The US-based electric vehicle manufacturer Lucid Motors is reducing its workforce by 18% – approximately 1,300 employees – as part of the “cost discipline” initiatives announced by the business earlier this year to respond to changes in the macroeconomic landscape.
In a filing with the US Securities and Exchange Commission (SEC), Lucid Motors said that it will incur in expenses ranging from $24 to $30 million associated with the layoffs, the majority of which will be recognized during the first fiscal quarter of 2023.
According to Peter Rawlinson, the Chief Executive Officer and Chief Technology Officer of Lucid Motors (LCID), the company has been adopting several other measures to reduce costs but they have not been sufficient to achieve the company’s goals in this matter.
All employees affected by the layoffs should be notified within the next three days. Rawlinson asserted that every level of the organization, going from executives to factory workers, will be impacted by the departures.
Specific details about the severance package and other benefits to be offered to those being let go were not disclosed by Rawlinson in the press release.
Lucid Recalls a Third of Its Delivered Vehicles
The announcement was made on the same day that Lucid recalled 637 Air models due to power loss issues that can result in the car unexpectedly shutting down. Only are a small percentage of 10% or so of the models being recalled are expected to be affected by the issue.
As of the end of December 2022, Lucid said it had delivered 1,932 units of its Air model. Back then, the company reported cash and equivalents of $4.9 billion. However, the company’s cash reserves have been dropping at a relatively fast pace as Lucid spent $1.82 billion of its reserves in a single year.
This year, the company plans to manufacture between 10,000 and 14,000 vehicles while the management expects that its current liquidity levels should suffice to keep the business afloat until the first quarter of 2024 at least.
However, capital expenditures are expected to keep increasing this year to a range between $1.5 and $1.75 billion.
Will Lucid Be Able to Raise More Capital in This Challenging Environment?
Early-stage companies such as Lucid that are burning cash at a fast pace and losing billions of dollars every year may struggle to secure the financing they need to stay alive in the current macroeconomic environment.
This explains why investors have been disposing of the company’s stock lately. Even though Lucid stock accumulates a 10.6% gain thus far in 2023, it is trading almost 87% below its all-time high of February 2021.
Last week, the Federal Reserve implemented its nine consecutive interest rate hike to push the overnight lending rate to 5%, up from the previous 4.75% level. This is the highest point that interest rates have reached since September 2007 back when the financial crisis was starting to unfold.
These actions were taken despite the significant uncertainty caused by the collapse of the Silicon Valley Bank and the overall instability that the financial system is reportedly experiencing amid billions of dollars in losses that have not yet been recognized as a result of the latest drop in the value of fixed-income instruments including US Treasury bonds.
The last time that Lucid raised capital was in December 2022 when the company brought in $1.5 billion via an at-the-market offering (ATM) that was partially subscribed by the company’s largest shareholder to date – the Public Invest Fund of Saudi Arabia.
Lucid counts on the support of this large investment fund for future financing needs and it may be in their best interest to keep pouring money into the company as the PIF already owns 60.6% of the US-based EV producer.
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