Here Is Why Lucid Group Can’t Afford To Sell Its New Gravity SUV at $80,000 Without Additional Saudi Cash

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it is said that there is a lot of clarity in hindsight. Lucid Group should have started retailing its newly unveiled Gravity SUV a lot sooner than the cash sieve that is the Lucid Air electric sedan. After all, the SUV aims to hit the market’s sweet spot in terms of price and amenities, and might even have become the embattled company’s lifeline in today’s turbulent waters. Nonetheless, the Gravity electric SUV might yet transform into Lucid Group’s much-needed panacea, but not without a significant cash infusion from the Saudis.

Lucid Group finally unveiled its 3-row all-electric luxury SUV a few hours back. Called Gravity and starting at just around $80,000, the company’s latest offering boasts a stunning design and an outstanding range of over 440 miles.

Lucid Group says that it designed an all-new “ultra-compact” battery platform for the Gravity SUV. As per the company’s claims, the new platform is a “little more than half the size” of the ones used in comparable offerings from other companies. Peter Rawlinson, the CEO and CTO of Lucid Group, noted yesterday:

“Its smaller, lighter, and higher technology battery pack means fewer precious metals and minerals, less energy to charge, less electricity consumed, less pressure upon the grid, and a lighter weight and more dynamic vehicle.”

Of course, the SUV leverages Lucid Group’s distinctive 900V electrical architecture that adds a range of around 200 miles from just 15 minutes of charging at a 350-kWh fast-charger.

This is all well and good. However, as very clearly flagged by an ex-Goldman i-banker in the above X post, the timing of Gravity SUV’s launch could not have been more deleterious, especially in the light of Lucid Group’s dwindling cash resources.

As we’ve noted in a previous post, Lucid Group was burning around $1 billion in cash every quarter toward the beginning of 2023. Lately, the company has managed to bring down its cash burn rate to around $700 million per quarter. The main problem for the company is the sluggish uptake of the pricey Lucid Air sedan which keeps its sales volume low and inventory elevated.

Now, with cash resources of just around $4.4 billion, Lucid Group can’t afford to rejig its production line for another model without incurring significant additional capital and operating costs, especially as Gravity’s production costs are likely much higher than the $80,000 price tag for the base variant.

With a market capitalization of just around $10 billion, an additional capital raise from the equity market would herald significant dilution for existing investors and is likely to face severe opposition. Consequently, the only feasible solution for Lucid Group is to tap the cash-rich coffers of its Saudi benefactors. After all, the Saudi PIF is the embattled company’s largest shareholder and the Saudi state itself has played an important role in propping up Lucid Group’s flagging order book by inking a decade-long supply order for up to 100,000 EVs in return for a dedicated EV manufacturing facility, dubbed the AMP-2, in the King Abdullah Economic City (KAEC) in Jeddah.

By pricing the base variant of the Gravity SUV at $80,000, Lucid Group is finally playing its cards just right and in tandem with the prevailing mood in the industry that has been scarred by a full-fledged price war initiated by Tesla. The company’s survival, however, now depends more than ever on the largesse of the Saudis.

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