Lucid Motors, an electric vehicle manufacturer, is planning to lay off around 400 employees, or 6% of its workforce, as part of a cost control initiative. The company reported a $680 million loss in the first quarter of this year, prompting the need for restructuring. The layoffs are expected to be completed by the end of the third quarter, with expenses estimated to be between $21-$25 million. These expenses will go towards severance payments, employee benefits, employee transition, and stock-based compensation.
The decision to reduce the workforce comes as interest in buying electric vehicles (EVs) in the US has dampened due to high interest rates and inflation. This has made expensive EVs less appealing compared to alternative options like hybrid vehicles. According to an analysis by Kelley Blue Book, EV sales in the first quarter of 2024 fell by 15.2% compared to the previous quarter. This downturn in sales is the first since the second quarter of 2020.
Lucid CEO Peter Rawlinson acknowledged the difficulty of letting go of talented team members but emphasized the need to be “vigilant” about costs and optimize resources for future success. He expressed confidence in delivering the “world’s best SUV” and expanding market share but noted that the company is currently not generating any revenue from the program.
Lucid is not the only company facing challenges in the EV market. Tesla announced in April that it would lay off over 10% of its global workforce due to duplication of roles and job functions. Similarly, Amazon-backed electric truck manufacturer Rivian announced plans to lay off 10% of its salaried workforce in February.
These layoffs come as the Biden administration aims to transition the US vehicle industry towards electrification. President Joe Biden outlined a plan to have 50% of all new vehicles sold in the US by 2030 be fully electric or plug-in hybrids. The US Environmental Protection Agency (EPA) has also announced pollution standards that can only be met by ensuring that 56% of new vehicle sales by 2032 are electric.
However, there are opposing views on federal government promotion of EVs. Republicans have introduced legislation seeking to end federal government promotion of EVs over gasoline-based vehicles. The Eliminating Lavish Incentives to Electric (ELITE) Vehicles Act aims to repeal the $7,500 federal tax credit provided to new EV purchases. The legislation also aims to bar China from accessing EV tax credits.
Despite the push for electrification, a survey of auto executives conducted by KPMG showed that automakers were less confident about the prospects of EVs. The executives’ confidence in EV profitability dropped from 48% in 2022 to 43% in 2023. The report noted that while there is a flood of EV models coming to the market, demand has weakened, and competition in the sector is intensifying.
In conclusion, Lucid Motors’ decision to lay off employees reflects the challenges faced by the EV industry in the current market conditions. High interest rates and inflation have dampened interest in EVs, leading to a downturn in sales. The Biden administration’s push for electrification is met with opposing views, with Republicans seeking to end federal government promotion of EVs. Despite the challenges, Lucid CEO Peter Rawlinson remains confident in the company’s ability to deliver a top-quality SUV and expand market share. However, it is clear that cost control and resource optimization are crucial for success in the EV industry.
