LCID

1. Executive Summary

• Lucid is tightening execution around Gravity’s ramp and balance-sheet durability while broadening access to the brand with the newly launched Gravity Touring at $79,900 and native NACS.
• Balance sheet strengthened via two 2025 convertible note deals and extension of runway; near-term maturities largely addressed.
• Q3 2025 marked a seventh straight delivery record, rising revenue, and management signaling Q4 as an inflection with Gravity to be the majority of production.

Key Takeaways

• Gravity Touring launch (Nov 20, 2025) expands addressable market; select configs available for immediate delivery and native access to 25,000+ Tesla Superchargers.
• Strengthened capital structure: closed $975M 2031 converts (Nov 17) and $1.1B 2030 converts (Apr 8) while repurchasing a substantial portion of 2026 converts.
• Q3 revenue up 68% YoY to ~$337M; deliveries +47% YoY; liquidity $4.2B with an undrawn ~$2.0B delayed-draw term loan (DDTL) from PIF, extending runway into H1 2027.
• 2025 production outlook updated to “around” 18,000 units (latest), with Gravity to drive the majority of Q4 output.

2. Financial Performance

Capital Raises & Proceeds

• 7.00% Convertible Senior Notes due 2031 (closed Nov 17, 2025):
• Gross: $975.0M; Net: ~$962.4M.
• Use of proceeds: ~$752.2M used to repurchase ~$755.7M principal of 1.25% converts due 2026; balance for general corporate purposes.
• Flexibility: cash/stock/combo settlement to manage dilution.
• Related transaction (Nov 12 pricing): Ayar (PIF) prepaid forward to purchase ~$636.7M of common stock, deliverable around notes’ maturity (subject to early settlement by counterparty).
• 5.00% Convertible Senior Notes due 2030 (closed Apr 8, 2025):
• Gross: $1.10B; Net: ~$1,082.2M.
• Use of proceeds: ~$935.6M to repurchase converts due 2026; capped call raises effective conversion price to $4.80 per share (pre 1-for-10 reverse split equivalent noted).
• $300M Uber strategic investment (closed Sep 4, 2025) tied to premium robotaxi program.
• 1-for-10 reverse stock split effective Aug 29, 2025; authorized share reduction to 1.5B.
• Net effect: refinance of 2026 maturities, extended debt stack (2030/2031), reduced near-term refinancing risk.

Early Revenue Initiatives

• Gravity commercialization:
• Gravity Grand Touring deliveries expanding (Canada began Oct 11, 2025).
• Gravity Touring launched Nov 20, 2025 at $79,900; orders open; select immediate deliveries; EPA-est. up to 337 miles with 89 kWh pack; native NACS; up to 300 kW DC fast charge (1000V) or up to 220 kW on Tesla Superchargers.
• Robotaxi ecosystem:
• Delivered first robotaxi engineering vehicles to Nuro; San Francisco targeted for 2026 initial deployment; Uber exclusivity on platform operations; Uber plans to deploy 20,000+ vehicles over six years.
• Software revenues potential:
• Expanded ADAS (DreamDrive Pro) features and future OTA monetization pathway; NVIDIA partnership to accelerate L4 capabilities and manufacturing AI.

Expense Management & Cash Flow

• Q3 2025:
• Revenue: ~$336.6–337.0M (+68% YoY; ~+30% QoQ).
• Deliveries: 4,078 (+47% YoY); Production: 3,891.
• Liquidity: $4.2B (≈$3.0B cash & investments + $1.2B credit facilities); DDTL with PIF increased to ~$2.0B undrawn.
• Margin trajectory:
• Prior quarters noted tariff-driven headwinds (Q2 gross margin impact ~21 ppt) and improving but still negative gross margin; management highlighting BOM reductions (Atlas drive unit, rare-earth-free variant) and scale mix (Gravity) to progress toward breakeven.
• CapEx guide:
• 2025 CapEx: $1.0–$1.2B (latest); focused on Gravity ramp, manufacturing footprint (incl. Nikola assets), and midsize platform.

3. Guidance and Future Outlook

Production Ramp–Up

• Full-year 2025 production: updated to be around 18,000 units (most recent guidance).
• Q4 2025: Gravity expected to be the majority of production; management framed Q4 as a turning point.
• Facility scaling aided by acquisition of Nikola’s AZ assets (additional ~884k sq. ft.) and workforce additions.

