Lucid Group Q3 2026 Earnings Call Transcript

Lucid Group (NASDAQ:LCID) reported third-quarter financial results on Monday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Lucid Group reported a 30% reduction in cash consumption in Q3 2026, with a target to achieve a $1.4 billion cash flow improvement by year-end.

The company secured a $1.75 billion increase in liquidity from its largest investor, PIF, enhancing its financial position.

Lucid is advancing key strategic initiatives including the Uber and Nuro Robotaxi program, AMP-2 factory development, and the midsize vehicle platform.

Operational highlights include a 70% reduction in warranty claims and a 16% decrease in warranty costs year over year.

Lucid Group’s leadership emphasized ongoing investments in customer experience, brand revamp, and service network expansion.

The company anticipates improved deliveries in H2 2026 compared to H1, driven by an improving BEV market and strong performance of the Gravity model.

Lucid’s partnership with Uber for Robotaxi services progresses towards a commercial launch in Q1 2027, with potential expansion opportunities.

Q3 2026 financials showed revenue of $350 million, a 4% increase year over year, and a narrowed adjusted EBITDA loss of $726 million.

Management highlighted that the Lucid brand is being redefined to enhance customer perception and drive strategic growth.

Lucid Group plans to provide formal 2027 guidance and detailed mid-term targets in its year-end results.

Full Transcript

OPERATOR

Good day and welcome to Lucid Group’s third quarter 2026 earnings conference call. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker, Kelly McEvoy, Head of Investor Relations. Ma’am, please go ahead.

Kelly McEvoy (Head of Investor Relations)

Thank you and welcome. Joining me today are Silvio Napoli, our CEO, and Alexandre De Bock, our CFO. Before handing the call over to Silvio, let me remind you that some of the statements on this call include forward-looking statements under federal securities laws. These include, without limitation, statements regarding the future financial performance of the company, production and delivery volumes, vehicles and products, studios and service networks, financial and operating outlook, timeline and guidance, liquidity position, capital expenditures, macroeconomic, geopolitical, policy and industry trends, tariffs and trade policy, company initiatives and plans, leadership changes, and other future events.

These statements are based on various assumptions, whether or not identified in this communication, and on the predictions and expectations of our management as of today. Actual events or results are difficult or impossible to predict and may differ due to a number of risks and uncertainties. We refer you to the cautionary language and the risk factors in our annual report on Form 10-K for the year ended December 31, 2025, subsequent quarterly reports on Form 10-Q, current reports on Form 8-K and other filings, and the forward-looking statements on page two of our quarterly earnings presentation, which is available on the Investor Relations section of our website at ir.lucidmotors.com. We undertake no obligation to revise or update publicly any forward-looking statement for any reason, except as required by law.

In addition, management will make references to non-GAAP financial measures during this call. A discussion of why we use non-GAAP financial measures and information regarding reconciliation of our GAAP vs. non-GAAP results is available in our earnings press release issued earlier this afternoon as well as in the earnings presentation. With that, I’d like to turn the call over to Lucid CEO Silvio Napoli. Silvio, please go ahead.

Silvio Napoli (Chief Executive Officer)

Thank you, Kelly. And good afternoon, everyone. Thank you for joining us for Lucid Group’s third quarter earnings call. But first things first. I’m pleased to welcome two new members of the Lucid Group team to the first earnings call in their new roles: Kelly, whom you just heard from, and Alexandre De Bock, our Chief Financial Officer. You’ll hear from Alexandre in a few minutes for the review of our financial performance. But turning now to our third quarter highlights, three months ago, I laid out a clear framework for transforming Lucid Group: the three C’s and the four must-win projects. Today, I want to show you five facts as first evidence of our progress. First, we are substantially reducing cash consumption. Second, each of our must-wins is advancing. We are on track to deliver our $1.4 billion cash flow improvement target for 2026. The Uber and Nuro Robotaxi program is progressing as per plan.

AMP-2 is moving towards inauguration and production readiness, and midsize is now on track. Third, we’ve increased our liquidity by $1.75 billion thanks to the continued financial support from our largest investor. Fourth, we continue to invest for the long term in customer experience, in the brand, and in the leadership team. Fifth and final evidence, our technology is moving forward, most notably in Robotaxi and in our software improvements. All in all, a positive start for our first 90 days in charge as a new leadership.

This is still the beginning and there is significant work ahead. But our direction is clear, and it is energizing to see our hard work already starting to deliver clear and measurable results. This early progress is built on the three key priorities we set in August. Together they provide a framework for transforming Lucid Group and for measuring our progress, and most importantly, for rebuilding trust. First, cash and cost. We committed to reduce cash consumption and identified a $1.4 billion cash flow improvement. In Q3, we reduced our free cash outflow by 30% compared to the prior quarter. That means a one-third reduction in cash consumption in just three months.

And based on the actions already underway, we are on track to achieve the full target by year-end. To get there, we reviewed every major cost, every single investment, and each individual program across. We acted with urgency to reduce cash consumption while also protecting investments critical to long-term value creation. We are focusing capital allocation on the activities consistent with our priorities. Deciding what not to do is as important as what to do.

