Unidentified Analyst: Hey, everybody. Hi, Peter, you said in your prepared remarks, and in the statements that you published that sales momentum is building? Can you quantify what supports that statement? Over what period was it measured? Were you talking year-on-year? Or were you talking about momentum building kind of more during the quarter and sequentially?
Peter Rawlinson: Okay. Yes. Hi, Adam. So if we look at 2023 versus 2022, I believe we were up by 37% or close to 37% on memory. And if you compare Q1 2024 to Q1 2023, that’s where we had the 39.9%, very, very close to 40% growth. So we’re bucking the trend of the market quite nicely.
Unidentified Analyst: Okay. And just as a follow-up, you said that your focus remains on cost, a relentless attention to cost. And you mentioned some big improvements this quarter on BOM costs specifically. Can you give some examples of this improvement in BOM within the quarter? And who are you benchmarking for the BOM cost for the gravity? Thank you.
Gagan Dhingra: Adam, thank you for your question. So yes, in this quarter, despite the pricing actions, our gross margin improved and is mainly due to cost optimization initiatives, including BOM cost reduction. And within BOM cost, there are various components, and we are working hard with both the supplier side of things and internally and internally more on the technology side of it, where we are bringing the battery cost down. Our car is the lowest per vehicle range. But also then on the logistics side of it, we are able to bring our cost down significantly quarter-over-quarter. And in addition, we have identified a few other initiatives that we want to execute throughout the year. We’re also managing our inventory very effectively, that helps bringing the cost down.
Maynard Um: Great. We’ll take our next question, Tawanda.
Operator: Our next question comes from the line of John Murphy with Bank of America. Your line is open.
John Murphy: Good evening, everybody. Peter, I don’t necessarily mean to conflate the company necessary with Tesla for many reasons. But I mean, as we look at the SNX, the company was struggling and it wasn’t until the three NOI launch that there was kind of an escape velocity on self-funding. And it seems like we’re looking at sort of — somewhat of a parallel here, I don’t mean to make explicit direct comparison, but it does seem like the space or the smaller vehicle launching in late 2026 will be sort of where you potentially reach that escape velocity similar to when they hit the three NOI. So I was wondering if you would maybe kind of concur with that to some degree, right? I hope you don’t take a fence to that, but to some degree.
And then also, as we think about that, we’re seeing sort of these dribs and drabs and I wouldn’t say $1 billion is a drib and drab, it’s a lot of money. But sort of this question from investors, will you be able to get the funding sort of guaranteed to get to the launch of that escape velocity or maybe it’s the space in 2026. So I mean, one, do you kind of agree with sort of that logic, that’s when you reach escape velocity? And will you have the funding to get there?
Peter Rawlinson: Thank you, John. An interesting parallel and a very thoughtful question from you as always I mean, look, the vision is to get to very significant volume. And clearly, that comes in two steps — well, there’s three steps. First of all, scale or with brand awareness. Step two, going for about six times the TAM with Gravity. And I really believe there’s a very big significant opportunity with Gravity that Model X didn’t capture because Model X was a bit car like, a bit CUV like whereas Gravity is a proper SUV, and it’s a seat-seat three-row and we’ve got this unique secret weapon that we can go further with less battery and address the critical cost of making these products. And which you’ll see unfold as we get to a degree of scale, which Gravity will enable.
But it’s true to say that we won’t bear full fruition of all that until we get the midsized platform into production and it’s scheduled for start of production late 2026. Now, regarding our partnership, what really makes sets us Lucid apart is the combination of two things; a unique world-class technology, combined with our special relationship with the PIF and their relationship with the PIF transcends a nearly financial one because they are invested in us a cornerstone of transitioning the economy of Saudi Arabia to a sustainability model with their audacious Vision 2030. And they are — we are in this together. They are equally incentivized for success. Right now, running in Saudi Arabia is the first car plant they’ve ever had operating and it’s elusive plant.
Right now, we’re laying the foundations, literally pouring the concrete for our complete business unit, our CBU factory, which is scheduled to sync with the advent of the arrival of the midsize there in Saudi Arabia. They are incentivized for our success. We are mutually incentivized for success, nothing less than success is acceptable here.
John Murphy: Okay. That’s very helpful. just one second follow-up. 9,000 vehicles produced or Airs produced this year. You already delivered more than you produced. I think there’s well over 5,000 units — or I think there are over 5,000 units in inventory. Could we see deliveries significantly above that 9,000 production number? I think you did 239. Delivery is greater than production this quarter. Should we expect something similar to that go through the rest of the year? Or could it actually be higher?
