By Naveen Athrappully
Electric vehicle manufacturer Lucid Motors plans to lay off hundreds of workers as part of a cost control initiative amid weakening EV demand.
On May 24, Lucid announced a restructuring plan to “optimize” the company’s operating expenses by reducing its current workforce by roughly 400 employees, or around six percent of the total, according to an SEC filing. The restructuring is expected to be completed by the end of Q3, with the company incurring $21-$25 million in charges connected with the plan. Many of the expenses will go toward severance payments, employee benefits, employee transition, and stock-based compensation. The payments are estimated to be made by the third quarter.
In 2023, Lucid suffered a net loss of $2.82 billion. In Q1, 2024, the company reported a net loss of $680 million. Shares of Lucid had fallen over 33 percent year to date as of May 25. In the past year, shares declined by more than 63 percent.
Lucid’s workforce reduction comes as interest in buying electric vehicles among U.S. customers has dampened due to high interest rates and inflation, making costly EVs appear unappealing compared to alternatives like hybrid vehicles.
An analysis of EV sales data by automotive research firm Kelley Blue Book found that the sale of EVs in Q1, 2024, fell by 15.2 percent compared to Q4, 2023.
“Electric vehicle sales in the U.S. declined during Q1 2024—the first quarter-over-quarter downturn since Q2 2020,” said Stephanie Valdez Streaty, director of Industry Insights at Cox Automotive.
In an email to employees, Lucid CEO Peter Rawlinson said that the workforce reduction will impact “employees at all levels, including leadership and mid-level management. The reduction in force will not impact our hourly manufacturing and logistics workforce.”
“Letting go of our talented team members is difficult and a decision we did not take lightly,” he wrote. “We have extended severance and health benefits to the impacted employees, and we are offering them outplacement services.”
While the CEO expressed confidence that Lucid will deliver the “world’s best SUV” and expand the company’s market share, he noted that the firm is currently not generating any revenue from the program.
Hence, Lucid has to be “vigilant” about costs and optimize its resources in a way that will position the company for success, he wrote.
Amid dampened EV market conditions, other firms have also been forced to lay off workers. In April, Tesla announced that it would lay off over 10 percent of its global workforce. The EV giant planned to let off at least 14,000 of the 140,473 workers, according to a December 2023 report.
Since the company grew rapidly over the past years, there was “duplication of roles and job functions in certain areas,” Tesla owner Elon Musk said in an email obtained by The Epoch Times. As such, the company had to look at “cost reductions and increasing productivity.”
In February, Amazon-backed electric truck manufacturer Rivian announced plans to lay off 10 percent of its salaried workforce. The firm also said it would produce fewer than expected vehicles this year.
California-based Lucid makes cars ranging from $71,400, going up to $250,500, depending on options.
EV Plan for America
The EV layoffs come as the Biden administration pushes ahead with its aim to transition the U.S. vehicle industry toward electrification. In 2021, President Joe Biden outlined a plan to have 50 percent of all new vehicles sold in the United States by 2030 be fully electric or at least plug-in hybrids.
In March, the U.S. Environmental Protection Agency (EPA) announced final pollution standards for passenger cars, light-duty trucks, and medium-duty vehicles for model years 2027 through 2032 and beyond.
The standards can only be met by the vehicle industry by ensuring that 56 percent of new vehicle sales by 2032 are electric and at least 13 percent of sales are plug-in hybrids or other partially electric cars.
EPA Administrator Michael Regan said the new measures “solidify America’s leadership in building a clean transportation future and creating good-paying American jobs, all while advancing President Biden’s historic climate agenda.”
President Biden recently announced that tariffs on Chinese EVs would be raised from 25 to 100 percent in a bid to protect the U.S. auto sector from cheap imports from China.
Meanwhile, Republicans are pushing forward legislation seeking to end federal government promotion of EVs over other vehicles like gasoline-based ones.
On May 2, Sen. John Barrasso (R-Wyo.) introduced the Eliminating Lavish Incentives to Electric (ELITE) Vehicles Act (S. 4237) which seeks to repeal the $7,500 federal tax credit provided to new EV purchases.
S. 4237 wipes federal investment tax credit for EV charging stations and closes a loophole that allows certain foreign entities to evade restrictions on EV incentives. China would be barred from circumventing guardrails to access EV tax credits.
“Working families in Wyoming shouldn’t be footing the bill for the luxuries of Biden’s climate elitists. The federal government has no business pushing Americans into expensive electric cars they don’t want or can’t afford,” said Mr. Barrasso.
“Repealing these tax credits keeps China out of our markets and lets Americans, not Washington, use their hard-earned money to purchase the vehicles that are best for them.”
A Jan. 4 KPMG survey of 1,000 auto executives showed that automakers were less confident about the prospects of EVs. Executives who said they were “extremely confident” about profitability dropped to 43 percent in 2023 from 48 percent in 2022 in the United States.
Though a flood of EV models is coming to the market, EV demand “has weakened” and some of the firms could come under “extreme pressure” as competition in the sector intensifies, the report stated.