On the basis of this progress, PIF, our anchor shareholder, decided to increase our credit facility, which resulted in $1.75 billion of increased liquidity. The continued support of such magnitude from our largest investor is a great sign of trust in the new Lucid Group leadership team, and it is directly attributable to delivering on our commitments. So let’s continue with how we’re doing that. Turning to customer and quality. Our objective remains unchanged: to deliver an exceptional experience for our customers throughout the journey of buying and enjoying a Lucid. That is why we are making significant investments in customer experience and quality. The initiatives we communicated last quarter are well underway, and we are beginning to see measurable progress. Changes to our website have improved the online buying experience, and we’re becoming more effective in the way that we sell.

Since January, web leads are up 79%, and session-to-order conversion has doubled. Cost per order is down 82%. Our significant investment in service has already cut wait times by around 20%, supported by a 40% increase in service technicians, 15% more mobile service capacity, and an expanded service footprint. As anticipated at Q2, we are pulling out all the stops to improve the quality of our products and services. This means addressing both quality at source and in the field. For quality in the field, our over-the-air capabilities now enable us to monitor the health of customers’ vehicles remotely and even fix quality problems in the field.

One telling example was the recall for Lucid Air models decided last August, which could be fully executed without customers having to bring their car to a service center. Taken together, these actions are starting to deliver tangible benefits. In Q3, warranty claims reduced by 70%, and warranty costs were 16% lower year over year. We also continue to invest in customer-driven innovation. Last month, the rollout of UX 3.0 brought Gravity’s user interface to the Air platform, helping to streamline software development across models. This update was made available over the air to our customers with newer Lucid Airs. In parallel, we continue to invest in our core technology.

Through the midsize testing process, our new Atlas drive unit has demonstrated incredibly high power densities, which everyone will be able to experience when they finally get a chance to drive the new Cosmos next year. At the same time, we are conscious that what makes the Lucid experience so unique has not always been communicated effectively or even consistently. That’s why we decided it was important to invest in revamping the brand. The brand revamp process started last week with an online preview. From here we will progressively roll out the new brand as we build towards the launch of our midsize platform. Going forward, we want to not just rely on pure engineering prowess, but also concentrate on how it feels to enjoy and drive a Lucid.

As we build up to the launch of Cosmos and Earth, you will see this evolution of the Lucid brand in the storytelling, visual identity, and customer experience. Lucid Group is still a very young company, yet our technology and products have already won many of the most prestigious industry awards. The latest one was awarded to us just a few days ago, with Car and Driver magazine ranking Lucid as its top-rated automotive company with a perfect 10 out of 10 score.

Finally, culture and team, which in my book is the most fundamental pillar of all to deliver transformation. The new leadership team announced last quarter is now in place, providing clear accountability and combining experienced Lucid leaders with new talent and capabilities across the business. We continue to simplify the organization, reduce layers, introduce essential processes, and challenge the way we work. One of the first results is the workforce reduction, which went from 10,600 at the end of Q1 to 7,700 by the end of Q3.

We have assigned clear ownership and resources to each of our critical programs and linked 2026 incentives directly to our four must-win projects. Our new Lucid mission is attracting high-caliber talent. Recent appointments strengthen our commercial and finance teams with deep domain expertise. Seeing these top professionals joining us, eager to be part of this unique opportunity, is extremely motivating for our workforce and further enforces our own belief.

And belief is essential to perform and to deliver on our four must-wins. I’ve already covered the first one, our operating reset, and explained how we are on track to deliver $1.4 billion in cash flow improvements by year-end. Alexandre will provide more details shortly. Our second must-win is Robotaxi, specifically the Uber and Nuro program. The project is progressing as per plan. In October, our team began manufacturing our pre-production vehicle builds, which will be used for homologation. Later in Q4, we expect to start manufacturing the first vehicles for the commercial launch fleet.

We also expect the launch of driverless testing this quarter, ahead of a commercial launch in the Bay Area in Q1 2027. This will be fully driverless from day one. In fact, it is hard to think of another example of such a tripartite business venture, with each partner bringing their specific competence to the program, combining state-of-the-art autonomous technology, a world-leading ride-hailing service, and software-defined vehicle platforms. Building on the success of our partnership with Uber and Nuro, a new partnership with BOLD further validates the strength of our position in this fast-growing industry.

It also extends our reach to a second continent, with the initial objective to deploy at least 25,000 fully autonomous Lucid vehicles from our upcoming midsize platform. Our third must-win is AMP-2, a new factory in Saudi Arabia. Over the last few months, AMP-2 remained on track despite the regional challenges. Stamping line installation is complete and commissioning is underway. Body shop installation is accelerating, drive unit installation is progressing, and paint is now in finalization. With equipment continuing to arrive on site, process validation, trial builds, production, and know-how transfer are in full swing.

We are hiring and training the team and have received more than 10,000 applications. Given the rapidly evolving situation in the region, our teams are constantly reevaluating potential scenarios and putting additional mitigations in place. At this stage, our timeline is unchanged. We continue to expect AMP-2 to be ready for inauguration in the earlier part of 2027 and for midsize production in the second half of 2027. And that brings us to our fourth must-win: midsize, which is our opportunity to bring Lucid Group’s technology to a broader EV customer base. Midsize will expand Lucid Group’s addressable market more than eightfold. Building on new production capacity at AMP-2, it will radically increase scale and improve unit economics. During Q3, midsize continued moving closer to industrialization and product launch. The final stage of prototyping is underway, including homologation and crash testing.

