a very strange mechanism, and full marks to the Saudis that they were very flexible and open to that. I thought perhaps there would be a conservatism that would rule that out. SPACs got a bad name because of the perceived lack of due diligence and oversight. But that wasn’t the case with us. When we merged with the Michael Klein-led [Churchill Capital], they were super diligent.