Lucid lost customer orders earlier this year because it could not locate its own vehicles, Chief Executive Officer Silvio Napoli said, in the bluntest account yet of the disorder he found at the EV maker when he assumed the role on the first day of June.
“Beginning of Q3, we struggled because, and I have to say this, we didn’t even know where cars were,” Napoli told analysts on Monday’s third-quarter earnings call.
“We had orders that were taken where it would take sometimes two weeks to deliver to the customer, and so we will lose the order,” he said.
Napoli was answering an analyst from BNP Paribas who asked whether deliveries would rise or fall in the fourth quarter. He described the fix as “fundamental discipline.”
“Today, we finally have granularity as a company of our size should have about what cars are being produced, where are they being shipped, where are they being stored and by when can they be available,” he said.
How the Stock Built Up
The admission explains part of the inventory problem Napoli inherited. Lucid built 18,686 vehicles and delivered 12,391 in the three quarters to June, a difference of 6,295, according to its production and delivery reports.
Inventory tripled in 18 months to $1.38 billion at the end of June, of which $623 million was finished vehicles. Lucid has written down $1.11 billion of inventory and supplier commitments in five quarters.
Napoli said in August that “building vehicles faster than we could deliver them was consuming cash and increasing inventory.” Lucid eliminated a shift at its Arizona plant in June and built 2,954 vehicles in the third quarter, fewer than the 3,806 it delivered.
Finished vehicle inventory fell to $534.7 million at the end of September. Lucid’s presentation showed two aerial photographs of a lot at the Arizona plant, one packed with cars in April and one largely cleared in September.
The Fix
The presentation names the process “Car Flow,” which it says “aligns production, sales, and supports inventory reduction.”
Napoli linked it to a rebuilt sales organization. A new commercial team now has “a clear commercial cadence,” he said, and can make sure “that we sell the cars that we know can be available on the day for the customers who require it.”
“We can see the cadence improvement really, I’m going to say, month after month,” he said.
Lucid’s presentation said a Chief Technology Officer, Chief Financial Officer, Chief Customer Officer and Chief Transformation Officer joined early in the third quarter. The company’s head of global logistics left for the humanoid robot maker Figure in September.
Napoli gave figures for the sales changes. “Since January, web leads are up 79% and session-to-order conversion have doubled,” he said. “Cost per order is down 82%.” Lucid also deployed an AI sales agent in September.
Service and Brand
The tracking gap was one of several shortcomings Napoli acknowledged on the call.
On service, he said customers do not ask about the company’s future. “They say, ‘When can I service my car?’ Admittedly, as I said before, we were not structured with the right level of support across the markets we operated.”
Lucid has cut service wait times by about 20%, he said, with 40% more service technicians and 15% more mobile service capacity. Warranty claims fell 70% and warranty costs were 16% lower than a year earlier.
On the brand, he said an outside assessment found that staff in different studios and markets described it differently. “Our customer love us, even though at times, to be candid, we probably made it hard for them,” he said.
A Smaller Company
The changes have come with deep cuts. Headcount fell from 10,600 at the end of the first quarter to 7,700 at the end of the third, Napoli said, a reduction of 2,900 that Chief Financial Officer Alexander De Bock put at 28%.
Lucid announced job cuts in June that it said would save about $158 million a year together with the shift reduction.
The better tracking has yet to show in volumes. Third-quarter deliveries fell 3.7% from the second quarter and 6.7% from a year earlier.
De Bock said he expects deliveries to rise in the fourth quarter, and Napoli said second-half deliveries would exceed the first half’s 7,046. “It takes more than one quarter to rebuild credibility,” Napoli said.
Lucid shares closed up 9.4% at $3.60 on Monday, before the results, and traded at about $3.49 before the market opened on Tuesday.