Parallel production in Coolidge is entering its final build phase, including know-how transfer to AMP-2. In parallel, we are expanding our network in Europe, a strategic market for the new platform. Today we are on track to start production in the second half of 2027. We expect to provide more detail on the timing of the reveal and start of production in Q1. Let me bring this all together. Our Q3 results provide early evidence that the transformation is taking effect. First, we’re consuming less cash. Second, we’re beginning to see measurable improvement in customer experience and quality. Third, with a new leadership team in place, operating under a new structure and a new culture based on greater discipline and accountability. At the same time, each of our four must-wins is advancing and is on target.

We are on track to meet the $1.4 billion cash flow improvement target for 2026. The Uber and Nuro program is making good progress. AMP-2 is progressing towards production readiness, and midsize is moving towards industrialization and launch. All these are important first steps, but they are only the first steps. It takes more than one quarter to rebuild credibility. With that, I will turn the call over to Alexandre for the financial review.

Alexandre De Bock (Chief Financial Officer)

Thank you, Silvio. I’m delighted to be here today and to have joined Lucid Group at such a critical moment. The company has exceptional technology, operates in markets with significant long-term growth potential, and has a range of compelling opportunities. My focus is on establishing sustainable processes, improving transparency, and driving disciplined cash management and capital allocation to help translate Lucid Group’s potential into consistent results.

It is still early, but we see the first results of the transformation in our Q3 results. We have much more work ahead of us, but I’m confident in our ability to build on this early momentum. Let’s turn to our third quarter financial results. During the third quarter, we deliberately reduced production to release cash from inventory and better align with near-term demand. This was largely achieved through eliminating a second shift at AMP-1 in June. As a result, in Q3 we produced 2,954 vehicles, well below the deliveries of 3,806 vehicles, and as a consequence converting working capital into cash. The U.S. BEV market in Q3 turned out to be weaker than was expected in August. With market volumes down 13% sequentially, our deliveries outperformed the broader market, down 4% sequentially.

Year over year, our deliveries declined 7% compared with a 41% decline in the U.S. BEV market, largely due to the ending of the U.S. Federal EV credits. Overall, a very resilient performance for the quarter. Going into the fourth quarter, we see an improving BEV market and, as a result, we expect our H2 deliveries to be sequentially above H1. Revenue increased 4% year over year to $350 million despite slightly lower deliveries and a $10 million headwind from lower regulatory credits. These headwinds were more than offset by the favorable mix effect from growth in Gravity deliveries as well as continued momentum in pre-owned vehicle revenue. Q3 gross profits improved by $169 million as compared with Q2, reflecting the benefits of our operating and research cost reductions and a reduction of just over $200 million in impairment charges.

This translates into a gross margin improvement from minus 105% in Q2 to minus 74% in Q3. I will come back to the impairment in more detail shortly. These positives were partially offset by reduced regulatory credits, lower volumes and the consequent fixed-cost absorption, and some negative trim mix effects. Our adjusted EBITDA loss narrowed to $726 million in the quarter, an improvement of almost 20% compared to Q2. This reflects the improvement in gross profit as well as structural cost-reduction measures executed across our back office and administrative functions, marketing, and engineering.

Since the end of Q1, we have reduced headcount across the company by 28%. At the same time, we have deliberately reinvested in our strategic priorities, including Lucid Technologies, customer experience, and brand. Operating expenses in the quarter also included approximately $20 million of advisory costs associated with our transformation and not classified as exceptional restructuring charges. All of this translates into a 17% sequential improvement in adjusted diluted net loss per share.

Reducing inventory across the working capital cycle was a key commitment at Q2 and remains a key component of our operating reset. We made a good start in Q3, reducing net inventory by $156 million compared with Q2, driven primarily by converting work in progress and selling vehicles from existing inventory. Progress with raw materials was more modest due to timing. The reductions in purchasing commitments we made in Q2 began to take effect towards the end of Q3.

We expect the raw-material inventory to continue to unwind, and in Q4 we also reduced work in progress by nearly one-quarter and finished goods by almost 15%, and we expect to continue to convert finished-goods inventory into cash as we maintain lower production in Q4. As mentioned earlier, our inventory impairment charge declined massively to $94 million in Q3 from $300 million in Q2. This improvement reflects actions taken to reduce inventory and future purchase commitments, improve inventory quality, and reduce costs.

Overall, good progress. Reflecting the benefits of our operating reset, cash consumption declined by 30% sequentially in Q3 with a free cash outflow of just over $1 billion. Our operating reset actions are beginning to take effect and should deliver further cash flow improvement in Q4. As we committed, we are releasing cash from working capital, managing capital expenditure with greater discipline, and driving structural cost improvement. It is also important to point out that Lucid Group is going through a major investment cycle, particularly our second advanced manufacturing plant, M2, and the new midsize vehicle platform.

We’re also investing in the Robotaxi program at Uber and incurring some costs to support our operating reset. Taken together, these strategic investments represent an estimated $1.5 billion cash outflow year to date, or approximately 40% of our year-to-date cash outflow. These investments are set to reduce with the midsize launch and the M2 completion. Last June the company launched a foundational cash savings program to reduce the increasing cash consumption trajectory and attributable to three key areas: operating expenses, CapEx, and inventory. Accordingly, $1.4 billion of actions were set in motion, the vast majority of which have been implemented. You can see that we are making great progress in each of these categories as we reduce inventory, delay and reduce CapEx, and reduce operating expenses.

