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- [00:04]
Goldman Sachs Podcast Host
Exchanges. The Goldman Sachs podcast featuring exchanges on rates, inflation and US Recession. Risk exchanges on the market impact of AI. For the sharpest analysis on forces driving the markets and the economy, count on exchanges between the leading minds at Goldman Sachs. New episodes every week. Listen now.
- [00:34]
Tim Higgins
In the world of electric vehicles, Tesla and its CEO Elon Musk are seen as the leaders. But there are others nipping at their heels, including a British man named Peter Rawlinson, who is the chief executive of electric carmaker Lucid. Rawlinson has been a key player in the electric car revolution, but his company is at a crossroads. It's fighting to be one of the winners in the race to an electrified future at a time when it's not clear that everyone is going to survive.
- [01:04]
Peter Rawlinson
I want to change the narrative here. We have raised in a brutal market around 1.75 billion right now and I think that puts us in an incredible position. It helps secure the future of this company and I would challenge many other companies to raise that sort of quantum in these sort of trading conditions.
- [01:26]
Christopher Mims
Rawlinson's pedigree is hard to match. He was one of the engineers behind the Tesla Model S which helped reshape how the world thinks about the electric car and is seen as one of the most innovative vehicles of the 21st century. At Lucid, he has developed a critically acclaimed sedan called the Air and is preparing to launch a three row SUV called the Gravity. Lucid has begun taking orders for the high end version of the $94,900 vehicle scheduled to begin production late this year. A less expensive version, around $80,000, is planned for late next year. The technology in his vehicles is cutting edge, but those advancements have yet to translate into big sales.
- [02:08]
Tim Higgins
For Lucid, the clock is ticking. The auto business is brutally competitive and fast moving, even with funding from Saudi Arabia's public investment fund. Questions linger over whether Lucid can move fast enough to bring out less expensive vehicles and reach the volumes necessary to make it a sustainable company.
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Christopher Mims
At the same time, Rawlinson has to compete with super affordable new entrants from China that are wrecking many rivals plans from the Wall Street Journal. I'm Christopher Mibs.
- [02:39]
Tim Higgins
And I'm Tim Higgins. This is Bold Names, where you'll hear from the leaders of the bold name companies featured in the PA pages of the Wall Street Journal today. We ask what will it take for EV maker Lucid to become a sustainable company? And Peter Rawlinson tells us why Lucid's biggest competitor isn't Tesla. There's a lot to talk about today.
- [03:04]
Interview Host
From the cash eating machine that is the car business, to efforts to make cheaper EVs, the rise of Chinese rivals, and maybe even your old boss, Elon Musk at Tesla. But first, just quickly for our audience, what is Lucid doing to advance the world of EVs and how does that compare to what Tesla has been up to?
- [03:26]
Peter Rawlinson
Lucid exists to advance the state of the art of EVs and why this is of seminal significance importance is that we need to address the key barriers to the widespread adoption of sustainable mobility. The first barrier has been range anxiety. Back in 21, we launched the first car in the world with over 500 miles range. To this day, there's no competitive vehicle that achieves within 100 miles of that car that we launched over three years ago. What's very important is that we achieve the range in an intelligent way through technology, that we go further with less batteries. And this is where efficiency comes in. With a more efficient car, we can travel further with less batteries. And batteries are the most significant cost element of the cost structure of an EV. If we're to truly address the cost of EVs to catalyze a widespread adoption, we must hit the core issue, which is the cost of batteries as a function of their size. As a commercial enterprise, we have to start with a high end product first to develop that technology. But our existence, it's all about advancing the state of the electric car through high technology.
- [04:50]
Interview Participant
So if we project that into the future, does that mean that your ultimate goal is a long range or a relatively long range vehicle that is truly affordable or even less expensive than a gasoline powered vehicle?
