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Lucid Group, Inc. (LCID)

CIK: 0001811210. SIC: 3711 Motor Vehicles & Passenger Car Bodies. Latest 10-K as of: 2026-02-24.

SIC breadcrumb: Manufacturing > Transportation Equipment > SIC 3711 Motor Vehicles & Passenger Car Bodies

SEC company page: https://www.sec.gov/edgar/browse/?CIK=1811210. Latest filing source: 0001628280-26-011053.

Selected Fundamentals

MetricValueUnitFYFiled
Revenue1,353,790,000USD20252026-02-24
Net income-2,698,051,000USD20252026-02-24
Assets8,386,981,000USD20252026-02-24

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-02-24. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001811210.json. Derived margins, ratios, and free cash flow are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Free cash flow = operating cash flow - capital expenditures. Missing metrics are omitted rather than fabricated.

Metric20182019202020212022202320242025
Revenue608,181,000595,271,000807,832,0001,353,790,000
Net income-277,357,000-719,380,000-2,579,761,000-1,304,460,000-2,828,420,000-2,713,942,000-2,698,051,000
Operating income-257,934,000-599,227,000-1,530,446,000-2,593,991,000-3,099,588,000-3,020,820,000-3,501,753,000
Diluted EPS-13.08-28.42-6.41-1.51-13.59-12.52-12.09
Operating cash flow-235,299,000-570,196,000-1,058,133,000-2,226,258,000-2,489,753,000-2,019,674,000-2,931,912,000
Capital expenditures459,582,000421,220,0001,074,852,000910,644,000883,841,000868,158,000
Assets1,402,681,0007,881,713,0007,879,238,0008,512,718,0009,647,931,0008,386,981,000
Liabilities227,382,0003,972,358,0003,529,537,0003,661,026,0004,475,277,0005,386,204,000
Stockholders' equity-359,860,000-621,080,000-1,318,777,0003,909,355,0004,349,701,0004,851,692,0003,872,812,000717,287,000
Cash and cash equivalents614,412,0006,262,905,0001,735,765,0001,369,947,0001,606,865,000997,827,000
Free cash flow-1,029,778,000-1,479,353,000-3,301,110,000-3,400,397,000-2,903,515,000-3,800,070,000

Ratios

ROE and ROA use period-end equity/assets. Liabilities / equity uses total liabilities divided by stockholders' equity. Current ratio uses current assets divided by current liabilities when both are reported.

Metric20182019202020212022202320242025
Return on equity-65.99%-29.99%-58.30%-70.08%-376.15%
Return on assets-51.29%-32.73%-16.56%-33.23%-28.13%-32.17%
Liabilities / equity1.020.810.751.167.51
Current ratio3.5816.435.244.724.181.25

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-05. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001811210.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

QuarterEnd DateRevenueNet IncomeDiluted EPSMethod
2022-Q22022-03-31-0.36reported discrete quarter
2022-Q32022-09-30-0.40reported discrete quarter
2023-Q12023-03-31-0.43reported discrete quarter
2023-Q22023-06-30-764,232,000-0.40reported discrete quarter
2023-Q32023-09-30-630,894,000-0.28reported discrete quarter
2023-Q42023-12-31-653,766,000derived Q4 = FY annual - nine-month YTD
2024-Q12024-03-31-680,859,000-0.30reported discrete quarter
2024-Q22024-06-30-643,390,000-0.34reported discrete quarter
2024-Q32024-09-30-992,475,000-0.41reported discrete quarter
2024-Q42024-12-31-397,218,000derived Q4 = FY annual - nine-month YTD
2025-Q12025-03-31235,048,000-366,171,000-0.24reported discrete quarter
2025-Q22025-06-30259,432,000-539,432,000-0.28reported discrete quarter
2025-Q32025-09-30336,580,000-978,428,000-3.31reported discrete quarter
2025-Q42025-12-31522,730,000-814,020,000derived Q4 = FY annual - nine-month YTD
2026-Q12026-03-31282,465,000-1,028,344,000-3.46reported discrete quarter

Quarterly Charts

Macro Cross-References

Latest quarter (10-Q)

Latest 10-Q source: 0001628280-26-030517.

Extracted structurally from real Item 2 body heading to real Item 3/4 boundary. Confidence: high. Filing date: 2026-05-05. Report date: 2026-03-31.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report and our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on February 24, 2026. This discussion may contain forward-looking statements based upon Lucid’s current expectation, estimates and projections that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors”, in Part II, Item 1A of this Quarterly Report.

Unless otherwise noted, the share, per share, and related information in this Quarterly Report has been retrospectively adjusted to reflect the Reverse Stock Split.

Overview

We are a technology company that is shaping the future of mobility through our innovations, advanced technology, and software-defined vehicle platforms. Our award-winning Lucid Air and Lucid Gravity set new standards with their unmatched combination of performance, range, space, and efficiency. Our focus on in-house hardware and software innovation, vertical integration, and a “clean sheet” approach to engineering and design led to the development of the award-winning Lucid Air and Lucid Gravity, and upcoming Midsize platform.

We sell vehicles directly to consumers through our retail sales network and online channels, including Lucid Financial Services. We believe that owning and operating our sales network provides the best opportunity to closely manage the customer experience, gather direct feedback, and ensure that every interaction is tailored to customer needs. We are also actively exploring alternative importer and agency models to enhance flexibility and optimize our distribution strategy in response to evolving market dynamics. We also own and operate a vehicle service network comprised of service centers in major metropolitan areas and a fleet of mobile service vehicles. In addition to our in-house capabilities, we continue to grow an approved list of specially trained collision repair shops, which in some cases serve as repair hubs for mobile service.

Recent Developments

Series C Subscription Agreement

In April 2026, we entered into the Series C Subscription Agreement with Ayar. Pursuant to the Series C Subscription Agreement, we issued to Ayar 55,000 shares of our Series C Redeemable Convertible Preferred Stock, par value $0.0001 per share, for an aggregate purchase price of $550.0 million in a private placement.

The Series C Redeemable Convertible Preferred Stock sold to Ayar pursuant to the Series C Subscription Agreement was issued pursuant to the Series C Certificate of Designations filed with the Secretary of State of the State of Delaware in April 2026 and was sold in reliance on the exemption from registration provided in Section 4(a)(2) of the Securities Act.

Uber Transactions

Vehicle Production Agreement

In April 2026, we announced the entry into the Second VPA with Uber, under which Uber and its designated fleet operators have agreed to the Minimum Quantity Guarantee of 25,000 Lucid Midsize platform vehicles for use as robotaxis that have been modified to include certain autonomous driving hardware and other features (the “Lucid Midsize Plus vehicles”) over a six-year period following the start of production. Start of production of Lucid Midsize Plus vehicles is targeted to occur in late 2028.

Pursuant to the offset provisions under the first VPA we entered into with Uber on July 16, 2025, the Minimum Quantity Guarantee increased the aggregate number of Lucid Gravity Plus and Lucid Midsize Plus vehicles Uber is committed to purchase to at least 35,000 units.

Uber Private Placement

In April 2026, in connection with the Second VPA, we and a subsidiary of Uber, SMB, entered into a subscription agreement, under which we issued to SMB, in a private placement, $200.0 million of our common stock.

43

Underwriting Agreement

In April 2026, we entered into the 2026 Underwriting Agreement with the Underwriter, under which the Underwriter purchased from us shares of our common stock in a registered offering, and we received aggregate net proceeds of $291.5 million.