We have delivered approximately $800 million so far, of which approximately $260 million occurred in Q2 and $540 million in Q3. The targeted improvement is against internal forecasts and is not intended to be measured against our first half results. Nevertheless, you can clearly see a significant first improvement from the H1 run rate of close to $1.5 billion per quarter to slightly more than $1 billion in the third quarter. We anticipate further free cash flow improvements going into the fourth quarter.

Turning now to liquidity. At the end of September, total liquidity amounted to $2 billion. After quarter end, we drew down $400 million from our delayed draw term loan facility with PIF in mid-October, and last week we expanded the facility by $1.75 billion, strengthening our liquidity position and reflecting the continued support of our largest investor. Adjusted for this, total liquidity at quarter end would have been $3.75 billion. And this provides us now with liquidity into Q4 2027 and bridges a period of major investments in M2, Robotaxi, and the midsize platform.

In conclusion, our operating reset is off to an encouraging start. During Q3 we improved the free cash flow and P&L trends of the prior quarters. Our focus now is on delivering sustained improvements. Some of the actions we have taken are already visible in our results. Others will have an increasing impact over the coming quarters. And there is more work still to do. In Q4 we will continue to execute against the priorities we have laid out: maintaining disciplined production levels, releasing cash from working capital, driving structural cost reductions, and ensuring pricing discipline.

The timeline we outlined at Q2 still applies. Following the completion of our business review, we expect to provide formal 2027 guidance with our year-end results, along with further detail on our mid-term plan and targets. And that plan will be grounded in clear and ambitious objectives we will commit to deliver, with an operating model designed to translate Lucid Group’s strengths into consistent execution, improved financial performance, and ultimately profitable growth.

Thank you. And now we will hand back to Kelly for the Q&A session.

Kelly McEvoy (Head of Investor Relations)

Thank you. We’ll now begin the question and answer session by taking questions submitted through the SAY Technologies platform. First, we’ve had a couple of questions on the future and hope, including from Paul J., who asks, why should individuals continue investing or have hope in Lucid Group? And also from William Kaye, who asks, I’m looking for a sign of hope. What’s the most promising path forward for Lucid Group?

Alexandre De Bock (Chief Financial Officer)

I’ll take that question. Thank you, Kelly. And most of all, thanks, Paul and William, for this deep question. You mentioned the word hope. I believe there is much more than hope. There is belief, and the proof of that is me, Alexandre De Bock, being here. If we didn’t believe in the future of this company and its massive potential, we wouldn’t be here now. Why is there this belief? Let’s put factual proof points. Number one, as you just heard, we have early wins that show that we’re on the right track. Of course, there is more to do, but you know, 30% cash burn reduction in three months is one indication. Second proof point, our strategic investments are bearing fruit, whether it’s M2, whether it’s our midsize, and those investments will set the scene for the next chapter of Lucid Group going forward, which I look forward to explaining more when we speak again in Q1.

And third proof point is that Lucid Group was never meant to be, quote unquote, just an EV company. We were born as a technology company. Today we apply to EVs, but look, we’re already entering a new market, Robotaxi, $600 billion size market where we are, in fact, in the lead, which opens a whole new set of opportunities for us. Fourth element perhaps to consider is that industrial turnarounds do take time. There is no magic wand. We have to first, I would say, ingest the bad food that was regurgitated for too long before we can get fit and start again. We are going through that process and, again, once more, early days, a lot to do, but we are on the right track. So again, thanks for your question. There is more than hope. There is belief in a way forward.

Kelly McEvoy (Head of Investor Relations)

Thank you. Our next question comes from Steven H., who asks, FSD is helping Tesla to secure more of the EV market. When will Lucid Group have a comparable option?

Peter Rawlinson (Chief Technology Officer)

Thank you for this question. So we don’t talk about FSD. We talk about L2 or L4. So first of all, this year, actually the last two quarters, we introduced already the hands-free highway solution for both Air and Gravity. What we are still in process of finalizing and developing is the CT hands-free option. That is something we are actively working together with outside partners, and we look forward to introducing this next year as the program completes.

Kelly McEvoy (Head of Investor Relations)

And the next question comes from Craem Earl, who asks, with the partnership with Uber, what direction do you think the company is taking? How big is this partnership and how will it affect Lucid Group going forward?

Silvio Napoli (Chief Executive Officer)

Thank you. The Uber partnership, the tripartite partnership, is really important. Besides itself, it’s a proof point of a potential to enter this new, exciting, profitable market which is just becoming a reality nowadays. And again, we are a company that is in the lead, which has now not only a presence in the U.S. with an immediate opportunity, but now, as you heard, on the basis of success, we’re already starting having an MoU discussion together with Bolt, which is going to open yet another market.

So that partnership is essential, and I’m very pleased to see it proceeding on track.

Kelly McEvoy (Head of Investor Relations)

Great. That now concludes the questions from the SAY Technologies platform. Before we open the phone line, I would ask everyone to please restrict themselves to two questions. And with that, I’ll turn it back to the operator to conduct the Q&A session on the line.

