EV Maker Lucid to Lay Off 1300 Workers in Restructuring Plan to Cut Costs

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Electric vehicle (EV) maker Lucid Group Inc. is set to lay off approximately 1,300 employees, or around 18% of its workforce, as part of a larger restructuring effort aimed at reducing costs as it works to ramp up production of its Air luxury sedan. Lucid is expected to incur one-time charges of between $24 million and $30 million related to the job cuts, with most of that amount being recognized in the first quarter of 2023.

Lucid CEO Peter Rawlinson stated in a letter to employees that the job cuts would impact “nearly every organization and level, including executives,” and that affected employees would be notified over the next three days. Severance packages would include continued healthcare coverage paid by Lucid, as well as an acceleration of equity vesting, Rawlinson wrote.

The EV maker ended 2022 with about $4.4 billion in cash on hand, enough to last until the first quarter of 2024. However, there have been signs that demand for the high-priced Air has fallen short of Lucid’s internal expectations, and the company may be struggling to convert early reservations to sold orders.

Lucid said it had more than 28,000 reservations for the Air as of Feb. 21, its most recent update. However, the company plans to build just 10,000 to 14,000 vehicles in 2023, far fewer than the roughly 27,000 that Wall Street analysts had expected. With Lucid’s factory currently set up to build about 34,000 vehicles per year, the company has warned of continuing losses.

“We are also taking continued steps to manage our costs by reviewing all non-critical spending at this time,” Rawlinson said.

Lucid’s restructuring plan is expected to be substantially completed by the end of the second quarter. The EV maker is also expected to continue reviewing non-critical spending to further manage costs.

Lucid’s job cuts come amid increased competition in the EV industry, particularly from Tesla Inc. and traditional automakers offering cheaper EV models. Last month, Rivian Automotive Inc. announced it would lay off 6% of its workforce as part of cost-cutting measures.

Lucid’s shares closed down over 7% on Tuesday following the Insider report. The job cuts are the latest setback for the company, which had already reported a major drop in orders during the fourth quarter and forecast 2023 production that fell well short of analysts’ expectations.

As Lucid works to ramp up production of its Air luxury sedan and compete with established players in the EV industry, the company is focusing on reducing costs through layoffs and managing non-critical spending. Lucid’s cash on hand should allow it to weather the current storm, but the EV maker will need to carefully manage costs and build demand for its high-priced Air model to succeed in the competitive EV market.

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