DDTL Credit Facility

In April 2026, we borrowed $500.0 million under the DDTL Credit Facility. In April 2026, we also entered into the DDTL Amendment, pursuant to which the aggregate undrawn delayed commitments under the DDTL Credit Facility were increased by $500.0 million, such that, after giving effect to such increase, the sum of outstanding delayed draw term loans and aggregate undrawn commitments was increased to approximately $2.5 billion.

The DDTL Amendment, among other things, eliminated the minimum liquidity covenant and removed the requirement that we fully utilize the borrowing availability under the ABL Credit Agreement (as defined therein) prior to making borrowings under the DDTL Credit Facility.

CEO Announcement

In April 2026, we announced that Silvio Napoli will be our next Chief Executive Officer (“CEO”). Mr. Napoli is expected to be appointed as our CEO once he receives the right to work in the U.S. In addition, Mr. Napoli was appointed to our Board of Directors and Executive Committee.

Potential Impact of Adverse Economic Conditions and Trade Policy Uncertainties on our Business

A global economic recession, downturn or other adverse economic conditions, whether due to changes or uncertainties in trade policies, the imposition or proposed imposition of tariffs, export controls, threat of a trade war, persistent inflation, political instability, global or regional conflicts or other geopolitical events, public health crises, interest rate increases or other central bank policy actions, bank closures and liquidity concerns at financial institutions, or other factors, have in the past and may in the future have an adverse impact on our business, prospects, financial condition and results of operations. If any of our suppliers, sub-suppliers or partners experience financial distress, insolvency or disruptions in operations, they may be unable to fulfill their obligations or meet our production and quality requirements. Adverse economic conditions and uncertainty about the current and future domestic or global economic conditions may also cause our customers to defer purchases or cancel their orders in response to higher interest rates, limited consumer credit availability, lower cash reserves, fluctuations in foreign currency exchange rates, and weakened consumer confidence. A reduction in demand for our products may result in a decline in product sales, with a corresponding material adverse impact on our business, prospects, financial condition and results of operations. Given our premium brand positioning and pricing, an economic recession or downturn is likely to have a disproportionate adverse effect on us compared to our competitors in the EV and traditional automotive sectors, to the extent that consumer demand for luxury goods declines in favor of more cost-conscious alternatives. In addition, adverse economic conditions and uncertainties surrounding trade policies, tariffs and export controls could also cause supply chain and logistical challenges and operational risks. In particular, the U.S. federal government enacted the law commonly referred to as the OBBBA, which eliminates, limits or phases out certain tax credits that had previously provided significant benefits to lessees and purchasers of EVs and adds new eligibility requirements on manufacturers to continue claiming tax credits on EV components. It also eliminates certain penalties for noncompliance with certain fuel efficiency standards and introduces certain key tax law modifications.

Taken together, adverse economic conditions and uncertainties surrounding trade policies, tariffs and export controls, coupled with supply chain challenges and the potential difficulty of passing costs to consumers or sharing the burden with suppliers, could reduce demand for our products and have a material adverse effect on our business, prospects, results of operations and financial condition. In addition, the deterioration of conditions in the financial markets may limit our ability to obtain external financing to fund our operations and capital expenditures for business growth on terms favorable to us, if at all. See “Risk Factors” in Part II, Item 1A of this Quarterly Report for more information regarding risks associated with a global economic downturn or recession, changes or uncertainties in trade policies, or the imposition or proposed imposition of tariffs, including under the captions “A global economic recession, downturn or other adverse economic conditions may have a material adverse impact on our business, prospects, results of operations and financial condition.” and “Changes in U.S. trade policy, including the imposition of or uncertainties surrounding tariffs or revocation of normal trade relations and the resulting consequences, could adversely affect our business, prospects, results of operations and financial condition.”

Key Factors Affecting Our Performance

We believe that our future success and financial performance depend on a number of factors that present significant opportunities for our business, but also pose risks and challenges, including those discussed below and in the section entitled “Risk Factors” in Part II, Item 1A of this Quarterly Report.

44

Design and Technology Leadership

We believe that we are positioned to be a leader in the EV market by unlocking the potential for advanced, high-performance, and long-range EVs to co-exist. We designed the Lucid Air and the Lucid Gravity with race-proven battery and powertrain technologies, offering robust performance together with a sleek exterior design and expansive interior space due to our miniaturized key drivetrain components. The Lucid Gravity is a groundbreaking new class of SUV, conceived from the ground up. Enabled by our revolutionary technology, the Lucid Gravity provides the interior space and practicality of a full-size SUV within the exterior footprint of a mid-size SUV. As a result, it provides a sophisticated space for up to seven adults, game-changing versatility, and an unparalleled driving experience.

The Lucid Air and the Lucid Gravity are software-defined vehicles, designed to improve over time, with OTA software updates and key hardware already in place in the vehicle. This holistic systems approach to the integration of hardware and software is what allows us to provide these continuous OTA updates.

We designed the Lucid Gravity to share components with the Lucid Air where possible, and we continue to evaluate opportunities to apply components developed for the Lucid Gravity to the Lucid Air, further expanding the number of common parts while also enhancing the customer experience in the Lucid Air. These measures enable efficiency in design, engineering, and capital expenditure deployment for the Lucid Gravity. We anticipate continued consumer demand for the Lucid Air based on its luxurious design, high-performance technology, sustainability leadership, and the growing acceptance of and demand for EVs as substitutes for gasoline-fueled vehicles. We also anticipate that these attributes will drive customer demand for the Lucid Gravity, and our future models, including our upcoming Midsize platform.

Distribution Models

We operate a direct-to-consumer sales and service model in North America, which we believe allows us to offer a personalized experience for our customers based on their purchase and ownership preferences. We expect

[Excerpt truncated for page length; source filing is linked above.]

Latest 10-K MD&A

Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high. Filing date: 2026-02-24. Report date: 2025-12-31.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis provides information that Lucid management believes is relevant to an assessment and understanding of Lucid’s consolidated results of operations and financial condition as of December 31, 2025 and for the fiscal year ended December 31, 2025. The discussion should be read together with our consolidated financial statements and related notes that are included elsewhere in this Annual Report. For discussion related to our financial condition as of December 31, 2024, results of operations for the fiscal year ended December 31, 2024 and year-to-year comparison between the years ended December 31, 2024 and 2023, refer to the Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed with the SEC on February 25, 2025. This discussion may contain forward-looking statements based upon Lucid’s current expectations, estimates and projections that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” in Part I, Item 1A of this Annual Report.

76

Unless otherwise noted, the share, per share, and related information in this Annual Report has been retrospectively adjusted to reflect the Reverse Stock Split (as defined in Note 2 “Summary of Significant Accounting Policies” to our consolidated financial statements included elsewhere in this Annual Report).

Overview

We are a technology company that is shaping the future of mobility through our innovations, advanced technology, and software-defined vehicle platforms. Our award-winning Lucid Air and Lucid Gravity set new standards with their unmatched combination of performance, range, space, and efficiency. Our focus on in-house hardware and software innovation, vertical integration, and a “clean sheet” approach to engineering and design led to the development of the award-winning Lucid Air and Lucid Gravity, and upcoming Midsize platform.

We sell vehicles directly to consumers through our retail sales network and online channels, including Lucid Financial Services. We believe that owning and operating our sales network provides the best opportunity to closely manage the customer experience, gather direct feedback, and ensure that every interaction is tailored to customer needs. We are also actively exploring alternative importer and agency models to enhance flexibility and optimize our distribution strategy in response to evolving market dynamics. We also own and operate a vehicle service network comprised of service centers in major metropolitan areas and a fleet of mobile service vehicles. In addition to our in-house capabilities, we continue to grow an approved list of specially trained collision repair shops, which in some cases serve as repair hubs for mobile service.