OPERATOR

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11. Again, we do ask that you please limit yourselves to two questions. Please stand by while we compile our Q&A roster. Our first question comes from the line of Andres Sheppard with Cantor Fitzgerald. Your line is open. Please go ahead.

Andres Sheppard (Analyst at Cantor Fitzgerald)

Hey everyone, good afternoon and congratulations on the quarter, and particularly the material cost savings. Very exciting to see, and thanks for taking our questions. I guess to start off, you know, you talked a little bit about AMP-2 and midsize timelines. I guess could you maybe help us understand what is left between now and AMP-2 being operational, and any more milestones that you can mention to us that we should be tracking ahead of the midsize production ramp-up next year?

Thank you.

Silvio Napoli (Chief Executive Officer)

Thank you, Andres, for your question. So, AMP-2. I mentioned this during my intervention before. We are, in fact, in the process of finalizing all the individual elements of the production supply chain. So I mentioned how the paint shop is in commissioning, I mentioned how the body shop is now being finally assembled, and other parts are being commissioned. Allow me to take perhaps a kind of a musical example: it’s like if all the players in an orchestra were tuning their instruments. The next step is to make sure they play together, right? And so this is what’s going to come as the next step, when we then start activating each element of the chain to make sure they work in sync at the quality level, with the speed and timing that we want them to.

And at this stage, when the know‑how transfer from Arizona, which is now in progress, will be completed, we’re going to start producing 1, 2, 10, 100, 100,000 of our midsize units, to then be ready for complete launch and ramp-up at the end of the year. This is where we are today. I’m extremely impressed by the way the team has been managing that, confronted with, admittedly, a very fluid situation up there, and that makes me extremely positive for the future.

Andres Sheppard (Analyst at Cantor Fitzgerald)

Excellent, that’s very helpful. Appreciate that color, and just maybe as a quick follow-up, wanted to get maybe an update on liquidity and capital needs. But I guess more importantly, how would you characterize your current relationship with the PIF as it stands today? Obviously they’ve been very supportive and helpful. Should we expect them to continue to do that going forward? Just any color on potential future capital needs and how you’re thinking about those.

Thank you.

Silvio Napoli (Chief Executive Officer)

Thank you, Andres. I’ll take the beginning, and then I’ll pass it on to Alexander. So, to be fair, we are extremely fortunate, privileged, to have a solid, thoughtful, and at the same time demanding shareholder as PIF. They provide us the flexibility to carry out the strategic investment phase that we’re doing. And of course, we now operate to create value for all our shareholders, including PIF. I mentioned demanding, and yes, they should be demanding.

And so, as I said, the latest credit extension that they provided us with, this $1.75 billion, is also the result of what they’ve seen as improvement that we could generate over the last three months. So all of that at this point of our development, preparing for the next chapter, is absolutely crucial. Alexander, would you like to…

Alexandre De Bock (Chief Financial Officer)

Well, I can just re‑emphasize the importance of the additional financing. So that gives us now a liquidity of $3.75 billion pro forma at the end of Q3. As you know, we’re going through a cycle of major investments, mainly AMP-2 and then the launch of the midsize vehicle. So we expect that some of those investments have to continue, of course, throughout 2027. But what it also means is that once these projects reach their completion, we will see a significant reduction in the capital needs for the company.

Andres Sheppard (Analyst at Cantor Fitzgerald)

Excellent. Thank you both. Very helpful. Congrats again. We’ll pass it on.

OPERATOR

Thank you. Thank you. And our next question is going to come from the line of Alex Perry with Bank of America. Your line is open. Please go ahead.

Alex Perry (Analyst at Bank of America)

Hi, thanks for taking our questions here. You know, just first, I wanted to see if we could get, you know, more of an update on the timing of your public launch under the Uber network with robotaxis and how that will really scale over time, I guess. What else do you need to validate for the 1Q27 launch in the Bay Area? And then just any thoughts you have on, you know, if the deal with Uber could potentially be upsized over time. I think it’s, you know, 35,000 total vehicle commitment right now.

You know, is there a chance for that deal to be upsized? Thanks.

Silvio Napoli (Chief Executive Officer)

Alex, thank you for your question. So let me revert to one of the elements about why is this project so important? Why are we so excited to see it proceeding in this unique tripartite way? So today the next milestone is what we call the driverless mile, which means that as part of the homologation, before you can take on a commercial ride, there is a process whereby those autonomous vehicles have to be tested in a limited perimeter on an established trajectory for a certain period of time.

And they have to accumulate enough miles to do that. This is the stage that is starting now. This of course involves a number of government approvals or authorities and of course also checks as an engineering thing. So this is what we’re going through now. The idea is that then, as per the progress as part of the, in Q1, this will then evolve into a commercial launch, which will initially be limited to a certain number of authorized users and then be open to the big public. That is the process. And if you think about it, this has been started only in January 25. So the speed at which three different companies could work together is definitely quite unprecedented.

Now, having done all that, what is the upside? I think it’s a bit too early to speak about that. You can tell our Bolt agreement already shows the strategic upside because it’s a proof point of how Lucid technology is uniquely positioned. Because we’re a software‑defined vehicle, we are agnostic. When someone like Uber or Bolt come to see us, we are not going to tell them, oh, it’s not possible, because we know better. We are very open to understand the requirements, and our vehicle technology allows us to do that.

