Lucid’s Gravity SUV arrives with big expectations and big risks

lucid motors Receives rave reviews from critics. However, the number of customers is overwhelmingly low.

That’s a problem that the company can’t deal with.

The Arizona-based EV maker has top-notch technology, deep financial backers, and highly regarded vehicles. But it has struggled to meet production targets and has been unable to steal attention from established, century-old luxury brands.

Lucid is ramping up production of its high-end three-row SUV, the Gravity, but will only sell a few hundred units through 2025. Gravity’s production ramp-up faces many challenges, primarily supply chain shortages.

But the company already has plans for another vehicle aimed more at the middle market, where it will compete with its best-selling vehicles. tesla Model Y SUV. The company is also investing in self-driving cars for consumers, while also working on a robotaxi fleet. Uber and self-driving technology maker Nuro.

In the process, Lucid burns through a lot of money. The company’s third-quarter results were worse than Wall Street expected, with a net loss of nearly $1 billion.

“Their gross margins have deteriorated quite a bit,” said Tom Narayan, an analyst at RBC Capital Markets. “A lot of people are doing the math: How long can companies continue to lose cash?”

A tougher environment adds to the challenge for all EV manufacturers. Demand is lower than expected, and many automakers are withdrawing from the market. EVs lost important support from the federal government, including a $7,500 tax credit, charging funds and limits on state-level programs that encourage automakers to produce zero-emission vehicles.

“Great car”

Cox Automotive says Lucid’s first vehicle is a sedan called Air, which is the most popular vehicle in its segment. Through the third quarter, the company said it was the third best-selling full-size luxury sedan and the best-selling electric vehicle. The Air is often a “critics choice.” No other EV can reach the 512 miles of range of the Air Grand Touring’s top trim level.

Last year, Lucid delivered 10,241 vehicles, mostly Air sedans, a 71% increase from 2023. Tesla, the US EV leader, has delivered 1.8 million units.

Unfortunately, sedans have consistently been compared to SUVs, crossovers, and pickups, which now pretty much dominate the roads. Seven of the top 10 best-selling models in the U.S. are in these three segments, according to Edmunds.

“It was a great car,” said Sam Abuelsamid, vice president of telemetry market research. “It’s still a great car, but in some ways it was brought to market at the wrong time.”

According to JATO Dynamics, the world’s best-selling car in 2023 was Tesla’s Model Y. Cox Automotive said it sold more than 265,000 units in the U.S. through the third quarter of 2024, outselling the Model 3 sedan by about 100,000 units. The Model 3 is unusually popular among EV sedans. After the two Tesla models, the three cars that round out the top five are crossovers. chevrolet equinox, ford Mustang Mach-E and Hyundai Ioniq5.

Tesla’s closest competitor to the Air in terms of size, performance, and price, the Model S, sold just over 4,500 units in the same period.

Even the best-selling EVs, such as the Model Y, are cheaper than the Air, which starts at just over $70,000 and tops out at about $250,000. The Model 3 is nearly half that. The average EV transaction price in November was just over $59,000, according to Cox Automotive.

“There’s just not enough market for these luxury electric sedans at the moment,” Abuelsamid said.

Lucid sold just over 300 Gravity SUVs in the U.S. through the third quarter of 2025, according to Cox Automotive. Like the Air, the Gravity is also expensive. Nevertheless, the company says Gravity stands to attract six times more customers than Air.

“Let’s see if that happens,” Narayan said. “Based on the latest numbers I’ve seen, it looks like sedan sales are about on par.”

Marc Winterhoff, Lucid’s interim CEO, said in an interview with CNBC that the company is seeing “a very significant increase in demand for Gravity compared to Air.” He added that most customers price their cars at $100,000 or more.

production troubles

Demand may be strong, but Lucid also needs to get the vehicles into customers’ hands. Gravity’s launch in early 2025 was hit by shortages of key materials such as magnets, aluminum and chips, Winterhoff said on the company’s third-quarter earnings call.

“So far we haven’t been able to produce as much as we would like,” Winterhoff told CNBC. “We are now very confident that we have resolved those issues.”

Deliveries increased for the seventh consecutive quarter and were up 47% compared to the third quarter of 2024. Lucid added a second shift to the final assembly section of the factory to meet demand.

The company said demand is resilient despite concerns that the EV market is stalling after federal EV incentives ended on September 30.

“We saw an increase in deliveries in October,” Winterhoff said. “Deliveries have fallen significantly in EVs for many other pure EV players and established players who also have (internal combustion) vehicles.”