- [05:07]
Peter Rawlinson
That's a very interesting point. The EV of the future, I believe, will have shorter range but very significantly smaller batteries. So currently we've got a research program called Vision 6, which is a research program to achieve 6 miles per kilowatt hour. If we can do that, even if it's physically possible, if we could get to 6 miles per kilowatt hour, it would be possible to have an EV in the Future, say of 180 miles range, which would only require a 30 kilowatt hour battery pack. And that's more than enough for most consumers. And if you knew there was fast charging on every street corner, why would you need to carry more than 180 miles as antidote for range anxiety on the vehicle? And that 30 kilowatt hour battery pack would only cost a few thousand dollars, not twenty odd thousand dollars. It would be significantly lighter and that would have a multiplier effect on the cost down of the rest of the vehicle, it would take up much less space. It could just fit neatly under the front seats. And that creates the consumer car of the Future, maybe the 20, $25,000 car and its efficiency and the technology that Lucid's developing today for its high end products which will enable that.
- [06:27]
Interview Participant
So I love it. I love the $20,000 electric vehicle. I think that's probably what the market needs to break through. Are you going to build that $20,000 vehicle?
- [06:36]
Peter Rawlinson
No, because that market sucks. We're a public traded company and we're commercially viable in the future. That's the vision. That market is notorious because you get into mass manufacture, terrible low margins. If you look at Porsche's the most profitable traditional car company, it doesn't operate in that sphere. I think this is where our licensing opportunity comes to play as a tech company licensing our technology so that other OEs can benefit from that and they could put such a vehicle in place. They have a more installed manufacturing base that's out there, it's ready depreciated. The capex that we'd require to install the manufacturing base for millions of these units makes little sense to me. So our mid size vehicle which is scheduled for start of production late 26, we anticipate that being priced at about 48 to $50,000. And I think that sort of would be a nice bookend for our product range. We have Sapphire at 249, coming down to midsize at 48. And I'm very, I think that's the right zone for us to operate in with our own products, but to license and enable others to make more affordable.
- [07:53]
Interview Host
Products as the market evolves so quickly. It sounds like you all are evolving. I remember hearing you years ago talk about a Tesla like plan where you were going to have the high end version and the middle version and then you were going to try to do a cheaper, less expensive version down the road. But it was going to be way off. It sounds like adapting to where kind of the market's going. And the reality is that maybe making EVs isn't what you thought it was going to be like 10 or 20 years ago.
- [08:20]
Peter Rawlinson
When we last spoke to him, I envisaged Lucid being more of a Mercedes competitor than a Tesla competitor. And we overtly targeted S class Mercedes with lucid air. And I think we've got a superior product in many ways. We never really targeted Tesla. I think the media likes to portray it as a Tesla competitor. It was always Mercedes and Porsche we were aiming for.
- [08:45]
Interview Host
Why was that I thought there was.
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Peter Rawlinson
A latent market for people who wanted a higher quality, better engineered product with more performance and more range and just a better driving experience, a more luxurious experience. We play really competing with the grandee German marks, Mercedes, Audi, BMW and Porsche. That's where I see us.
- [09:08]
Interview Host
The lucid air, I think, has won just about every award out there. But that enthusiasm hasn't necessarily been turning out in the sales just yet. You're projecting what, 9,000 sales this year? A few years ago you were hoping for 90,000. Where's the disconnect between that enthusiasm and where the rubber hits the road?
- [09:28]
Peter Rawlinson
So we're actually outselling all the key competitors in the US market. We're outselling the Mercedes eqs, we're outselling Porsche Taycan, and actually recently we've been out selling Tesla Model S. But if you look at our projected volumes, no one anticipated macro high interest rates and such a tough market. Nobody did that. But we're outselling the Grand Marquise of brands of Germany in the us, Speaking.
- [10:01]
Interview Participant
Of German brands and macro conditions, Volkswagen might shut down its marquee EV factory. EV factories that were built during the boom times of anticipated demand for EVs in the US are operating at half of their capacity or less. Where they cannot be making money, they can't be operated profitably. This is a really dire time, I think, for a lot of EV makers. And the conventional ones are pulling back and saying we're going to do hybrids instead, or, oh, let's ramp up our conventional SUVs again. This feels to me like an existential moment for a lot of EV automakers. What kind of consolidation, what kind of shakeout do you anticipate in the industry as a whole?