We designed, developed, and now manufacture and sell two groundbreaking EVs: The Lucid Air sedan, for which customer deliveries began in late 2021, and the Lucid Gravity SUV, which arrived on the road in late 2024. We plan to expand our vehicle lineup with the upcoming Midsize platform vehicles, which is scheduled to start production in late 2026.

Introducing a new vehicle is challenging and complex, particularly at our accelerated pace, and we are leveraging insights gained from our Lucid Air and Lucid Gravity production ramps while planning for our Midsize production. The highly uncertain macroeconomic environment and swift-moving trade policies further complicate these efforts. In response to this uncertainty, we are diligently working to optimize our supply chain and manufacturing plans.

Recent Developments

Workforce Reduction

In February 2026, we announced a reduction of our current U.S. workforce (the “Plan”) intended to align with our long-term operating goals as we focus on the start of production of our Midsize platform, expansion into the robotaxi market and development of ADAS technologies, as well as the sale and distribution of our current models in existing and new geographies. We expect to substantially complete the Plan by the end of the second quarter of 2026, subject to local law and consultation requirements. As a result of the Plan, we expect to incur total restructuring charges of approximately $40 million to $42 million, primarily related to severance payments, employee benefits, and employee transition. We expect the Plan to provide us with an annualized cash savings of approximately $145 million to $150 million.

2031 Notes

In November 2025, we issued $975.0 million aggregate principal amount of the 2031 Notes in a private offering. The net proceeds from the offering were $962.2 million after deducting debt issuance costs.

Repurchase of 2026 Notes

Contemporaneously with the 2031 Notes offering, we repurchased $755.7 million aggregate principal amount of the 2026 notes, using $748.2 million of the net proceeds of the 2031 Notes.

77

Potential Impact of Adverse Economic Conditions and Trade Policy Uncertainties on our Business

A global economic recession, downturn or other adverse economic conditions, whether due to changes or uncertainties in trade policies, the imposition or proposed imposition of tariffs, export controls, threat of a trade war, persistent inflation, political instability, global or regional conflicts or other geopolitical events, public health crises, interest rate increases or other central bank policy actions, bank closures and liquidity concerns at financial institutions, or other factors, may have an adverse impact on our business, prospects, financial condition and results of operations. If any of our suppliers, sub-suppliers or partners experience financial distress, insolvency or disruptions in operations, they may be unable to fulfill their obligations or meet our production and quality requirements. Adverse economic conditions and uncertainty about the current and future domestic or global economic conditions may also cause our customers to defer purchases or cancel their orders in response to higher interest rates, limited consumer credit availability, lower cash reserves, fluctuations in foreign currency exchange rates, and weakened consumer confidence. A reduction in demand for our products may result in a decline in product sales, with a corresponding material adverse impact on our business, prospects, financial condition and results of operations. Given our premium brand positioning and pricing, an economic recession or downturn is likely to have a disproportionate adverse effect on us compared to our competitors in the EV and traditional automotive sectors, to the extent that consumer demand for luxury goods declines in favor of more cost-conscious alternatives. In addition, adverse economic conditions and uncertainties surrounding trade policies, tariffs and export controls could also cause supply chain and logistical challenges and operational risks. In particular, the U.S. federal government enacted the law commonly referred to as the OBBBA, which eliminates, limits or phases out certain tax credits that had previously provided significant benefits to lessees and purchasers of EVs and adds new eligibility requirements on manufacturers to continue claiming tax credits on EV components. It also eliminates certain penalties for noncompliance with certain fuel efficiency standards and introduces certain key tax law modifications.

Taken together, adverse economic conditions and uncertainties surrounding trade policies, tariffs and export controls, coupled with supply chain challenges and the potential difficulty of passing costs to consumers or sharing the burden with suppliers, could reduce demand for our products and have a material adverse effect on our business, prospects, results of operations and financial condition. In addition, the deterioration of conditions in the financial markets may limit our ability to obtain external financing to fund our operations and capital expenditures for business growth on terms favorable to us, if at all. See “Risk Factors” in Item 1A of Part I of this Annual Report for more information regarding risks associated with a global economic downturn or recession, changes or uncertainties in trade policies, or the imposition or proposed imposition of tariffs, including under the captions “A global economic recession, downturn or other adverse economic conditions may have a material adverse impact on our business, prospects, results of operations and financial condition.” and “Changes in U.S. trade policy, including the imposition of or uncertainties surrounding tariffs or revocation of normal trade relations and the resulting consequences, could adversely affect our business, prospects, results of operations and financial condition.”

Key Factors Affecting Our Performance

We believe that our future success and financial performance depend on a number of factors that present significant opportunities for our business, but also pose risks and challenges, including those discussed below and in the section entitled “Risk Factors” in Item 1A of Part I of this Annual Report.

Design and Technology Leadership

We believe that we are positioned to be a leader in the EV market by unlocking the potential for advanced, high-performance, and long-range EVs to co-exist. We designed the Lucid Air and the Lucid Gravity with race-proven battery and powertrain technologies, offering robust performance together with a sleek exterior design and expansive interior space due to our miniaturized key drivetrain components. The Lucid Gravity is a groundbreaking new class of SUV, conceived from the ground up. Enabled by our revolutionary technology, the Lucid Gravity provides the interior space and practicality of a full-size SUV within the exterior footprint of a mid-size SUV. As a result, it provides a sophisticated space for up to seven adults, game-changing versatility, and an unparalleled driving experience.

The Lucid Air and the Lucid Gravity are software-defined vehicles, designed to improve over time, with OTA software updates and key hardware already in place in the vehicle. This holistic systems approach to the integration of hardware and software is what allows us to provide these continuous OTA updates.

We designed the Lucid Gravity to share components with the Lucid Air where possible, and we continue to evaluate opportunities to apply components developed for the Lucid Gravity to the Lucid Air, further expanding the number of common parts while also enhancing the customer experience in the Lucid Air. These measures enable efficiency in design, engineering, and capital expenditure deployment for the Lucid Gravity. We anticipate continued consumer demand for the Lucid Air based on its luxurious design, high-performance technology, sustainability leadership, and the growing acceptance of and demand for EVs as substitutes for gasoline-fueled vehicles. We also anticipate that these attributes will drive customer demand for the Lucid Gravity, and our future models, including our upcoming Midsize platform.

78

Distribution Models

We operate a direct-to-consumer sales and service model in North America, which we believe allows us to offer a personalized experience for our customers based on their purchase and ownership preferences. We expect to continue to incur significant expenses in our sales, service and marketing operations for sales of the Lucid Air, the Lucid Gravity, and any future vehicle programs, including the upcoming Midsize platform, that we may offer over the coming decade, including to open additional studios, expand our sales force, grow marketing and brand awareness, and establish a robust service center operation. As of December 31, 2025, we have opened 62 studios and service centers (excluding temporary and satellite service centers): 40 in the United States (14 in California, four in each of Florida and New York, two in each of Arizona, Illinois, Massachusetts, New Jersey, Texas, Virginia and Washington, and one in each of Colorado, Georgia, Michigan and Pennsylvania), seven in Germany, five in Canada, four in Saudi Arabia, three in Switzerland, one in Netherlands, one in Norway, and one in the United Arab Emirates. We also plan to hire additional sales, customer service, and service center personnel. We believe that investing in our direct-to-consumer sales and service model will be critical to delivering and servicing the Lucid EVs we currently manufacture and sell.

