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Lucid Group (NASDAQ:LCID) is currently going through the veritable hellhole that is the production ramp-up, with the company forced to reduce its projections of EV deliveries for the entire 2022 at each of the past few quarterly earnings disclosure. However, the most difficult period for Lucid Group might finally be in the rear window after the company introduced sweeping changes in its logistics operations as well as the top management.
As a refresher, while announcing its earnings for Q1 2022, Lucid Group had slashed its production target for the year from over 20,000 units to between 12,000 and 14,000 units. Then, the company slashed its yearly production target to between 6,000 and 7,000 units while announcing its earnings for the second quarter of 2022.
Bear in mind that Lucid Group’s AMP-1 facility in Casa Grande, Arizona, currently has a production capacity of 34,000 units per annum. The company is adding a second assembly line at the facility to handle the production of the Lucid Gravity SUV that is expected to launch in 2024. Once the upgrade is complete, the facility’s annual production capacity will increase to 90,000 vehicles per year. Separately, Saudi Arabia recently awarded Lucid Group around $3 billion in incentives to establish a 155,000-units-per-year production facility in the Kingdom. The Saudis have also signed an agreement to purchase up to 100,000 electric vehicles from the company over the next ten years.
This brings us to the crux of the matter. Some of the major hurdles that Lucid Group faced in ramping up production at the AMP-1 included logistics constraints as well as a tribal mentality of sorts where the production line, instead of working in a cohesive manner, was divided into disparate cliques. In order to tackle these two issues, the company has now moved a significant proportion of its logistics operations in-house and implemented sweeping managerial restructuring, which saw at least six key executives on the manufacturing front leave the company in recent days.
Bear in mind that Rivian, another upstart EV manufacturer that faced almost identical challenges as those currently being faced by Lucid Group, was able to overcome much of its production-related inertia when it replaced its VP of operations, Charly Mwangi, with a veteran from Magna International, Frank Klein.
As per our internal source, as well as comments on the Lucid Owners forum, Lucid Group’s production cadence has now increased to between 40 and 50 cars per day from an earlier run rate of just 5 to 15 cars daily. Assuming 20 working days in a month, Lucid Group can feasibly produce around 1,000 EVs per month. However, the current production run rate is expected to increase further to between 50 and 60 cars per day in short order. This means that the company now stands a fair chance of meeting its own watered-down production guidance of delivering between 6,000 and 7,000 vehicles in the entire 2022.