Two years ago, Tesla chief executive Elon Musk proudly said there was still no battery-powered car capable of competing with the Model S he released in 2012.
Back then, that was true – and even the 2020 Porsche and Jaguar models didn’t fit the specifications of his eight-year-old electric vehicle. “I’m still waiting,” Musk joked.
Lucid Motors says the wait is almost over.
The Lucid Air, which is slated to begin production later this year, offers a range of 500 miles, twice the 2012 Tesla range and a quarter more than any current Tesla, plus a charging system that would replenish hundreds of miles in minutes.
The company, backed by the Kingdom of Saudi Arabia, wants to mimic not only Tesla’s battery-stretching performance in its cars, but also the acceleration of the stock market that catapulted it to become one of the companies. most valuable in the world.
This week, the company filed a $ 24 billion listing application through a special purpose acquisition company, in the largest Spac transaction to date.
“We are in a fantastic position. We have raised more than we need and we have long term financial partners who can engage more, ”Peter Rawlinson, CEO of Lucid, told the Financial Times.
But the announcement of the stock market listing came with the announcement of a delay in the Air’s launch, initially slated for spring. He highlighted, for anyone who may not be familiar with Tesla’s winding journey to profitability, how deadlines can slip in the electric car industry.
Lucid was founded as early as 2007, as a battery technology company called Atieva, when a group of Musk employees defected, convinced that Tesla’s plan to build an actual car, rather than providing batteries and transmissions was the wrong approach.
“It took the team until 2013 to recognize what Tesla recognized,” said Rawlinson, chief engineer of the Model S, who was on board that year to design a “post-luxury” vehicle. .
Despite the backbone of automotive manufacturing, Lucid’s fame so far has come from battery technology – especially for the circuit. He is the designer and manufacturer of batteries for the 24 vehicles of Formula E, the electric racing championship founded in 2014.
In its early years, Formula E drew a lot of jokes. Drivers had to make mandatory pit stops to swap vehicles halfway through the race as they weren’t able to complete the circuit on a single charge.
“Formula E was created to illustrate the potential of electrification, but all it has done is illustrate its limits,” said Rawlinson.
Lucid competed to deliver better technology in 2016, won the contract, and helped redefine racing as the electric counterpart of Formula 1, drawing Porsche and Mercedes to competition.
The partnership generated only modest revenues, but it allowed Lucid to differentiate itself from its competitors, attract talent and ultimately led to a critical investment of $ 1 billion in 2018 from the fund. Saudi public investment, which remains the majority owner of Lucid.
“Everyone thought I was crazy, but it saved the business,” Rawlinson said.
The deal to merge Lucid with Churchill Capital IV, one of several Spacs set up by trader Michael Klein, came as no surprise.
Rumors had been circulating for weeks about a potential deal and Klein has a long history with Saudi Arabia – whose sovereign wealth fund will remain the majority owner of the electric car maker – as one of the kingdom’s top advisers.
A heady mix of two of Wall Street’s favorite trends – Spacs and EVs with a lot of promise but no revenue – pushed Klein’s Spac shares up nearly 500% before the deal was announced. But when the press release went out, it became clear that some of the major players had gotten a good deal.
While Churchill shares traded up to $ 60, Churchill and institutional backers received Lucid shares at $ 10 or $ 15 apiece. This unusual way of structuring the deal effectively gave the company three different valuations ranging from $ 12 billion to $ 64 billion.
Like so many businesses that use reverse mergers, the company is months away from any significant revenue, and its plans seem to involve burning money at a staggering rate for years to come.
The forecast in its investor presentation is to burn $ 7.5 billion between 2022 and 2024, before eventually generating $ 321 million in cash in 2025, and then $ 1.5 billion in 2026.
Revenue will rise to $ 2.2 billion next year, quadruple to $ 9.9 billion by 2024, then climb to nearly $ 23 billion by 2026, the presentation says, which implies profits from 2024. It goes without saying that these figures are speculative.
Production was pushed back into the second half of this year, the company revealed in the same document.
“All the car programs after several months there are parts quality issues,” Rawlinson said. “If it was perfect, we would have it in production today.”
Even among analysts who consider Lucid to be the best of the breed among Tesla followers, there is widespread skepticism that Lucid can fulfill its promise to go from zero deliveries today to 50,000 by 2023 and 1 m by 2030.
“Going from PowerPoint to full-scale production of millions of units is extremely difficult,” said Neil Campling, technical analyst at Mirabaud Securities. “We’ve been here a number of times before, where proof of concept hasn’t led to real commercial viability and real scale.”
Rawlinson said the Spac deal gave the company a breather to tackle quality issues, grossing $ 4.4 billion after fees, meaning it won’t need to raise again before. early 2023 to finance its second vehicle, the Gravity SUV.
Rawlinson doesn’t hesitate to invite comparisons with Tesla, suggesting that Lucid can replicate his success and outdo any of the established competitors such as Mercedes and Jaguar.
“There is only one company that has world-class technology and that is Tesla. No one else is even close, ”he said.
But if Lucid has the advantage of learning from Tesla’s successes and failures, the group will also face an avalanche of new models from mainstream manufacturers, in an assault that analysts call “the Empire Strikes Back.” .
Arndt Ellinghorst, automotive analyst at Bernstein, predicts that up to 30 million electric vehicles will be produced each year by 2030.
“There is no longer a first-come advantage,” he said. “There’s very little technological differentiation left in the battery or software, so it all really comes down to brand value and the ability to scale quickly – manufacturing, service, the whole ecosystem of a car. It is not easy. “
Rawlinson rejected the thesis, pointing out that early efforts by established names like Audi and Jaguar have all failed, and saying none of the major automakers pose a threat right now.
“It’s going to sound incredibly jaded, but I’m not worried about any of them,” he said. “I want them to come. Bring it on.”