Expansion Plans

• Retail/service: new Studios & Service Centers in San Jose and San Diego; global network now 64 sites; deepened CA footprint (15 locations).
• Geographic: Gravity to expand in Canada now; Europe targeted for early 2026 deliveries.
• Platform roadmap: Midsize platform SOP remains targeted for end of 2026.

Operational Targets

• Efficiency: Atlas drive unit family with improved efficiency, lower BOM, and rare-earth-free variant.
• Cost/quality: NVIDIA Industrial AI/Omniverse for predictive analytics, intelligent robotics, and digital twins to compress cycle times and reduce costs.
• Profitability path: “Directional goal toward breakeven” as mix scales and cost actions compound.

4. Strategic Positioning and Initiatives

Cost Management

• Drive-unit redesigns (Atlas) and materials re-spec (rare-earth-free) to lower BOM.
• Supply-chain localization: multi-year graphite supply agreement (Graphite One) to support domestic sourcing; launch of MINAC to strengthen U.S. critical minerals sourcing.
• Manufacturing leverage: Nikola asset acquisition to expand AZ footprint; NVIDIA AI factory initiatives to enhance throughput/yield.

Product Development

• Gravity line expansion: Grand Touring + new Touring trim to broaden price bands while preserving performance/range.
• ADAS/Autonomy: DreamDrive Pro enhancements (hands-free assist, lane change); NVIDIA DRIVE Thor-based centralized compute for future L4 roadmap.
• Infotainment and OTA: Android Auto rollout (Air), UX 3.0 in Gravity, continuous OTA upgrades.

Market Expansion

• Brand amplification through partnerships (Uber, Nuro, NVIDIA) and cultural ambassadors; targeted retail build-out in key U.S. DMAs; access to Tesla Supercharger network to reduce adoption friction.

5. Competitive Positioning and Market Trends

Market Positioning

• Positioned in premium EV with leadership in range, charging speed (up to 400 kW capability on 1000V equipment), and interior space (up to 120 cu ft cargo in Gravity five-seat).
• Native NACS integration removes charging-network anxiety, a critical purchase barrier.

Competitive Strengths

• Proprietary high-voltage architecture (926–1000V-class charging support), efficient in-house powertrain, and strong software/compute roadmap via NVIDIA partnership.
• Balance sheet supported by PIF (DDTL, equity/derivatives support) and strategic investors (Uber).

Emerging Industry Trends

• Consolidation around NACS and Supercharger access as table stakes.
• Shift toward centralized compute and software-defined vehicles; OTA monetization pathways.
• Robotaxi/autonomy partnerships converging with ride-hailing networks; focus on safety case and regulatory acceptance.

6. Technology and Innovation Strategy

Technological Advancements

• Transition to NVIDIA DRIVE Thor compute with DriveOS; dual redundant compute per vehicle planned on midsize platform.
• Manufacturing digitization via NVIDIA Omniverse and Industrial AI to reduce cost and improve quality.

New Product Developments

• Gravity Touring delivered/available configurations now live; 89 kWh pack, up to 337 miles EPA-est., fast charge up to 300 kW (1000V).
• DreamDrive Pro feature additions (L2++ now; roadmap to L4) and Android Auto integration.

Alignment with Market Needs

• Price-band expansion (Touring at $79,900) addresses affordability without major sacrifices in range/performance.
• Native NACS directly addresses charging convenience, accelerating mainstream adoption.

7. Risk and Reward Analysis

Growth Catalysts

• Gravity mix shift and Touring trim broaden TAM and utilization of NACS network.
• Robotaxi program (Uber/Nuro) and NVIDIA partnership create optionality for recurring software/autonomy revenues.
• Cost-down roadmap (Atlas, rare-earth-free motors) plus AI-enabled manufacturing to improve margins.

Downside Risks

• Premium EV demand elasticity amid macro uncertainty; competition from legacy and EV-only OEMs with aggressive pricing.
• Execution risk on Gravity ramp and midsize SOP timeline; supply-chain localization timing (e.g., graphite production starting 2028).
• Regulatory/tariff headwinds impacting costs; autonomy timelines dependent on evolving regulation and safety validation.
• Convertible note overhang and potential dilution (mitigated by settlement flexibility and capped calls); reliance on PIF-backed facilities.