Still, analysts say this is a more difficult time to make EVs than when Tesla was ramping up production of the Model 3 and Model Y.

“Those were the only games in town,” Narayan said. “So there was no competition there. They also benefited from a huge drop in battery prices. And they got a lot of government support. Today we are in a completely different world.”

Narayan said if gross margins continue to deteriorate, the company will eventually have to return money to investors. Lucid is currently about 55% owned by the Saudi Public Investment Fund, according to FactSet.

During the third quarter, Lucid and PIF agreed to increase the delayed draw term loan credit facility from $750 million to approximately $2 billion. DDTL is a loan that businesses can take out over time rather than all at once. This brings total liquidity to $5.5 billion. The company said it has enough volumes to get through the first half of 2027.

“To date, Saudi Arabia has invested billions of dollars in Lucid and has been very patient with Lucid’s struggles to expand production and sales,” Abuelsamid said. “It’s unclear how long they will continue to be patient.”

The company also received a $300 million investment from Uber in September to develop a robotaxi platform with a third partner, self-driving technology developer Nuro. In addition to that, Uber plans to purchase 20,000 Gravity vehicles for self-driving cars.

Separately, Lucid partners with the following companies: Nvidia The company is developing what it calls “the first truly eyes-off, hands-off, mind-off (L4) consumer-owned autonomous vehicle.” L4 stands for Level 4, which is about the highest level of autonomy in current systems devised by the Society of Automotive Engineers.

“You have to invest first, then you can reap the benefits later,” says Winterhoff. “So we have to do a lot of things in parallel.”

Small SUVs are also available

Despite Gravity’s production challenges, the company is already working on its next vehicle, a midsize crossover with a price closer to the industry average of about $50,000.

This may increase trading volume, but it also magnifies losses.

“If gross margins are negative on average vehicle transactions of about $100,000 or more, what are Lucid’s Air and Gravity aiming for now, and what will happen when they sell nearly half that amount of vehicles?” Narayan said.

“Part of the answer may be that they have better operating leverage because they are much larger,” Narayan said. The argument, he said, is that Lucid’s technology allows it to squeeze much more range out of its batteries than its competitors.

“Our vehicles are 30% to 40% much more efficient than our competitors, which means we need to use smaller batteries to achieve the same range,” said Emad Dolala, Lucid’s senior vice president of engineering and digital. “That means lower costs (of materials), which means higher profit margins.”

Drala said the Lucid Air Pure has the same battery size as the Tesla Model Y, but has a range of 420 miles, about 100 miles longer than the Tesla Model Y.

Lucid says the money is being spent on developing a suite of technologies and manufacturing processes that are difficult to imitate.

“Lucid has about 10 years of powertrain history,” Dara said. “This didn’t happen overnight. There’s a lot of intellectual property patented technology across the powertrain, vehicle and software” that is leading to “improved efficiency across the board,” he said.

This also extends to the way cars are manufactured.

“We’re using a manufacturing process here that no other company in the industry uses for powertrains,” said Adrian Price, Lucid’s senior vice president of operations.

“Lucid is very highly vertically integrated,” he says, which means bringing much of the car manufacturing process in-house. “We have more of our own subassemblies, and that’s how we get performance that other companies don’t offer. A lot of that engineering is outsourced from other big automakers. We don’t just do the engineering, we do the manufacturing. And by doing it in-house, we can control some of Lucid’s secret sauce.”

One area where Lucid appears to be lagging behind its competitors is brand awareness.

“A lot of people don’t know what Lucid is,” Narayan said. “I think that’s the biggest hurdle for them.”

The company is focusing more on marketing and increasing its profile in the luxury goods market, where it competes with companies such as Mercedes-Benz, Porsche and BMW.

“Luxury brand buyers usually like traditional things,” Narayan says. “Brand is important, so how do you build it from scratch?”

“We are very well known and have won many awards in the automotive press, so anyone who is interested in cars knows us,” Winterhoff said. But that’s not the majority of car buyers. ”

Therefore, the company launched a new marketing and advertising strategy for The Gravity, welcoming Hollywood actor Timothée Chalamet as its first Global Brand Ambassador.

“We are shifting our focus from focusing on the vehicle and its features to what it means to own a Lucid and what it says about you,” Winterhoff said.

Winterhoff said he was confident the company could successfully ramp up production of the Gravity while building and eventually delivering mid-size cars.

“That’s the point where I think this is a sustainable business going forward,” he said. “We also have clear plans for profitability.”

Watch the video for an exclusive look inside Lucid’s Gravity production and see what’s next for the automaker.