Peter Rawlinson: Well, we haven’t guided on that. And actually I’d love to see it. what is crucial here is the key message is that management is taking prudent steps in balancing our production with deliveries so that we don’t get an undue amount of inventory and have that working capital tied up. This is prudent from management.
Maynard Um: Thanks Tawanda, we’ll take our next question please.
Operator: Our next question comes from the line of Itay Michaeli with Citi. Your line is open.
Itay Michaeli: Great. Thanks. Hi everyone. Just two questions for me. First, Peter, can you just give us an update on kind of supplier readiness for the Gravity launch? What would the progress you’re making there? And just over how you’re feeling about that? And then maybe a second question, just going back to the gross margin. I know there’s a lot of noise in that number. I was hoping you could talk a little bit to what you’re seeing across trends for kind of variable margins, they’re just kind of looking at parts, material, freight and warranty, excluding kind of labor and overhead costs. If you can give us a little bit of sense of how that’s trending? That would be helpful, too. Thank you.
Peter Rawlinson: Thanks Itay. Yes, so we — I’m personally overseeing the march towards the Gravity start of production. And literally in this room, every morning — my morning starts with a review of the status. And in order to ready the program, we need to sync three activity streams, the readiness of the Gravity product, the readiness of the factory, Arizona factory and the build-out of that and the installation of all the equipment. And the third thing you covered in your question was the readiness of the supply base. And absolutely, we’re all over this. We have literally a few hundred suppliers with thousands of parts. Truly drawn upon some of the best suppliers right around the world. And that is something we’re managing very closely.
And to that aim, I want this process to be really super transparent. So I personally commissioned the team to make a series of videos, which will tell the tale for everybody who’s following the company, the path to Gravity, the road to Gravity, the series. We launched that just last week, and that’s going to trace those three connecting pillars, the product, the factory readiness and supply chain readiness. But we’ve got a major advantage this time with this product, Itay, because we’re not trying to do it coming out of a pandemic. So, there should be a lot more opportunity for us to do SQA, which is supplier quality awareness and audit. And we have our supplier quality engineering teams visiting those suppliers and checking and verifying and validating the readiness for starter production late this year.
Now regarding margins, I would like to defer the question to Gagan, please.
Gagan Dhingra: Yes. Thanks, Peter. So Itay, on the gross margin, we have been working very hard with both the supplier side of things and then taking cost out of the business. And looking at the bond cost first, is a significant effort. We are continuously bringing thousands of dollars out from the cost. But one thing this quarter specifically, I want to call about technology. our car also has its lowest cost of ownership. And if you look at in the investor deck, we added Slide 7 and Slide 8, explaining how our car has the lowest cost. And it will be good for you to look at that. And then in parallel, our — the cost optimization team, this team is challenging each and every one and also for every dollar value, and I’m personally leading this initiative with support from Peter.
But what does that mean to us, we’re able to significantly bring the logistic cost down. We are looking more and more opportunities. Now it’s a matter of scale because we today are spending significant amount of money on the fixed cost. Even on the variable cost, we identify more opportunities, and it will help us because look at it from a supplier perspective, also, they also allocate their fixed overhead to the volume they deliver. But we have part to go there. And with Gravity coming late 2024, we are getting close and close to our capacity, and that will give us an operating leverage.
Maynard Um: Thanks Tawanda, can we move to our next question?
Operator: Thank you. Our next question comes from the line of Andres Sheppard with Cantor Fitzgerald. Your line is open.
Andrew Shepherd: Hey, everyone, good afternoon. Congratulations on the quarter and thanks for taking our question. Peter, I was just — I wanted to follow up on maybe deliveries to Saudi Arabia. Trying to get a sense if it’s possible to maybe quantify it a little bit as to how that agreement will develop later this year, next year and onwards. I think in the past, you had mentioned that — and please correct me if I’m wrong, but that a lot of these deliveries would include the Gravity and the midsized high-volume models, which have yet to reach their SOPs. So just wondering are we able to quantify what these deliveries to Saudi Arabia will be this year, next year as you work your way up to the Gravity.
Peter Rawlinson: Yes. We’re not planning to guide on the split in the future, but our deliveries in Q1 exceeded 500 units. I’m very confident that we’ve got equal demand for our products in Saudi, particularly to the SUV, that’s going to be quite an interesting market. But again, I’m not in a position to guide right now on these. And we haven’t decided yet where would guide on that specific split, either Andrew.