As we expand globally, our strategy includes establishing third-party distribution partnerships through proven business models such as importer, dealer, agent, and authorized repairer relationships. Introducing these channels is expected to enable rapid growth in these markets while optimizing the capital required to build a comprehensive sales and service network. All third-party partnerships are expected to be governed by robust agreements, standards, and guidelines to ensure compliance and maintain the Lucid customer experience throughout the entire journey.

Expanding and Improving Manufacturing Capacity and Processes

Achieving commercialization and growth for each generation of our EVs requires us to make significant capital expenditures to scale our production capacity and improve our supply chain processes in the United States and internationally. We expect our capital expenditures to increase as we continue constructing the CBU portion of AMP-2 and expanding AMP-1. The amount and timing of our future manufacturing capacity requirements, and resulting capital expenditures, will depend on many factors, including the pace and results of our research and development efforts to meet technological development milestones, our ability to develop and launch new EVs, our ability to achieve sales and meet customer demand at anticipated levels, our ability to utilize planned capacity in our existing facilities and our ability to enter new markets.

Technology Innovation

We develop in-house battery, powertrain, and software technology, which requires significant capital investment in research and development. The EV market is highly competitive, including both established automotive manufacturers and new entrants. To establish market position and attract customers, we plan to continue making substantial investments in research and development for the commercialization and continued enhancements of the Lucid Air and the Lucid Gravity, the development of our Midsize platform, as well as future generations of our EVs and other products.

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Results of Operations

Revenue

The following table presents our revenue for the periods presented (in thousands):

Year Ended December 31,

2025

2024

$ Change

% Change

Revenue

$

1,353,790 

$

807,832 

$

545,958 

68 

%

We recognize revenue from vehicle sales when the customer obtains control of the vehicle, which is upon delivery. We also generate revenue from non-warranty after-sales vehicle services and parts, sales of battery pack systems, powertrain kits, retail merchandise, regulatory credits, and sales of non-Lucid vehicles acquired as part of the trade-in program. We generate regulatory credits revenue from the sale of tradable credits we earn under various regulations. This includes credits related to ZEVs and GHG, and CAFE credits.

Revenue increased by $546.0 million, or 68%, for the year ended December 31, 2025, as compared to the year ended December 31, 2024. The increase was primarily driven by higher Lucid vehicle deliveries for the year ended December 31, 2025, as compared to the year ended December 31, 2024. In addition, our ramp-up of the Lucid Gravity which has a higher average selling price, resulted in a favorable product mix that further contributed to the increase in the revenue. We believe the recent proposal to lower the U.S. federal fuel economy standards and eliminate CAFE EV credit trading may create uncertainties to future regulatory credit sales. Please see “Risk Factors — Risks Related to Our Business and Operations — The unavailability, reduction or elimination of certain government and economic programs could have a material adverse effect on our business, prospects, financial condition and results of operations”.

Cost of Revenue and Gross Profit (Loss)

The following table presents our cost of revenue for the periods presented (in thousands):

Year Ended December 31,

2025

2024

$ Change

% Change

Cost of revenue

$

2,610,176 

$

1,730,943 

$

879,233 

51 

%

Gross profit (loss)

$

(1,256,386)

$

(923,111)

$

(333,275)

36 

%

Gross margin

(92.8)

%

(114.3)

%

Cost of vehicle sales includes direct parts, materials, shipping and handling costs, allocable overhead costs such as depreciation of manufacturing related equipment and facilities, information technology costs, personnel costs, including wages and stock-based compensation, estimated warranty costs, charges to reduce inventories to their net realizable value, charges for any excess or obsolete inventories, and losses from firm purchase commitments. Cost of vehicle sales also includes depreciation of operating lease vehicles. Manufacturing credits earned are recorded as a reduction to cost of vehicle sales.

Cost of other revenue includes direct parts, material and labor costs, depreciation of tooling costs, shipping and logistic costs. Cost of other revenue also includes costs associated with providing non-warranty after-sales services and costs for retail merchandise.

Cost of revenue increased by $879.2 million, or 51%, for the year ended December 31, 2025, as compared to the year ended December 31, 2024, primarily due to higher delivery volume of the Lucid vehicles and higher inventory write-downs including losses from firm purchase commitments, partially offset by improvements in vehicle cost efficiency driven by higher production volume. Cost of revenue included approximately $120 million of incremental tariff cost impact during the year ended December 31, 2025. In the near term, we expect our production volume of vehicles to continue to be less than our manufacturing capacity.

We recorded write-downs of $815.7 million and $617.4 million for the years ended December 31, 2025 and 2024, respectively, to reduce our inventories to their net realizable values, for any excess or obsolete inventories, and losses from firm purchase commitments. The increase in the write-downs was primarily due to higher inventory balance and firm purchase commitments driven by the Lucid Gravity production ramp-up and tariff impacts for the year ended December 31, 2025, as compared to the year ended December 31, 2024. While the final scope and application of recently announced changes in trade policy remain uncertain at this time, higher tariffs on imports and subsequent retaliatory tariffs could adversely impact our financial results. We expect inventory write-downs could negatively affect our costs of vehicle sales in the near term as we ramp production volumes up toward our manufacturing capacity.

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On August 16, 2022, the IRA was enacted with clean energy incentives. The impact of the IRA on our results of operations was not material for the years ended December 31, 2025 and 2024. We will continue to evaluate the expected future impact of the IRA on our business and financial statements upon issuance of additional regulatory guidance.

Gross margin improved to (92.8)% for the year ended December 31, 2025, as compared to (114.3)% for the year ended December 31, 2024, primarily driven by improvements in vehicle cost efficiency and an increase in regulatory credit sales, partially offset by higher inventory write-downs and losses from firm purchase commitments. In addition, gross margin was negatively impacted by $120 million of incremental tariff cost and approximately $70 million of additional costs associated with the Lucid Gravity production ramp-up. Our gross margin was also negatively impacted by the fact that our direct production costs for vehicles sold during the period exceeded the revenue generated from those sales, independent of the charges for inventory write-downs.

Operating Expenses

The following table presents our operating expenses for the periods presented (in thousands):

Year Ended December 31,

2025

2024

$ Change

% Change

Research and development

$

1,211,397 

$

1,176,453 

$

34,944 

3 

%

Selling, general and administrative

1,033,970 

900,952 

133,018 

15 

%

Restructuring charges

— 

20,304 

(20,304)

(100)

%

Total operating expenses

$

2,245,367 

$

2,097,709 

$

147,658 

7 

%

Research and Development

Our research and development efforts have primarily focused on the development of our battery and powertrain technology, the Lucid Air, the Lucid Gravity, and future generations of our EVs, including our Midsize platform. Research and development expenses primarily consist of materials, supplies, personnel-related expenses for employees involved in the engineering, designing, and testing of EVs, and contractor fees. Personnel-related expenses primarily include salaries, benefits and stock-based compensation. In addition, research and development expenses include prototype material, engineering, design and testing services, and allocated facilities costs, such as office and rent expense and depreciation expense.

Research and development expense increased by $34.9 million, or 3%, for the year ended December 31, 2025, as compared to the year ended December 31, 2024. The increase was primarily attributable to increases of $85.8 million in payroll related expenses and $26.4 million in utilization of contractors and professional fees primarily related to an increase in headcount to support our Midsize platform, $17.9 million in facilities and rental related costs, $11.6 million in stock-based compensation expenses, and $7.5 million in other expenses. These increases were partially offset by a decrease of $115.1 million in engineering, design and testing services, and prototype materials related mostly to the Lucid Gravity as we started production in late 2024.