- [10:52]
Peter Rawlinson
I don't know what a lot of these EV makers are. There's a lot of traditional car companies that have had very lame attempts at doing EVs, and there's one or two startups that are actually in production. The false narrative is that EVs are in decline, the sales are up. It's just they're not accelerating as fast as Sam had predicted. And you put against that backdrop the lame efforts from some of the traditional makers with their EV efforts. I'm not surprised people are not buying them. So, I mean, you've got to ask yourself, where is the market going to be in the 2000 and 30s? We have to move to sustainable transport mode. It has to be pure battery electric. That is the only scientific, logical solution. A hybrid is the worst of all worlds. It is just an incredibly dumb solution. This is a huge opportunity for us as lucid. We're all in on the right technical laws of physics solution which is pure battery electric, not hybrid, not fuel cell. They're dumb as well. And this is a huge opportunity. This is the time for us to be brave. Where others are fearful, we're leading with our technology. We're going to have the best SUV on the planet with gravity. It's a seminal product, a landmark. No one else is going to be close to where gravity is. And we're moving ahead with our mid size, which is going to be our world platform.
- [12:24]
Interview Participant
You're preaching to the converted in terms.
- [12:26]
Christopher Mims
Of how we should move to battery electric vehicles.
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Interview Participant
And having been in your vehicles, they're a joy to drive. Everyone should go test drive one if they want to have one of the ultimate driving experiences. So I agree with all of that.
- [12:41]
Peter Rawlinson
Thank you, Chris.
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Interview Participant
But the American consumer doesn't seem to right. So hybrids may be a dumb solution, but sales for them are on fire. Toyota is sitting pretty in that respect right now. And then in terms of.
- [12:58]
Interview Host
Let me interrupt you for a second. And the Toyota Prius is all of a sudden sexy. I mean, have you seen it?
- [13:04]
Interview Participant
It actually looks good and it's fun to drive.
- [13:05]
Peter Rawlinson
All of a sudden, all of a sudden looks sexy.
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Interview Participant
I'll give it that.
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Interview Host
I'm sorry, Chris. It does.
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Peter Rawlinson
It's a cool design. I like it.
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Christopher Mims
Yes, it is cool.
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Interview Participant
And so. But the other thing is, you talked about lame automakers with their lame attempts and. But some of these attempts do seem to fall into the realm of more than good enough. And buyers are responding. GM now has a $35,000 SUV that is well reviewed that actually returned their EV sales to growth despite the fact that they stopped making the bolt. So your technology is amazing, but is it too amazing? EV technology has matured so much since you started your company. Isn't it the case that like these kind of Chinese cars and the cheaper EVs that are coming could be good enough? Right, for the average American?
- [13:57]
Peter Rawlinson
Yeah, I think that there is a market for mediocrity. There is a mass market for mediocrity. But there's also a misconception that our technology is somehow esoteric in its nature and therefore over complex and therefore difficult to make and therefore unnecessarily expensive. And that is not true. Our technology is a very significant cost down driver. That's why it exists. Our motor, for example, is capable of 600 more horsepower, but it only weighs 31.5 kilos. It is very significantly lighter than the competition. And the cost of a motor is driven by its mass. It literally is the mass of copper that's in it, the mass of magnets and the mass of electrical steel. Because our motors and powertrain systems are more effective and efficient, we use less batteries. So this is our play that we will be able to make a car more profitably in the future once we achieve scale as a consequence of that technology. Now there's always going to be a mass market for mediocrity, but there's always going to be room at the top for the best. And when the best becomes a cost down enabler, that's when we will achieve lift off. And right now the tech is a cost enabler. We don't have the scale and we need to multiply the scale with the technology to create that lift off.
- [15:34]
Tim Higgins
We just heard how Lucid is trying to fight mediocrity. When we come back, Peter Rawlinson talks about what investors are getting wrong about his company.
