Photo: Lucid | Edited
When Tesla announced massive price cuts in January, we figured EV startups like Lucid would be the most affected. Lucid has now announced a restructuring plan that involves laying off 18% of its workforce, or around 1,300 people. The move is meant to cut costs as the EV startup struggles to ramp production.
EV startups are in for a tough 2023 as raising new capital becomes more difficult, and production challenges mean young companies are burning through their cash reserves. Establishing a positive cash flow in the automotive industry is even more difficult, considering the huge investments needed to ramp production. Lucid had to learn this the hard way and is now in a very difficult situation.
Lucid announced on Tuesday that it would lay off 18% of its workforce, or around 1,300 employees, affecting nearly every company level. The details of the restructuring plan will be discussed over the next three days, as CEO Peter Rawlinson revealed in a letter to employees. The company expects to incur costs between $24 million and $30 million in compensations by the end of the second quarter when the plan will be complete.
According to Rawlinson’s letter, Lucid wants to cut costs by reviewing “all non-critical spending.” It’s unclear whether he sees its employees as non-critical or more cuts in other areas are expected. The laid-off employees would be offered severance packages including “access to career resources, healthcare coverage continuation, and acceleration of equity,” according to a memo reviewed by Insider.
The layoffs mark another setback for the company that produced around 7,200 vehicles last year but only found buyers for 4,400 of them. Both numbers are disappointing, considering that Lucid wanted to produce 20,000 vehicles in 2022. The production capacity is much larger, at 34,000 cars per year. Lucid also disappointed investors with the 2023 guidance for 10,000 to 14,000 cars. It looks like the company has a bigger problem with demand, as analysts saw a major drop in orders during the fourth quarter of 2022.
Lucid was among the more promising EV startups, but its main product, the Air sedan, is utterly expensive at a time when Tesla is slashing prices like there’s no tomorrow. Tesla can certainly afford that, thanks to the fat margins of its automotive business, making the Model S more desirable. At the same time, it made Lucid Air far less attractive, and many reservation holders have canceled their orders as a result.
A picture taken on Monday at Lucid’s factory in Casa Grande reveals hundreds of cars sitting in a holding lot. Lucid delayed its most affordable version of the Air sedan, which would be more competitively priced to the Model S, at $87,400. Currently, the cheapest Lucid Air is the Pure version with AWD and some upgrades, at $97,700. The most affordable Model S starts at $89,990, making the Lucid Air a tough sale.
Lucid announced on Tuesday that it would lay off 18% of its workforce, or around 1,300 employees, affecting nearly every company level. The details of the restructuring plan will be discussed over the next three days, as CEO Peter Rawlinson revealed in a letter to employees. The company expects to incur costs between $24 million and $30 million in compensations by the end of the second quarter when the plan will be complete.
According to Rawlinson’s letter, Lucid wants to cut costs by reviewing “all non-critical spending.” It’s unclear whether he sees its employees as non-critical or more cuts in other areas are expected. The laid-off employees would be offered severance packages including “access to career resources, healthcare coverage continuation, and acceleration of equity,” according to a memo reviewed by Insider.
The layoffs mark another setback for the company that produced around 7,200 vehicles last year but only found buyers for 4,400 of them. Both numbers are disappointing, considering that Lucid wanted to produce 20,000 vehicles in 2022. The production capacity is much larger, at 34,000 cars per year. Lucid also disappointed investors with the 2023 guidance for 10,000 to 14,000 cars. It looks like the company has a bigger problem with demand, as analysts saw a major drop in orders during the fourth quarter of 2022.
Lucid was among the more promising EV startups, but its main product, the Air sedan, is utterly expensive at a time when Tesla is slashing prices like there’s no tomorrow. Tesla can certainly afford that, thanks to the fat margins of its automotive business, making the Model S more desirable. At the same time, it made Lucid Air far less attractive, and many reservation holders have canceled their orders as a result.
A picture taken on Monday at Lucid’s factory in Casa Grande reveals hundreds of cars sitting in a holding lot. Lucid delayed its most affordable version of the Air sedan, which would be more competitively priced to the Model S, at $87,400. Currently, the cheapest Lucid Air is the Pure version with AWD and some upgrades, at $97,700. The most affordable Model S starts at $89,990, making the Lucid Air a tough sale.
To clarify, I’m not sure if these are sold cars awaiting shipment or inventory. Just cool to see so many lined up and the factory expansion since my last visit
— Kyle Conner (@itskyleconner) March 28, 2023
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