Selling, General, and Administrative

Selling, general, and administrative expenses primarily consist of personnel-related expenses for employees involved in general corporate, selling and marketing functions, including executive management and administration, legal, human resources, facilities and real estate, accounting, finance, tax, and information technology. Personnel-related expenses primarily include salaries, benefits and stock-based compensation. Selling, general, and administrative expenses also include allocated facilities costs, such as office, rent and depreciation expenses, professional services fees, sales and marketing expenses and other general corporate expenses. As we continue to grow as a company, build out our sales force, and commercialize the Lucid Air and Lucid Gravity, and future generations of our EVs, including our Midsize platform, we expect an increase to our selling, general and administrative costs.

Selling, general, and administrative expense increased by $133.0 million, or 15%, for the year ended December 31, 2025, as compared to the year ended December 31, 2024. The increase was primarily attributable to increases of $52.3 million in sales and marketing expenses, $34.7 million in facilities and rental related costs, $33.1 million in payroll related expenses due to our continued commercialization and growth strategy, $11.6 million in utilization of contractors and professional fees, and $11.3 million in other general corporate expenses. These increases were partially offset by a decrease of $26.6 million in stock-based compensation expenses, primarily driven by a reversal of previously recognized expenses for the former CEO’s unvested time-based RSUs during the year ended December 31, 2025.

81

Restructuring Charges

On May 24, 2024, we announced a restructuring plan (the “2024 Restructuring Plan”) intended to optimize operating expenses in response to evolving business needs and productivity improvement through a reduction in workforce. We completed the 2024 Restructuring Plan during the first quarter of 2025. During the year ended December 31, 2024, we recorded restructuring charges of $20.3 million.

Other Income (Expense), net

The following table presents our other income (expense), net for the periods presented (in thousands):

Year Ended December 31,

2025

2024

$ Change

% Change

Other income (expense), net:

Change in fair value of common stock warrant liability

$

19,514 

$

34,150 

$

(14,636)

(43)

%

Change in fair value of equity securities of a related party

(15,785)

(43,057)

27,272 

(63)

%

Change in fair value of derivative liabilities associated with redeemable convertible preferred stock (related party)

623,225 

155,350 

467,875 

301 

%

Gain on extinguishment of debt

121,765 

— 

121,765 

*nm

Interest income

156,443 

213,026 

(56,583)

(27)

%

Interest expense

(95,101)

(32,923)

(62,178)

189 

%

Other expense, net

(8,692)

(18,469)

9,777 

(53)

%

Total other income, net

$

801,369 

$

308,077 

$

493,292 

160 

%

*nm - not meaningful

Change in Fair Value of Common Stock Warrant Liability

On February 22, 2021, Churchill entered into a definitive merger agreement with Atieva, Inc. in which Atieva, Inc. would become a wholly owned subsidiary of Churchill (the “Merger”). Upon the closing of the Merger on July 23, 2021, Churchill was immediately renamed to “Lucid Group, Inc”. Our common stock warrant liability relates to the Private Placement Warrants to purchase shares of our common stock that were effectively issued upon the closing in connection with the Merger. Our common stock warrant liability is subject to remeasurement to fair value at each reporting period.

The Private Placement Warrants remained unexercised as of December 31, 2025. The liability was remeasured to a fair value of nil and $19.5 million as of December 31, 2025 and 2024, respectively. The change in fair value resulted in unrealized gains of $19.5 million and $34.2 million for the years ended December 31, 2025 and 2024, respectively. The change in fair value was classified within change in fair value of common stock warrant liability in the consolidated statements of operations and comprehensive loss. See Note 7 “Common Stock Warrant Liability” to our consolidated financial statements included elsewhere in this Annual Report for more information.

Change in Fair Value of Equity Securities of a Related Party

On November 6, 2023, in connection with the commencement of the Strategic Technology Arrangement with Aston Martin, we received 28,352,273 ordinary shares of Aston Martin. The ordinary shares of Aston Martin are subject to remeasurement to fair value at each reporting period. Such shares were remeasured to a fair value of $24.3 million and $37.8 million as of December 31, 2025 and 2024, respectively. The change in fair value resulted in unrealized losses of $15.8 million and $43.1 million for the years ended December 31, 2025 and 2024, respectively, and was classified within change in fair value of equity securities of a related party in the consolidated statements of operations and comprehensive loss. See Note 5 “Fair Value Measurements and Financial Instruments” and Note 16 “Related Party Transactions” to our consolidated financial statements included elsewhere in this Annual Report for more information.

Change in Fair Value of Derivative Liabilities Associated with Redeemable Convertible Preferred Stock (Related Party)

In March 2024, we entered into a subscription agreement (the “Series A Subscription Agreement”) with Ayar. Pursuant to the Series A Subscription Agreement, Ayar agreed to purchase from us 100,000 shares of our Series A Redeemable Convertible Preferred Stock for an aggregate purchase price of $1.0 billion in a private placement. Subsequently, in March 2024, we issued the shares to Ayar pursuant to the Series A Subscription Agreement and received aggregate net proceeds of $997.6 million after deducting issuance costs of $2.4 million.

In August 2024, we entered into a subscription agreement (the “Series B Subscription Agreement”) with Ayar. Pursuant to the Series B Subscription Agreement, Ayar agreed to purchase from us 75,000 shares of our Series B Redeemable Convertible Preferred Stock for an aggregate purchase price of $750.0 million in a private placement. Subsequently, in August 2024, we issued the shares to Ayar pursuant to the Series B Subscription Agreement and received aggregate net proceeds of $749.4 million after deducting issuance costs of $0.6 million.

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We concluded that the conversion features, inclusive of all settlement outcomes where the pay-off is indexed to the if-converted value, meets all the requirements to be separately accounted for as a bifurcated derivative. As a result, we bifurcated the Redeemable Convertible Preferred Stock between (i) the host contracts which are accounted for within mezzanine equity, and (ii) the bifurcated derivative liabilities related to the conversion features. The bifurcated derivatives are remeasured to fair value at each reporting period with changes in fair value recorded in the consolidated statement of operations and comprehensive loss.

The derivative liabilities of the Redeemable Convertible Preferred Stock were remeasured to a fair value of $16.2 million and $639.4 million as of December 31, 2025 and 2024, respectively. We recognized gains of $623.2 million and $155.4 million for the years ended December 31, 2025 and 2024, respectively, primarily driven by decreases in our stock price, within change in fair value of derivative liabilities associated with redeemable convertible preferred stock (related party) in the consolidated statements of operations and comprehensive loss. See Note 8 “Redeemable Convertible Preferred Stock” to our consolidated financial statements included elsewhere in this Annual Report for more information.

Gain on Extinguishment of Debt

In April 2025, we repurchased $1,052.5 million aggregate principal amount of the 2026 Notes, using $931.4 million of the net proceeds of the 2030 Notes. In November 2025, we repurchased $755.7 million aggregate principal amount of the 2026 Notes, using $748.2 million of the net proceeds of the 2031 Notes. The repurchases of the 2026 Notes were accounted for as debt extinguishments. The difference between the consideration paid to repurchase a portion of the 2026 Notes and the then carrying value of the 2026 Notes resulted in a total gain of $121.8 million, and was recorded within gain on extinguishment of debt in the consolidated statement of operations and comprehensive loss during the year ended December 31, 2025. See Note 6 “Debt” to our consolidated financial statements included elsewhere in this Annual Report for more information.

Interest Income

Interest income decreased by $56.6 million, or 27%, for the year ended December 31, 2025, as compared to the year ended December 31, 2024, primarily due to lower average balances and higher average purchase price of available-for-sale securities.