So this is the way we see the upside. In terms of number of units, etc., with Uber, we now focus on delivering what we’re doing now. Hopefully that helps to see an understanding. But once more, it is about this opening up of this totally new market where only a few companies, I would say, including many much larger than us, cannot compete. And we are there already with two alliances already present in the market.

Alex Perry (Analyst at Bank of America)

That’s really helpful. And then just my follow‑up question, I wanted to follow up on sort of the cadence of delivery. So would you expect deliveries to sequentially increase as you move into the fourth quarter versus the third quarter? I think the guidance you gave, and correct me if I’m wrong, is second‑half total consolidated deliveries above the first half. And I guess maybe just more overarching, it sounded like you’re seeing maybe some signs of green shoots heading into the fourth quarter.

What is driving that? Thanks.

Silvio Napoli (Chief Executive Officer)

Alex, thank you. I’d like Alexander to address the point.

Alexandre De Bock (Chief Financial Officer)

Well, I think the overall BEV markets going into the fourth quarter is definitely increasing coming from Q3. So as a consequence, and I believe in this more solid market, we also expect to increase our deliveries going from Q3 to Q4. And if you take it all together sequentially from H1 to H2, that should give us an improvement sequentially between the two half years. So, promising direction.

Silvio Napoli (Chief Executive Officer)

And building on that, perhaps let me add one element: the strong performance of Gravity. We observe, quarter on quarter and steadily, an increase in deliveries of the Gravity. We’re talking about high double‑digit increases, which is reinforcing the point that Alexander just made in terms of us seeing the momentum continuing into Q4.

Alex Perry (Analyst at Bank of America)

Perfect. That’s really helpful. Best of luck going forward.

OPERATOR

Thank you. And our next question is going to come from the line of Ben Kallo with Baird. Your line is open. Please go ahead.

Ben Kallo (Analyst at Baird)

Hey, good evening, good afternoon. Congrats on the update. Lots of work you guys have been at. A couple questions. First, just to the earlier investor questions, the ones that are sent online and people asking Neil just about the future of Lucid. I’m wondering how you guys address that with your potential customers, current customers, repeat customers—like, if there’s a brand thing—just to strengthen people’s view that you’ll be around for the long haul.

Silvio Napoli (Chief Executive Officer)

Thank you, Ben. I must say we have had a similar question last summer with those unfounded rumors circulating. So, as you can tell, we’re dealing with them factually. There are less and less of these questions, I’m very pleased to see. The announcement we made today, I believe, will further reduce any such concerns. But ultimately, people see the quality of our products, and they see that we’re here very much to stay. And so, again, facts speak louder than words, and you can see our sales picking up.

So that shows you that—combined with our investment in service—that I would say is very important. People are less—they don’t want to talk about the future—they say, when can I service my car? Admittedly, as I said before, we were not structured with the right level of support across the markets we operated. So by seeing those investments and that network growing to the level of density which is in line with the products we are selling, that provides the right engagement for our customers to proceed with orders of Lucid vehicles.

Ben Kallo (Analyst at Baird)

Great, thank you. And then just midsize vehicle—extremely important—and you guys have done a very good job of having the Lucid brand. I think I’ve asked this before, but I’m going to continue to ask it. How does the initial feedback been on the midsize vehicle being a continuation of your brand? Thank you, Chris.

Silvio Napoli (Chief Executive Officer)

Ben, thank you. As you appreciate, we still have not launched it, but we do run what you call customer clinics in different markets. We are doing more of those because, clearly, when the project was started—it was a few years ago—the situation has evolved, including new entrants in the market, others, by the way, no longer being there. And so now, as part of this decision to shift launch of the product into next year, we are also to validate this type of go‑to‑market, including customer feedback.

So far, extremely exciting. And so that, combined with the fact that this expands the addressable market eightfold compared to the premium market in which we are today, makes us very positive about the future. But clearly there is work to be done until we launch, when we make the vehicle available to customers in the second half of the year.

Ben Kallo (Analyst at Baird)

Thank you.

OPERATOR

Thank you, Ben. Thank you. And our next question comes from the line of [Analyst] with TD Cowen. Your line is open. Please go ahead.

Silvio Napoli (Chief Executive Officer)

Yes, thank you, Michael. It’s very important. Right. We said we are not just reducing costs, we’re investing in the fundamentals. So I mentioned service, I mentioned technology, but the brand is one of those. And I remember some of you indeed asking legitimate questions about the future of the brand. So we did a brand assessment and concluded that the brand is still very much there. Our customers love us, even though at times, to be candid, we probably made it hard for them.

But now this is changing with the new progress. But also the way the brand was conveyed was not always consistent. So if you ask people across different studios or markets, people have different ideas even within the company. So we had to fix that. A strong brand has to be one for all and a very clear communicator, not only through our sales channels, but everyone embodying the brand across the company. So that’s how we worked with an outside agent to make their assessment and move forward.

And part of this was also deciding how do we want this to be felt. If you look at our history, we always spoke about trophies, about awards, about the five best car of the year here, there, I mean, and you could tell, of course, these are good news, but that’s not the way customers can relate to. And so we decided, we looked at this research what makes people want to buy and own a Lucid. And we observed, amongst others, that one of our highest scores in terms of marketing was conversion from test drive to purchase decision.

