Upstart EV maker Lucid and Panasonic Holdings announced a multi-year agreement earlier this week that will provide the automaker with lithium-ion batteries for its Lucid Air sedan and upcoming Lucid Gravity SUV.
Panasonic has been supplying batteries solely to Tesla, but is now seeking to diversify its customer base.
“Panasonic is a fantastic partner with both innovative technology and depth of experience,” said Peter Rawlinson, Lucid’s CEO and CTO. “This agreement will help us meet the growing demand for lithium-ion batteries as we continue to ramp production of the full Lucid Air line-up in 2023 and expect to begin production of our Gravity SUV in 2024.”
The agreement furthers Panasonic’s plans to expand production of lithium-ion EV batteries beyond Japan and into the U.S. with production coming from both a facility in Japan, as well as expected future production from its recently announced $4 billion EV battery production facility in De Soto, Kansas. Batteries from that facility will be eligible for tax credits under the Inflation Reduction Act.
“With the increased electrification of the automotive market, partnerships with technology-leading EV manufacturers such as Lucid are critical to our mission,” said Kazuo Tadanobu, president, CEO of Panasonic Energy Co. Ltd. “This partnership will help us drive growth of the lithium-ion battery industry and accelerate the world towards a net-zero emissions future.”
Staving off further production cuts
Citing supply chain issues, Lucid cut its ambitious production forecasts twice already this year. Announcements of planned production cuts in February and again in August reduced the planned output from 20,000 to 12,000 and then to 6,000 units for the year. By mid-year, the company had produced fewer than 1,000 vehicles.
In August, Rawlinson said the company experienced sporadic shutdowns of its production line due to supply chain problems, but also faced problems accelerating its production line to build more vehicles. Initially he said the company couldn’t feed the correct parts to the line at the correct time and cadence, affecting build quality.
Mastering the art of just-in-time automobile manufacturing, generally known as the Toyota Production System after the company that first developed the techniques, is no easy feat for any automaker.
However, the company did produce 2,282 vehicles in the third quarter, it and expects to meet or exceed the 6,000-unit target for the year. Lucid realized third quarter revenues of $195.5 million from deliveries of 1,398 vehicles. The company further touts its 34,000 active reservations. Although that’s down from 37,000 earlier in the year, that number of reservations would yield up to $3.2 billion if they are completed as sales.
After raising the price for its vehicles by up to 13% in June, Lucid has begun offering a discount for employees to buy a vehicle and take delivery before the end of the year. According to Business Insider, the company is offering employees an $18,000 discount if they buy during December.
They’re doing this in the form of a stipend of $500 per pay period to help finance the purchase of a 2022 Lucid Air Grand Touring model, which retails for $154,000. The stipend would be added to each paycheck until $18,000 has been paid. The discount is also contingent on the employees continuing to remain at work for Lucid.
If enough employees ink the deal to buy the cars, the benefit of this plan is twofold: not only will it help bolster Lucid’s customer delivery and revenue numbers, but it essentially provides a free loan to the company, which will realize cash this month, and will only have to pay some of it back over the next 18 months. It also locks those employees in for the next 18 months, if they want to get their full stipend.
Signs point to a rocky road
Lucid has enough public interest to succeed if they can translate reservations into sales and deliveries, and the company’s specialty models have received rave reviews. However, the path from an exciting product to commercial success is always rough.
Lucid’s challenges with supply chains and manufacturing logistics are real and have sunk nascent automakers before. The new agreement with Panasonic should take some pressure off the supply line, and that’s good news for Rawlinson and his team.