Interest Expense

Interest expense primarily consists of contractual interest and amortization of debt discounts and debt issuance costs incurred related to the 2026 Notes, the 2030 Notes, and the 2031 Notes, commitment fees and amortization of deferred issuance costs from the ABL Credit Facility and the DDTL Credit Facility, interest on borrowings from the GIB credit facility and on our finance leases, and capitalized interest on construction in progress related to significant capital asset construction.

Interest expense increased by $62.2 million, or 189%, for the year ended December 31, 2025, as compared to the year ended December 31, 2024. The increase was primarily due to higher interest expense of $48.5 million from the issuances of the 2030 Notes and the 2031 Notes during the year ended December 31, 2025 and higher interest expense of $12.9 million from the GIB credit facility resulting from higher average borrowings during the year ended December 31, 2025, as compared to the year ended December 31, 2024.

Other Expense, net

Other expense, net primarily consists of foreign currency gains and losses and changes in residual value guarantee reserve. Our foreign currency exchange gains and losses relate to transactions and monetary asset and liability balances denominated in currencies other than the U.S. dollar. We expect our foreign currency gains and losses to continue to fluctuate in the future due to changes in foreign currency exchange rates.

Other expense, net decreased by $9.8 million, or (53)%, for the year ended December 31, 2025, as compared to the year ended December 31, 2024, primarily due to changes in foreign currency exchange rates.

Provision for (Benefit from) Income Taxes

The following table presents our provision for (benefit from) income taxes for the periods presented (in thousands):

Year Ended December 31,

2025

2024

$ Change

% Change

Provision for (benefit from) income taxes

$

(2,333)

$

1,199 

$

(3,532)

*nm

*nm - not meaningful

83

Our provision for (benefit from) income taxes consists primarily of U.S., state and foreign income taxes in jurisdictions in which we operate. We maintain a valuation allowance against the full value of our U.S. and state net deferred tax assets because we believe it is more likely than not that the recoverability of these deferred tax assets will not be realized.

On July 4, 2025, the OBBBA was signed into law, introducing significant changes to the U.S. federal income tax code. The OBBBA included provisions that allow for the immediate expensing of domestic research and development expenses and certain capital expenditures, as well as other changes related to the U.S. taxation of profits derived from foreign operations. We are electing to fully amortize its previously capitalized domestic research and development expenses in the current year. Due to the full valuation allowance on our U.S. deferred tax assets, the net tax impact of the legislation is immaterial. See Note 13 “Income Taxes” to our consolidated financial statements included elsewhere in this Annual Report for more information.

Liquidity and Capital Resources

Sources of Liquidity

As of December 31, 2025, we had $2.14 billion of cash, cash equivalents and investments. We also had $1.98 billion, $396.8 million, and $38.3 million of unused available credit amounts from the DDTL Credit Facility, the ABL Credit Facility, and the 2025 GIB Credit Facility, respectively, as of December 31, 2025. Our existing sources of liquidity include cash, cash equivalents, investments, and credit facilities. We funded operations primarily with issuances of common stock, convertible preferred stock, convertible notes, and loans.

We expect that our current sources of liquidity together with our projection of cash flows from operating activities will provide us with adequate liquidity for at least the next 12 months, including investment in funding (i) ongoing operations, (ii) research and development projects for new products/ technologies, (iii) further construction of AMP-1 in Casa Grande, Arizona, (iv) construction of the CBU portion of AMP-2 in Saudi Arabia, (v) vendor tooling, (vi) expansion of retail studios and service centers, and (vii) other initiatives related to the sale of vehicles or technology.

We anticipate our cumulative spending on capital expenditures to be in a range of approximately $1.2 billion to $1.4 billion for the fiscal year 2026 to support our continued commercialization and growth objectives as we strategically invest in manufacturing capacity and capabilities, our retail studios and service center capabilities throughout North America and across the globe, development of different products and technologies, and other areas supporting the growth of Lucid’s business. We expect to continue to receive financing and support for certain capital expenditures in connection with AMP-2 construction and purchases of machinery, tooling, and equipment. Refer to Note 6 “Debt” and Note 16 “Related Party Transactions” to the consolidated financial statements included elsewhere in this Annual Report for more information. Our future capital expenditures may vary and will depend on many factors including the timing and extent of spending and other growth initiatives. In addition, we expect our operating expenses to increase in order to grow and support the operations of a global technology automotive company targeting volumes in line with Lucid’s aspirations.

As of December 31, 2025, our total minimum lease payments are $706.5 million, of which $187.9 million is due in fiscal year 2026. We also have non-cancellable long-term commitments of approximately $2.63 billion, primarily relating to certain inventory component purchases. For details regarding these obligations, refer to Note 11 “Leases” and Note 12 “Commitments and Contingencies” to the consolidated financial statements included elsewhere in this Annual Report for more information.

2026 Notes

In December 2021, we issued $2,012.5 million of the 2026 Notes. The 2026 Notes accrue interest at a rate of 1.25% per annum, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on June 15, 2022. The 2026 Notes will mature on December 15, 2026, unless earlier repurchased, redeemed or converted. Before the close of business on the business day immediately before September 15, 2026, noteholders will have the right to convert their 2026 Notes only upon the occurrence of certain events. From and after September 15, 2026, noteholders may elect at any time to convert their 2026 Notes until the close of business on the second scheduled trading day immediately before the maturity date. We will settle conversions by paying or delivering, as applicable, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election. The initial conversion rate is 1.8255 shares of common stock per $1,000 principal amount of the 2026 Notes, which represents an initial conversion price of approximately $547.80 per share of common stock. The conversion rate and conversion price will be subject to customary adjustments upon the occurrence of certain events, including a reverse stock split. In addition, if certain corporate events that constitute a make-whole fundamental change (as defined in the indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time. As of December 31, 2025 and 2024, we were in compliance with applicable covenants under the indenture governing the 2026 Notes.

In April 2025, contemporaneously with the 2030 Notes offering, we repurchased $1,052.5 million aggregate principal amount of the 2026 Notes, using $931.4 million of the net proceeds of the 2030 Notes. In November 2025, we repurchased $755.7 million aggregate principal amount of the 2026 Notes, using $748.2 million of the net proceeds of the 2031 Notes. Following the redemption, our outstanding principal balance of the 2026 Notes was $204.3 million.

84

2030 Notes and Capped Call Transactions

2030 Notes

In April 2025, we issued $1,100.0 million of the 2030 Notes. Contemporaneously with the 2030 Notes offering, we entered into privately negotiated transactions with certain holders of the 2026 Notes to repurchase $1,052.5 million aggregate principal amount of the 2026 Notes, using $931.4 million of the net proceeds of the 2030 Notes. The 2030 Notes accrue interest at a rate of 5.00% per annum, payable semi-annually in arrears on April 1 and October 1 of each year, beginning on October 1, 2025. The 2030 Notes will mature on April 1, 2030, unless earlier repurchased, redeemed or converted. Before the close of business on the business day immediately before January 1, 2030, noteholders will have the right to convert their 2030 Notes only upon the occurrence of certain events. From and after January 1, 2030, noteholders may elect at any time to convert their 2030 Notes until the close of business on the second scheduled trading day immediately before the maturity date. We will settle conversions by paying or delivering, as applicable, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election. The initial conversion rate is 33.3333 shares of common stock per $1,000 principal amount of the 2030 Notes, which represents an initial conversion price of approximately $30.00 per share of common stock. The conversion rate and conversion price will be subject to customary adjustments upon the occurrence of certain events, including a reverse stock split. In addition, if certain corporate events that constitute a make-whole fundamental change (as defined in the indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time. As of December 31, 2025, we were in compliance with applicable covenants under the indenture governing the 2030 Notes.