- [15:50]
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- [16:04]
Investors should carefully consider the investment objectives, risks, charges and expenses. The current prospectus contains this and other information and is available@eatonvance.com read the perspectives carefully before investing not FDIC insured offer no bank guarantee May lose value not insured by any federal government agency Not a deposit Investments involve risk Principal losses possible distributed by Foresight Fund Services llc.
- [16:28]
Interview Host
The car business is notorious for eating cash, and so until you can get to that scale and to that volume, you're kind of in a dangerous dance or the danger zone, right between having something cool to sell and being able to get to the point where you can be sustainable. Recently you announced some plans for issuing new shares to the company in an effort to raise more money, close to $2 billion. And the market really reacted very negatively. Shares fell that day like 18%. And I think it rattled some investors who thought maybe lucid was okay. Cash wise, you ended the second quarter around 4 billion in cash, in part because of the commitments you have from your largest shareholder, the Saudi Arabia's Public Investment Fund. So what do you say to people who are nervous about Lucid about its ability to have cash and kind of the interim before getting to that period of sustainability?
- [17:24]
Peter Rawlinson
I'm glad you asked me that, Tim. On that day we were able to raise and secure funding of roughly $1.75 billion. And to do that in a brutal market, that is a show of the strength of this company. That 1.75 helps secure the future of Lucid with a cash Runway well into 2026, right through the critical ramp up phase of gravity and close to the start of production, the dawn of the past of production of a big one for us, our world platform, which is mid size and that 1.75 billion that we just raised then makes our total raise through 2024 over 4 billion. That is the strength of this company. Now this has been completely misconstrued by the media. The media's construed it as we are diluting in order to raise. No, I want to change the narrative here. We have raised in a brutal market around 1.75 billion right now with the public investment fund, absolute stalwart support of us as long term partners for success. And that secures our Future well into 2026. And I think that puts us in an incredible position. It helps secure the future of this company and I would challenge many other companies to raise that sort of quantum in these sort of trading conditions.
- [19:02]
Interview Host
So 2026, the mid size vehicle that's coming, is that what gets you to positive cash flow or can you do that with the gravity?
- [19:12]
Peter Rawlinson
We haven't guided to that, Tim. You could today if you like. You're very canny. No, we haven't guided to that. But I think there is a historical precedent here with the road that Tesla took. Clearly right now with air and gravity, we're a Mercedes and Porsche competitor, but overtly we become a Tesla competitor head to head with midsize. The vision of the company that I have set out is by the early 2000 and 30s that we'll be able to produce a million of those vehicles a year. I think it's going to be better, massively better than a Tesla Model Y. And because of our technological advantage, we should be able to make that car with a competitive range but with less batteries than anyone else, which will use less of the world's resources and cost us less to make and allow a better gross margin per vehicle than anyone else can achieve because of that. That is the game plan. That is the chess game that we're playing.
- [20:19]
Christopher Mims
We've heard from Peter about the competition in western markets, but what about when it comes to Chinese rivals and Elon Musk's plans for a robo taxi? That's after the break.
- [20:35]
Eaton Vance Advertisement Voice
This podcast is brought to you by Eaton Vance ETFs. What's inside your fixed income ETF is it built for today's bond market? Can it adapt to changing markets? Inside Eaton Vance Total Return Bond ETF evtr, you'll find a disciplined investment process, broad fixed income diversification, and an active, nimble approach for pursuing potential opportunities as markets evolve. Get to Know actively managed EVTR, the symbol of Core +more@eatonvance.com Symbols before investing.
- [21:04]
Prospective investors should carefully consider the investment's objectives, risks, charges and expenses. The current prospectus contains this and other information and is available@eatonvance.com Read the prospectus carefully before investing. Not FDIC Insured offer no bank guarantee May lose value not insured by any federal government agency Not a deposit Investments involve risk principal losses Possible distributed by Foresight Fund Services, LLC.
- [21:29]
Interview Host
It'S interesting as you lay out your next steps Elon Musk has been talking about his next steps. His attention is definitely clear on the robo taxi he has shown. One that he says will hit the market costs less than $30,000. I don't hear you talking about robo taxis. Why is that?
