Electric Cars Are About to Start Rolling Out of the Arizona Desert
(Bloomberg) -- On the outskirts of a small town less than 50 miles southeast of Phoenix, a 720,000 square foot electric vehicle factory is arising in the desert. If all goes as planned, a luxurious new battery-electric sedan will roll off its production line by year’s end.
Lucid Motors, a U.S. startup backed by Saudi Arabia’s Public Investment Fund, is building the factory and slated to start manufacturing its debut model later this year for delivery in early 2021. Lucid says construction has stayed on schedule at a time when other automakers have been forced to halt output and delay key models due to the coronavirus pandemic.
Through a series of logistical maneuvers, help from parts suppliers and a bit of good fortune, Lucid executives say they’ve been able to move forward with installation of critical assembly-line equipment such as robotic arms and precision tools including stamping presses and jigs.
“It was luck. I must say that,” Peter Hochholdinger, Lucid’s vice president of manufacturing, said in an interview.
A big contribution of good karma has come from location. Arizona did not prohibit construction work along with much of the rest of the U.S. starting in March. After completing the steel structure in February, Lucid finished the exterior walls and roofing and recently has taken delivery of production equipment from suppliers including Hokuto, a parts-mounting device maker. Equipment manufacturers based in Asia were quick to reopen after Japan, China and South Korea allowed businesses to resume operations.
Lucid hasn’t entirely avoided virus-related snags. Its paint-shop equipment supplier Durr Systems initially planned to complete its work for the facility at a manufacturing site in China. When that government imposed its shutdown, the job shifted to a Durr site in Mexico. After businesses then began to shut down in North America, the company reverted back to China, which had lifted restrictions. Hochholdinger said all this caused only minimal delay.
Suppliers also diverted resources to Lucid from other automakers that had to pause projects in the midst of virus shutdowns, Chief Executive Officer Peter Rawlinson said in an email.
Even so, building a factory with 200 people on site at any given time has not been easy. To keep workers safe and construction moving forward, Lucid says it has implemented strict social-distancing and sanitation protocols. Workers are required to wear face masks and goggles at all times and multiple temperature checks are done at the site’s single point of entry using an infrared thermometer. Hochholdinger said any worker not wearing a mask or registering a temperature above 100.4 degrees Fahrenheit (38 degrees Celsius) is asked to leave the site.
Virus-induced fevers aren’t the only potential hot spots. Temperatures can reach the high 90s in Casa Grande in May, so Lucid installed a cooling tent for workers to take breaks while maintaining distance.
Lucid trucked in 11.4 million pounds of steel and 67.4 million pounds of concrete. While the initial production volume the company is targeting is in the tens of thousands, the plant has been designed to eventually make as many as 380,000 vehicles. That’s more than the roughly 367,500 vehicles Tesla delivered last year, all of which were built at its plant in California.
Building from a bigger blueprint now will make it less costly for Lucid to expand in the future, Hochholdinger said. Initially, the general-assembly area and paint shop will be housed together, with a smaller building for the body shop. In the longer term, Lucid plans to move assembly to its own building and expand the paint shop using the vacated space.
Powertrain production is in a repurposed warehouse seven miles away from the main factory site. Hochholdinger said assembly of battery packs—using cells imported from LG Chem— won't require as much specialized equipment or bespoke installation, so the current arrangement is a cheaper, more straightforward option.
Lucid touts the operation as the first greenfield electric-vehicle site in the U.S. Tesla, by comparison, invested billions of dollars into what had been a joint-venture facility for Toyota and General Motors in Fremont, California.
While it was able to afford building from scratch, Lucid is still operating on a tight financial leash. The company received more than $1 billion from the Saudi fund in September 2018 and has not raised any additional money since. Hochholdinger credits a “nitpicky” finance team that requires justification for every purchase order with keeping the company within its budget. Rawlinson, the CEO, also has preached penny-pinching since taking the reins in April 2019.
In several interviews over the course of a year, Rawlinson, formerly the chief engineer of Tesla’s Model S, reiterated the money raised from Saudi Arabia’s PIF would be adequate to get Lucid through the factory build to the start of production.
The debut Air model, which is expected to sell for more than $100,000, can be ordered online, though buyers will be able to kick the tires at one of nine showrooms in the U.S. that Lucid plans to open this year in California and Florida. It has additional outlets slated for next year in Chicago, New York, Washington D.C. and Europe.
Prior to joining Lucid, Hochholdinger also was at Tesla as vice president of production in charge of the factory in Fremont. Before that, he spent 24 years at Audi and oversaw annual production of 400,000 cars at the peak of his career.
“It did teach me you can do things differently,” Hochholdinger says of his time at Tesla and Lucid. “You don't have to do 100% of the classic things car makers do.”
The city of Casa Grande agreed to reimburse $12.6 million of construction costs and contribute $1.5 million to Lucid’s training budget. The money will be paid if construction benefits local infrastructure and Lucid hires 1,114 full-time local workers, Craig McFarland, the city’s mayor, said in an email. Lucid has hired 733 workers so far, he said.
Arizona also offered $6.3 million in grants and $43.7 million in refundable tax credits if certain conditions are met. Lucid hasn't gotten any of these incentives yet because it hasn't met agreed-upon milestones, according to a spokeswoman for the Arizona Commerce Authority.
Lucid so far has avoided virus-related pitfalls other electric-vehicle startups have suffered. China’s Byton has furloughed half its California staff and delayed the start of vehicle production in China. Rivian Automotive, backed by Amazon and Ford Motor, also has delayed the start of production for its all-electric pickup and SUV.
Lucid says it has actually accelerated hiring, adding 120 new employees since mid-March, and is currently advertising 250 open positions. The company has not furloughed any of its employees or cut pay or hours, and it’s actively recruiting from competitors, Rawlinson said.
Lucid broke ground on the Casa Grande site in early December 2019, so construction could end up being completed within a year. Still, the company’s ramp-up will be slow. Hochholdinger said there will be 700 people working on production when the company's first car launches, a fraction of the more than 10,000 that Tesla employs at its factory in California.
©2020 Bloomberg L.P.