Valuation Metrics

• Near-term operating base (from most recent prints):
• Q3 2025 revenue: ~$337M on 4,078 deliveries; ASP implied in the low-to-mid $80k range before options/leases.
• 2025 production guide: ~18,000 units; Q4 expected to be Gravity-heavy.
• Scenario framing (illustrative, document-based):
• 2025 revenue sensitivity: If Q4 approaches $400–$500M on Gravity mix, full-year revenue could land roughly $1.23–$1.33B (Q1–Q3 actuals ~$831M + Q4 range), subject to mix/lease and regulatory credit variance.
• 2026 bridge: Midsize SOP late 2026 implies partial-year contribution; sustained cost actions and Gravity mix likely to continue gross margin improvement off a negative base.
• Comparative lenses:
• EV/Sales multiple is most relevant pre-EBITDA breakeven. A range approach (e.g., low case 1.0–1.5x vs. premium tech-enabled 2.0–3.0x) can be applied to forward revenue estimates and then adjusted for net cash/debt and convert dilution mechanics (capped calls, prepaid forwards).
• DCF remains highly sensitive to volume ramp, gross margin normalization, and CapEx cadence (guided $1.0–$1.2B for 2025). Investors should stress-test WACC and terminal margins given autonomy optionality.

Note: Exact per-share estimates require current share count (post 1:10 split and subsequent issuances/forwards) and market price, which are not provided in the documents.

8. Investment Thesis

Investment Rationale

• Technology-first premium EV with demonstrated leadership in range/efficiency/charging and an accelerating software/autonomy roadmap via NVIDIA.
• De-risked near-term capital structure (2030/2031 converts in place; 2026 largely repurchased) and extended liquidity runway into H1 2027 with undrawn ~$2.0B DDTL.
• Gravity ramp, lower-priced Touring trim, and NACS integration present a credible path to higher volume and stepwise margin improvement.

Price Target Justification

• Methodology: Blend of forward EV/Sales (primary), supplemented by a margin-normalization DCF cross-check.
• Base case: apply a mid-range EV/Sales multiple (e.g., ~1.5–2.0x) to a document-grounded 2025–2026 revenue trajectory with Gravity scale and initial midsize contribution; adjust for net cash/debt and convert features (capped calls, potential delivery under PIF prepaid forward).
• Upside case: higher multiple (e.g., ~2.5–3.0x) contingent on faster Gravity ramp, visible gross margin inflection, and credible autonomy software monetization milestones.
• Downside case: 0.7–1.0x reflecting slower demand or margin progress and/or elevated competitive pricing pressure.
• Translate enterprise value to equity using current net debt/liquidity and fully diluted share count; update as new deliveries, pricing, or capital actions occur.

Influencing Market Dynamics

• EV demand normalization, interest-rate path, and incentives/tariffs will drive pricing power and margin recovery.
• Charging standard convergence (NACS) reduces friction; autonomy regulatory progress could expand TAM and software take-rates.
• Competitive pricing from incumbents remains a swing factor for ASPs and inventory health.

9. Macroeconomic and Industry Trends

Regulatory Changes

• Tariff impacts noted in 2025 pressured gross margins; ongoing trade policy shifts remain a key variable for COGS and pricing strategy.
• Autonomy deployment depends on evolving state and federal frameworks; Lucid/Nuro safety case development will be pivotal for robotaxi timing.

Supply Chain Dynamics

• Strategic move toward U.S.-sourced critical minerals (Graphite One; MINAC collaboration) to enhance resilience and IRA-aligned sourcing over time; natural graphite production expected from 2028.
• Manufacturing footprint expansion via Nikola assets improves capacity and logistics; NVIDIA’s Industrial AI aims to bolster yields and reduce cycle times.

Technology Adoption Trends

• Rapid convergence on NACS and Supercharger access as a minimum requirement in North America.
• Shift to centralized, high-performance vehicle compute enabling faster ADAS feature deployment and OTA monetization.
• Increasing consumer acceptance of premium EV SUVs with long range and fast charging; Gravity Touring targets this sweet spot.