- [21:49]
Peter Rawlinson
Because I'm an engineer and I'm a realist and it's not possible.
- [21:54]
Interview Host
Robot taxis aren't possible, not with today's.
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Peter Rawlinson
Technology and certainly not a vision only.
- [21:58]
Interview Host
System and certainly not in the next 10 years.
- [22:01]
Peter Rawlinson
I think it's possible probably in the2030s. I've been consistently saying this from 2015, 2016. Year upon year I've been proven right. I've said it's a far greater intellectual problem and challenge than people realize. It is repeatedly underestimated the enormous enormity of that challenge. It is inevitable that we will get to full autonomy, but not with today's technologies and not with a vision only system. That's what I believe. I've been right so far.
- [22:35]
Interview Participant
What about Waymo then? They're doing it now. It's one thing to say Musk can't do this, but what about yeah them.
- [22:42]
Peter Rawlinson
So Waymo are doing it in a very different way. It's geofenced with multi sensor fusion with multiple 3 scanning lidars. So it's a very different approach. So we're kind of in between. We've got sensor fusion with LiDAR. We've got one LiDAR to 120 degree solid state fixed range about 125 meter LiDAR. We're like a level two plus right now. But what is misunderstood is that Tesla FSD is not yet at level three. They're still at a level two, maybe a two plus plus plus, but FSD isn't Even at level three. Yet there's a five level scale to autonomy. Tesla is not even at level three.
- [23:27]
Tim Higgins
And we should say LIDAR is a laser sensor that creates a 3D picture of the world that's used by most self driving cars.
- [23:35]
Interview Host
I get the impression listening to Elon, that maybe he's lost interest in the idea of selling cars that are driven by humans at a low cost, in part because of the increased competition in China, where the low end of the EV market has just become brutally competitive. And I just wonder, is this, are you seeing any similarities or any echoes to a similar time in the auto industry when the Japanese automakers really upended the global industry with their fuel efficient cars and their new ways of doing things that really caught Detroit by surprise and shuffled the deck that changed the industry for generations to come?
- [24:15]
Peter Rawlinson
Oh yes, Tim, there are waves of historical precedences here. The rise of Toyota and then more recently the Koreans coming in. Now what I'm seeing in China is an incredible turnaround, incredible advancements of their vehicle engineering, but I'm not seeing significant advancements of their core EV technology yet. So in terms of body engineering, fit and finish, door shut drop glass, wind noise, ergonomics, material choice and general design sensibility, they've come on leaps and bounds immeasurably. It's scary in the last few years. They're also world leading in their user interface in a way which is fascinating. So do not underestimate them. Then you've got the overlay that they're really, it's not a level playing field, that they're enjoying disproportionate state subsidies. And then of course, they have a low cost workforce as well to draw upon and the result is very significant.
- [25:22]
Interview Host
We're running out of time, but just quickly, how do you feel like Lucid is prepared to compete against the threat of the Chinese competitor?
- [25:31]
Peter Rawlinson
Look, I really believe in the strength of our technological innovation. This is a huge team effort. It's not me, it's. I'm surrounded by brilliant people. That is my job to attract sheer raw brain power and to direct that orchestra, to conduct that orchestra. And I have absolute faith that this is a tech race and there's always room at the top for the best technology. And I relish that challenge, I really do. And I have huge faith in my, the capability of the team that I've assembled here.
- [26:04]
Interview Host
We end where we began, talking about technological advances. Peter, thank you.
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Peter Rawlinson
Thank you so much.
- [26:15]
Tim Higgins
And that's bold names for this week. Jessica Fenton and Michael Lavalle are our sound designers. And Jessica also wrote our theme music.
- [26:23]
Christopher Mims
We got help this week from Julie Chang, Catherine Millsop, and Scott Salloway. For even more, check out our columns on WSJ.com I'm Christopher Mims.
- [26:35]
Tim Higgins
And I'm Tim Higgins. Thanks for listening.