Here’s Why Lucid Is Laying Off 1300 Employees

• Lucid Motors implements restructuring plan, citing evolving business needs and productivity improvements, that will see 18% of its workforce cut in the coming weeks.

• The EV maker began production of the Air sedan a year and a half ago, with the more expensive versions being produced first.

• Lucid expected to produce 10,000 to 14,000 EVs in 2023, amid continuing industry-wide component shortages.

It was just over a year ago when Lucid began assembling the first examples of its high-priced and high-performance Air sedan, amid ambitious plans to expand production to Saudi Arabia after the kingdom took a major stake in the EV maker.

Now, Lucid is planning to lay off approximately 18% of its workers. The cuts will amount to about 1300 employees, the company said in a regulatory filing, with the company saying it expects about $24 million to $30 million in expenses related to these job cuts.

The EV maker says it is taking this action to reduce operating expenses, while also citing productivity improvements since the start of production. The automaker termed these cuts as being part of a "restructuring plan."

"Given evolving business needs and productivity improvements, we are reducing the size of our organization by approximately 18%, which will affect Lucid employees and contractors," Lucid CEO Peter Rawlinson said in an email to employees this week. "This action is aligned with the cost discipline announcement we made in late February when we reported earnings. We are also taking continued steps to manage our costs by reviewing all non-critical spending at this time."

While the announcement of job cuts totaling nearly one in five employees may appear sudden, the EV maker emerged from a difficult first full year of production, and faces yet another difficult year.

In 2022 the automaker produced 7180 vehicles, while delivering 4369 vehicles, with the Air sedan accounting for all production. In 2023 the EV maker plans to produce between 10,000 and 14,000 vehicles. The numbers for both years represent rather small outputs compared to Lucid's official plans, last reaffirmed in May 2022, to have a production capacity of 500,000 EVs a year by the middle of the decade, thanks in part to a future production facility in Saudi Arabia.

While Rawlinson's letter mentions "evolving business needs" in regard to the cuts, over the past year industry analysts have cited the increasingly limited market for EV sedans with price tags around $100,000, as more competitors from German automakers continue to arrive.

The initial editions of the Lucid Air have all been priced well north of the $100,000 mark, though more affordable versions with smaller batteries are in the works as well. In addition, Lucid plans to offer the Gravity SUV starting in 2024, which is expected to start around $90,000.

While Lucid's production numbers in 2022 were certainly hampered by supply chain issues, industry watchers have also wondered just how many buyers there could be, annually, for six-figure luxury electric sedans, even amid plans by Saudi Arabia to purchase 100,000 Lucid EVs over a ten-year period. Given a commitment this large, one would have expected Lucid to hire more workers in 2023 instead of cutting almost a fifth of its entire workforce.

Is the luxury EV sedan segment just getting started, or has demand for such EVs likely peaked? Let us know your thoughts.