And that was linked to what? To the emotion that people feel when driving a Lucid. So that’s how we came to conclude that really we had to find a way to build on the engineering prowess, on the quality, but to combine it with the sense of how it feels to own, drive and enjoy Lucid. So that’s what you may have seen. On Thursday we issued the first preview of this new branding. It’s on YouTube, it’s on Instagram and maybe we’ll send to the participants another link to that. It’s really about that. It’s combining this feeling and everything we’ll do now, we will build on that. And so you will see this now being deployed across studios, about how we speak about our product and how we relate to that. So it’s a journey and the idea is to bring that ramping up, up until the midsize launch so that customers will not only buy a unique vehicle, but also understand the company that manufactures them.

And, for example, our California routes are part of that. Right. And so to make sure that everyone understands it. I look forward to providing more detail. I get very excited about this. I think it’s very important. But going forward you will hear more about that. Michael, thank you for the question.

Michael

Great, thank you. Maybe as a quick follow-up on the financials, maybe a little more on how we should think about Q4 free cash flow, particularly as it pertains to the remaining about $600 million of free cash improvements. I believe CapEx is going to be maybe kind of flattish sequentially in Q4. Maybe just talk about the inventory and OPEX contribution in the fourth quarter of that remaining $600 million of your initiatives. Thank you.

Silvio Napoli (Chief Executive Officer)

Thank you. Alexander, would you like to raise this question?

Alexandre De Bock (Chief Financial Officer)

No, happy to do so. So we indeed have $600 million left under the $1.4 billion program. The outcome of this will result in a sequential improvement once again from Q3 into Q4. But the magnitude of that improvement will not be the same size as the improvement we had Q2 to Q3. But you would expect, and you should expect, another improvement. And then if you look at the different components we have, of course on the OPEX side, there is further improvement that we will achieve from the actions triggered so far. But the main impact we will have in the fourth quarter is on the inventory side. So our strategy on the inventory side is as follows. We probably have achieved the vast majority of the improvement on the work in progress and that is primarily linked with our efficiency in the factory, quality in the factory.

So there we have achieved the vast majority, then we will continue to sell cars out of our finished goods. So there is definitely further improvement possible there. And then the single most important improvement should come from the raw materials. So through Q3, through the majority of Q3, we were still receiving goods that were ordered in the beginning of Q2. As you remember, we reduced our orders and the shift change happened towards the end of Q2.

So we were still receiving raw materials that were ordered beginning of Q2. And that reduction is now, or the reduction in those purchase orders is now flowing through. And that will give us a next improvement on the raw materials. And we expect that to continue into Q4. Thank you. Thank you for the question.

OPERATOR

Thank you. And our next question is going to come from the line of James Picariello with BNP Paribas. Your line is open. Please go ahead.

Jake (Analyst at BNP Paribas)

Hey guys, this is Jake on for James. I just wanted to follow up on E Tae’s question about cash flow. Could you help us understand kind of what the baseline expectation was for cash flow in the third and fourth quarter? So if we look at the year-to-date $800 million improvement commentary, that would suggest that excluding the actions you’ve taken, cash burn would have been something like $1.8 billion in the third quarter. And then if we look at the $3.75 billion of liquidity, that suggests that on average over the next four quarters, you’re still going to be burning something like $1 billion per quarter.

Alexandre De Bock (Chief Financial Officer)

Yeah, we can give some more color on this. So if you remember, the company going into the second half of last year and the first half of this year was on a trend of deteriorating free cash flow consumption. It’s on the back of this that targets were set and that we came up with a program to reduce $1.4 billion reductions across the three key drivers of this. Of the deteriorations of this $1.4 billion, $800 million has been achieved, of which $540 million in the third quarter.

And although this number is against internal projections, you kind of see it flowing through the free cash flow improvement from Q2 to Q3, where we have an improvement of close to half a billion dollars as well. I believe your question was also covering the next year. I would prefer to not give further color on 2027 yet. I think it’s more appropriate to do this as we are finalizing our strategic review and our budgeting process and we’re committing to give full transparency and guidance in our next earnings call. But I believe still the $3.75 billion is an important message because it covers that period of significant investments required at Lucid and is a period that is really the basis of scaling the company.

Jake (Analyst at BNP Paribas)

Understood, thank you. And then, as we have about seven weeks left in the year, so as you look at your order books, do you expect 3Q to 4Q deliveries to sequentially step up a little bit or step down a little bit? Thank you.

Silvio Napoli (Chief Executive Officer)

Jim, thank you. Let me take that. Alexander addressed a similar question before, so let me take a stab. I think there are a combination of facts. First and foremost, I addressed that as part of my words, but also you and I’ve seen a reference in one of the slides about this car flow. So at the beginning of Q3, we struggled because, and I have to say this, we didn’t even know where cars were. So we had orders that were taken where it would take sometimes two weeks to deliver to the customer and so we would lose the order.

Today we finally have granularity, as a company of our size should have, about what cars are being produced, where are they being shipped, where are they being stored, and by when can they be available. So based on that, I’m going to say fundamental discipline. Now, we also, together with a new commercial team who is doing tremendous progress with all the new talent in Berlin, have a clear commercial cadence. And they can exactly not only make sure that we make the best of every single opportunity, but also that we sell the cars that we know can be available on the day for the customers who require it. We can see the cadence, the improvement, really. I’m not saying month after month. That is step number one.

