Lucid cut its inventory write-downs by 69% in the third quarter to $93.7 million, the smallest charge in at least five quarters, as the Saudi-backed EV maker built fewer vehicles than it delivered to shrink a stockpile that had tripled in 18 months.
Inventory was valued at $1.22 billion at the end of September, down $156.2 million, or 11.3%, from $1.38 billion at the end of June, the company said on Monday. It was still $113.0 million above the level at the end of 2025.
Gross margin improved to negative 73.7% from negative 105.3% in the second quarter and negative 99.1% a year earlier. Lucid still spent about $1.74 to build and deliver each dollar of sales.
Almost all of the improvement came from the lower write-downs. Excluding them, the gross margin would have been about negative 47%, worse than about negative 31% in the second quarter, by EV‘s calculation.
Fewer Cars Built Than Sold
Lucid built 2,954 vehicles and delivered 3,806 in the quarter, drawing 852 from stock. It was the first quarter in which deliveries exceeded production since the third quarter of 2025. It had built 5,227 more vehicles than it delivered between the start of 2025 and the end of June, a surplus that built up over six quarters, and that figure now stands at 4,375.
Production fell 38% from the second quarter after Lucid eliminated the second shift at its Arizona plant in June. CEO Silvio Napoli told analysts on August 4 that “building vehicles faster than we could deliver them was consuming cash and increasing inventory.”
The unit surplus fell 16% in the quarter and the dollar value of inventory fell 11%. Lucid’s presentation said the gross reduction was $204 million before impairments.
The presentation illustrated the point with two aerial photographs of the East Lot at the Arizona plant, labeled April 2026 and September 2026, the first showing the lot packed with vehicles and the second showing it with less vehicles.
It gave no vehicle counts, and the photographs span a longer period than the quarter.
Where the Inventory Sits
Finished vehicles accounted for most of the decline. Finished goods fell $88 million from the end of June, work in progress fell $64 million and raw materials fell $4 million, according to the presentation.
That leaves $534.7 million of finished vehicles, $204.3 million of work in progress and $483.5 million of raw materials, according to Lucid’s quarterly filing with the Securities and Exchange Commission (SEC).
The fall in finished goods reverses the second quarter, when they rose $51 million while the other two categories fell. “Deliveries converting finished goods to cash,” the presentation said.
Work in progress fell 24%, which Lucid attributed to “significant improvement in manufacturing throughput combined with the deliberate reduction in production.”
Raw materials barely moved. Lucid said cuts to raw material commitments made late in the second quarter “delivered initial inventory improvement in Q3 with more expected to come in Q4.”
The company’s cash plan for 2026 counts on about $700 million from inventory. It has realized about $300 million, or 43%, the lowest share of the plan’s three parts.
In the cash flow statement, inventory released $77.2 million in the quarter, compared with a $446.6 million use a year earlier. Over nine months it still absorbed $768.4 million.
Lower payables offset part of the benefit. Accounts payable used $147.1 million of cash in the quarter, and the balance has halved this year to $241.1 million from $487.5 million.
Lucid also cited a process it calls “Car Flow,” which it said “aligns production, sales, and supports inventory reduction.”
Write-Downs
The charges reflect vehicles and parts carried at more than Lucid expects to recover from selling them. The company recognized $192 million, $287 million, $238 million and $300 million over the four quarters to June, according to its presentation.
The third-quarter charge was made up of $81 million of inventory provisions and $13 million of losses on purchase commitments and supplier claims. In the second quarter, a $373 million inventory provision was partly offset by a $73 million reduction in commitment losses.
Lucid attributed the decline to “lower inventory levels” and “reductions in future purchase commitments.”
The charge was equivalent to about 27 percentage points of gross margin, compared with about 74 points in the second quarter, by EV‘s calculation. Lucid has now written down $1.11 billion in five quarters. Write-downs for the first nine months were $621.3 million, up from $518.5 million a year earlier, because of the charges taken in the first half.
Outside data pointed to weak demand for Lucid’s older model during the quarter. The Air sedan sold an estimated 506 units in the U.S., down 80% from a year earlier and its weakest quarter since mid-2022, according to Cox Automotive estimates.
Lucid said the Gravity SUV “continued to regain momentum,” with “very strong growth in deliveries” from the second quarter. It did not give figures by model.
Gross Margin
The gross loss was $258.3 million, an improvement of $169 million from the second quarter and the least negative margin of the seven quarters in Lucid’s presentation.
Lucid credited the shift reduction, manufacturing and logistics efficiency and better working capital management, “resulting in significant impairment improvement of $205m.”
Those gains were offset by “lower volume, under-absorption of overhead costs, and trim mix” and by “reduced regulatory and duty credits,” the presentation said. Lucid said about half of the 14% sequential fall in revenue came from fewer regulatory credit opportunities. Regulatory credit revenue was $1.1 million, down from $25.4 million in the second quarter, the filing showed.
Output of 2,954 vehicles in the quarter is equivalent to about 13% of the Arizona plant’s annual capacity of 90,000, by EV‘s calculation, down from 21% in the second quarter.
“The operating reset announced with our Q2 results includes decisive actions to align our manufacturing capacity with demand, reduce inventory and lower operating expenses,” Chief Financial Officer Alexander De Bock said in a statement.
What Comes Next
Lucid said fourth-quarter production would again be below deliveries, and that its focus for the quarter is working capital and operating costs.
Management said in August that it planned to normalize inventory by the end of the year. Hitting the plan’s target would require about $400 million more from inventory in the fourth quarter, more than it has delivered in the previous two quarters combined.
The filing shows about $2.59 billion of non-cancellable long-term commitments, mainly for inventory components.
Lucid has no production target for 2026 after withdrawing its guidance, and said it will give 2027 guidance with its year-end results.
Lucid will hold a conference call at 5:30 p.m. Eastern time.