Capped Call Transactions

In connection with the 2030 Notes offering, we paid $118.3 million to enter into privately negotiated capped call transactions (the “Capped Call Transactions”) with certain financial institutions. The Capped Call Transactions cover, subject to anti-dilution adjustments, the number of shares of our common stock initially underlying the 2030 Notes. The Capped Call Transactions have an expiration date of April 1, 2030.

We expect the Capped Call Transactions generally would reduce the potential dilution to our common stock upon conversion of the notes or offset any cash payments that we could be required to make in excess of the principal amount of any converted notes, as the case may be, in the event that the market price per share of our common stock, as measured under the terms of the Capped Call Transactions, is greater than the strike price of the Capped Call Transactions. The initial strike price of the Capped Call Transactions corresponds to the initial conversion price of the 2030 Notes, or approximately $30.00 per share of our common stock. The initial cap price of the Capped Call Transactions was $48.00 per share of our common stock and is subject to customary anti-dilution adjustments.

2031 Notes

In November 2025, we issued $975.0 million of the 2031 Notes. Contemporaneously with the 2031 Notes offering, we entered into privately negotiated transactions with certain holders of the 2026 Notes to repurchase $755.7 million aggregate principal amount of the 2026 Notes, using $748.2 million of the net proceeds of the 2031 Notes. The 2031 Notes accrue interest at a rate of 7.00% per annum, payable semi-annually in arrears on May 1 and November 1 of each year, beginning on May 1, 2026. The 2031 Notes will mature on November 1, 2031, unless earlier repurchased, redeemed or converted. The holders may require us to repurchase the 2031 Notes on November 1, 2029. Before the close of business on the business day immediately before August 1, 2031, noteholders will have the right to convert their 2031 Notes only upon the occurrence of certain events. From and after August 1, 2031, noteholders may elect at any time to convert their 2031 Notes until the close of business on the second scheduled trading day immediately before the maturity date. We will settle conversions by paying or delivering, as applicable, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election. The initial conversion rate is 48.0475 shares of common stock per $1,000 principal amount of the 2031 Notes, which represents an initial conversion price of approximately $20.81 per share of common stock. The conversion rate and conversion price will be subject to customary adjustments upon the occurrence of certain events, including a reverse stock split. In addition, if certain corporate events that constitute a make-whole fundamental change (as defined in the indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time. As of December 31, 2025, we were in compliance with applicable covenants under the indenture governing the 2031 Notes.

International Manufacturing Expansion

On February 27, 2022, we announced the selection of KAEC in Saudi Arabia as the location of our first international manufacturing plant and signed related agreements with the Ministry of Investment of Saudi Arabia (“MISA”), the SIDF, and the Economic City at KAEC. We started the AMP-2 operations with re-assembly of the Lucid Air vehicle “kits” pre-manufactured in the U.S. and, over time, will commence production of complete vehicles.

85

SIDF Loan Agreement

On February 27, 2022, Lucid LLC, a limited liability company established in Saudi Arabia and our subsidiary (“Lucid LLC”) entered into the SIDF Loan Agreement. Under the SIDF Loan Agreement, SIDF has committed to provide loans (the “SIDF Loans”) to Lucid LLC in an aggregate principal amount of up to SAR 5.19 billion (approximately $1.4 billion); provided that SIDF may reduce the availability of SIDF Loans under the facility in certain circumstances. SIDF Loans will be subject to repayment in semi-annual installments in amounts ranging from SAR 25 million (approximately $6.7 million) to SAR 350 million (approximately $93.3 million), commencing on April 3, 2026 and ending on November 12, 2038. SIDF Loans are financing and will be used to finance certain costs in connection with the development and construction of AMP-2. Lucid LLC may repay SIDF Loans earlier than the maturity date without penalty. Obligations under the SIDF Loan Agreement do not extend to us or any of our other subsidiaries.

SIDF Loans will not bear interest. Instead, Lucid LLC will be required to pay SIDF service fees, consisting of follow-up and technical evaluation fees, ranging, in aggregate, from SAR 415 million (approximately $110.7 million) to SAR 1.77 billion (approximately $472.0 million), over the term of the SIDF Loans. SIDF Loans will be secured by security interests in the equipment, machines and assets funded thereby.

The SIDF Loan Agreement contains certain restrictive financial covenants and imposes annual caps on Lucid LLC’s payment of dividends, distributions of paid-in capital, or certain capital expenditures. The SIDF Loan Agreement also defines customary events of default, including abandonment of or failure to commence operations at the plant in KAEC, and drawdowns under the SIDF Loan Agreement are subject to certain conditions precedent. As of December 31, 2025 and 2024, no amount was outstanding under the SIDF Loan Agreement.

MISA Agreements

In February 2022, Lucid LLC entered into agreements with MISA, a related party of the PIF, which is an affiliate of Ayar, pursuant to which MISA has agreed to provide economic support for certain capital expenditures in connection with Lucid LLC’s on-going design and construction of AMP-2. The support by MISA is subject to Lucid LLC’s completion of certain milestones related to the construction and operation of AMP-2. Following the commencement of construction, if operations at the plant do not commence within 30 months, or if the agreed scope of operations is not attained within 55 months, MISA may suspend availability of subsequent support.

Pursuant to the agreements, MISA has the right to require Lucid LLC to transfer the ownership of AMP-2 to MISA, at the fair market value thereof, reduced by an amortized value of the support provided in the event of customary events of default including abandonment or material and chronically low utilization of AMP-2. Alternatively, Lucid LLC is entitled to avoid the transfer of the ownership of AMP-2 by electing to pay such amortized value. The agreements will terminate on the fifteenth anniversary of the commencement of CBU operations at AMP-2 at the latest.

During the year ended December 31, 2023, we received support of SAR 366 million (approximately $97.5 million) in cash, of which $62.5 million was recorded as deferred liability within other long-term liabilities and $35.0 million was recorded as a deduction in calculating the carrying amount of the related assets in the consolidated balance sheet as of December 31, 2023. As of December 31, 2024, we recorded $97.5 million as a deduction in calculating the carrying amount of the related assets in the consolidated balance sheet. During the year ended December 31, 2025, there were no further deductions to the carrying value of the related assets in the consolidated balance sheet. There were no unfulfilled conditions and contingencies attached to the payments received.

GIB Facility Agreement

On April 29, 2022, Lucid LLC entered into a revolving credit facility agreement (the “GIB Facility Agreement”) with GIB, maturing on February 28, 2025. GIB is a related party of the PIF, which is an affiliate of Ayar. The GIB Facility Agreement provided for two committed revolving credit facilities in an aggregate principal amount of SAR 1.0 billion (approximately $266.1 million). On March 12, 2023, Lucid LLC entered into an amendment of the GIB Facility Agreement (together with the GIB Facility Agreement, the “2023 Amended GIB Facility Agreement”) to combine the two committed revolving credit facilities into a committed SAR 1.0 billion (approximately $266.1 million) revolving credit facility (the “2023 GIB Credit Facility”) which may be used for general corporate purposes. Loans under the 2023 Amended GIB Facility Agreement had a maturity of no more than 12 months and bore interest at a rate of 1.40% per annum over SAIBOR (based on the term of borrowing) and associated fees. Under the 2023 Amended GIB Facility Agreement, we were required to pay a quarterly commitment fee of 0.15% per annum based on the unutilized portion of the 2023 GIB Credit Facility.