Step number two. Alexander alluded to this. The market is improving. If you look now, barring exceptional circumstances, finally, it seems that Q4 would be a BEV increase year on year. And that all together with the opportunities also coming with the cars we have on hand, we definitely see Q4 as providing numbers so that H2 will be higher than H1. And so including in particular the success of the Gravity, which, as I mentioned before, is gaining lots of momentum.

So clearly our direction, our expectation is H2 stronger than H1.

Jake (Analyst at BNP Paribas)

Got it. I appreciate the additional color. Thank you.

Silvio Napoli (Chief Executive Officer)

Thank you, James.

OPERATOR

Thank you. And our next question comes from the line of Andrew Percoco with Morgan Stanley. Your line is open. Please go ahead.

Andrew Percoco (Analyst at Morgan Stanley)

Great. Thanks so much for taking the question. So maybe just first I wanted to double click on some of your comments around Europe and just get a better understanding of why you think that market is a good use of capital at this point. Just given some of the competition that we see from China. Seems like there’s a lot of greenfield space in the US for you to take share with the midsize. I’m just curious your latest thoughts on why Europe still kind of makes sense from a capital allocation perspective.

Silvio Napoli (Chief Executive Officer)

Andrew, I have a question just to make sure I understand the question. You say why midsize makes sense or is it generally which market? Oh yes, midsize will be operating. First of all, there is one of the few automotive markets, not only in EV, one of the segments that is growing is the midsize one and so that is not the second. Midsize increases our addressable market eightfold. Third, a product with that type of performance, that type of features where our brand is in fact very, very in demand.

Many customers tell us I love to have the Gravity, but they say frankly it’s too big for me. And that is particularly true in markets like Europe but also in some parts of the U.S. So that plus the cost economics we mentioned before reinforces our belief that there is an opportunity, a strong one, to introduce the midsize in the market with a growth perspective. There is no product that has all the elements of a software-defined vehicle in the EV market today in that segment. So all in all, and this is, I know you probably allude to Chinese competition—by the way, we are in no position to underestimate them—but we don’t really compete in the same element.

In fact, the fact that customers don’t want to buy a Chinese product but are looking for performance, according to our market research, is one element that would reinforce the market for Lucid and for a midsize. So all in all this is a unique opportunity plus the capacity we have where we finally can also try attack markets that so far have been absent from makes us believe that this is a key element of our strategy going forward.

Alexandre De Bock (Chief Financial Officer)

And if I can add to this, I believe your question was also focused on Europe and the capital allocation for Europe. The model we’re using—or we are slightly changing the model we are using—to approach our customers in Europe with more moving towards the indirect model and using agents and importers. And that actually addresses, I believe, your question about the capital allocation. So we are very sensitive to that and for us it is the most efficient way to address this market at this stage.

Andrew Percoco (Analyst at Morgan Stanley)

Understood? Okay, that’s helpful. And then just maybe my follow-up question is around operating expense trends. I think you guys in the deck alluded to $130 million of savings so far. But if I just look simply on a year-over-year basis, you’re essentially flat. So I just want to better understand what the baseline is that you’re measuring against when you’re measuring some of those savings so that we can maybe track it ourselves as well. Thank you.

Alexandre De Bock (Chief Financial Officer)

Yeah, sure. So our—I mean Lucid Group—on several KPIs was on a downward trend in the second half of last year and the first half of this year, one of those being an increasing level of operating expenses, which were actually increasing before scaling the top line of the company. It’s on the back of that trend that the team has defined a $1.4 billion savings program. And you could argue this is linked with the targets set against the projections available at that time.

So that was actually a $1.4 billion program to really save cash at a period within which we need to really prioritize the top priorities for the company, and increasing OPEX was not one of those. So we needed to reduce our levels of OPEX against that projection, which we successfully did. And as a consequence, right now the deteriorating trend has not only stopped, it actually improved. And that’s actually the case for many of our KPIs. So we start seeing the net reduction against prior quarters, against last year, which is a promising trend.

Also, if you do the math, take into account as well there are some one-off elements in the third-quarter operating expenses of $20 million regarding some level of advisory costs, which I want to draw attention to.

Silvio Napoli (Chief Executive Officer)

Thanks so much, Andrew. You can relate to the fact that there is a new team. The new team arrived and observed the trend, and the actions you saw started then were about stopping, reversing, and then further on improving steadily on that concerning trend that would have put the company in danger. So there is the timing of which I think is also important to understand how this happened.

Andrew Percoco (Analyst at Morgan Stanley)

Yeah, makes sense and kudos on the progress. Best of luck.

Silvio Napoli (Chief Executive Officer)

Thank you.

Alexandre De Bock (Chief Financial Officer)

Thank you.

Kelly McEvoy (Head of Investor Relations)

I see no more questions on the line, so I think we will conclude the Q&A session there, and I’ll pass it over to Silvio for some closing remarks.

Silvio Napoli (Chief Executive Officer)

Thank you, Kelly. As you heard, we have made important progress this quarter, but there is much more work ahead. Our priorities are clear, and our focus remains firmly on execution and delivering on our commitments. We look forward to providing our 2027 guidance and updates on our midterm plan and targets with the full-year results. Thank you for joining us today. Thank you for your time.

OPERATOR

And that concludes our call today. Thank you for participating. You may now disconnect.

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