On February 24, 2025, Lucid LLC entered into the 2025 GIB Credit Facility maturing on February 24, 2028 to increase the credit facility committed amount from SAR 1.0 billion (approximately $266.1 million) to SAR 1.9 billion (approximately $506.6 million). Loans under the 2025 GIB Credit Facility may be used for general corporate purposes, have a maturity of no more than 12 months, and bear interest at a rate of 1.40% per annum over SAIBOR (based on the term of borrowing) and associated fees. We are required to pay a quarterly commitment fee of 0.25% per annum based on the unutilized portion of the 2025 GIB Credit Facility. Commitments under the 2025 GIB Credit Facility will terminate, and all amounts then outstanding thereunder would become payable, on the maturity date of the 2025 GIB Credit Facility.

86

The 2025 GIB Credit Facility contains certain conditions precedent to drawdowns, representations and warranties and covenants of Lucid LLC and events of default.

As of December 31, 2025 and 2024, we had outstanding borrowings of SAR 1,755.0 million (approximately $468.0 million) and SAR 475.0 million (approximately $126.4 million), respectively. The weighted average interest rate on the outstanding borrowings was 6.44% and 7.04% as of December 31, 2025 and 2024, respectively. As of December 31, 2025 and 2024, availability under the GIB credit facility was SAR 143.5 million (approximately $38.3 million) and SAR 523.2 million (approximately $139.2 million), respectively, after giving effect to the outstanding letters of credit. As of December 31, 2025 and 2024, we were in compliance with applicable covenants under the GIB credit facility.

ABL Credit Facility

In June 2022, we entered into the ABL Credit Facility with a syndicate of banks that may be used for working capital and general corporate purposes. The ABL Credit Facility provides for an initial aggregate principal commitment amount of up to $1.0 billion (including a $350.0 million letter of credit subfacility and a $100.0 million swingline loan subfacility) and has a stated maturity date of June 9, 2027. Borrowings under the ABL Credit Facility bear interest at the applicable interest rates specified in the credit agreement governing the ABL Credit Facility. In June 2024, we amended the ABL Credit Facility to update the Canadian reference rate. Availability under the ABL Credit Facility is subject to the value of eligible assets in the borrowing base and is reduced by outstanding loan borrowings and issuances of letters of credit which bear customary letter of credit fees. Subject to certain terms and conditions, we may request one or more increases in the amount of credit commitments under the ABL Credit Facility in an aggregate amount up to the sum of $500.0 million plus certain other amounts. We are required to pay a quarterly commitment fee of 0.25% per annum based on the unutilized portion of the ABL Credit Facility.

The ABL Credit Facility contains customary covenants that limit our ability and our restricted subsidiaries to, among other activities, pay dividends, incur debt, create liens and encumbrances, redeem or repurchase stock, dispose of certain assets, consummate acquisitions or other investments, prepay certain debt, engage in transactions with affiliates, engage in sale and leaseback transactions or consummate mergers and other fundamental changes. The ABL Credit Facility also includes a minimum liquidity covenant which, at our option following satisfaction of certain pre-conditions, may be replaced with a springing, minimum fixed charge coverage ratio financial covenant, in each case on terms set forth in the credit agreement governing the ABL Credit Facility. As of December 31, 2025 and 2024, we were in compliance with applicable covenants under the ABL Credit Facility.

As of December 31, 2025 and 2024, we had no outstanding borrowings under the ABL Credit Facility. Outstanding letters of credit under the ABL Credit Facility were $104.1 million and $56.9 million as of December 31, 2025 and 2024, respectively. Availability under the ABL Credit Facility was $596.0 million (including $199.2 million cash and cash equivalents) and $354.9 million (including $191.1 million cash and cash equivalents) as of December 31, 2025 and 2024, respectively, after giving effect to the borrowing base and the outstanding letters of credit.

DDTL Credit Facility

In August 2024, we entered into the DDTL Credit Facility with Ayar that may be used for working capital and general corporate purposes. The DDTL Credit Facility provides for a delayed draw term loan credit facility in an aggregate principal amount of $750.0 million and has a stated maturity date of August 4, 2029. Borrowings under the DDTL Credit Facility bear interest at the applicable interest rates specified in the credit agreement governing the DDTL Credit Facility.

In November 2025, we increased the aggregate principal amount of the DDTL Credit Facility from $750.0 million to $1.98 billion. We are required to pay a quarterly undrawn fee of 0.50% per annum based on the unutilized portion of the DDTL Credit Facility.

The DDTL Credit Facility contains customary covenants that limit our ability and our restricted subsidiaries to, among other activities, pay dividends, incur debt, create liens and encumbrances, redeem or repurchase stock, dispose of certain assets, consummate acquisitions or other investments, prepay certain debt, engage in sale and leaseback transactions or consummate mergers and other fundamental changes. The DDTL Credit Facility also includes a minimum liquidity covenant. As of December 31, 2025 and 2024, we were in compliance with applicable covenants, and had no outstanding borrowings under the DDTL Credit Facility.

Subscription Agreements and Underwriting Agreements

In June 2023, we completed the public offering pursuant to an underwriting agreement (the “2023 Underwriting Agreement”) for aggregate net proceeds of $1.2 billion and also consummated a private placement of shares to Ayar pursuant to a subscription agreement (the “2023 Subscription Agreement”) for aggregate net proceeds of $1.8 billion after deducting issuance costs. See Note 9 “Stockholders’ Equity” to the consolidated financial statements included elsewhere in this Annual Report, for more information.

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In March 2024, we issued 100,000 shares of our Series A Redeemable Convertible Preferred Stock to Ayar pursuant to the Series A Subscription Agreement and received aggregate net proceeds of $997.6 million after deducting issuance costs. In August 2024, we also issued 75,000 shares of our Series B Redeemable Convertible Preferred Stock to Ayar pursuant to the Series B Subscription Agreement and received aggregate net proceeds of $749.4 million after deducting issuance costs. See Note 8 “Redeemable Convertible Preferred Stock” to the consolidated financial statements included elsewhere in this Annual Report, for more information.

In October 2024, we completed the public offering pursuant to an underwriting agreement (the “2024 Underwriting Agreement”) and received net proceeds of $718.4 million and also consummated the private placement of shares to Ayar pursuant to a subscription agreement (the “2024 Subscription Agreement”) for net proceeds of $1,025.7 million after deducting issuance costs. See Note 9 “Stockholders’ Equity” and Note 16 “Related Party Transactions” to the consolidated financial statements included elsewhere in this Annual Report, for more information.

In September 2025, we consummated the private placement of shares to SMB pursuant to the 2025 Subscription Agreement for aggregate net proceeds of $299.7 million after deducting issuance costs. See Note 9 “Stockholders’ Equity” to the consolidated financial statements included elsewhere in this Annual Report, for more information.

We have generated significant losses from our operations as reflected in our accumulated deficit of $15.6 billion and $12.9 billion as of December 31, 2025 and 2024, respectively. Additionally, we have generated significant negative cash flows from operations and investing activities as we continue to support the growth of our business.

The expenditures associated with the development and commercial launch of our vehicles, the anticipated increase in manufacturing capacity, and the international expansion of our business operations are subject to significant risks and uncertainties, many of which are beyond our control, and therefore, may affect the timing and magnitude of these anticipated expenditures. These risk and uncertainties are described in more detail in the section entitled “Risk Factors” in Item 1A of Part I of this Annual Report.

Cash Flows

The following table summarizes our cash flows for the periods presented (in thousands):

Year Ended December 31,

2025

2024

Cash used in operating activities

$

(2,931,912)

$

(2,019,674)

Cash provided by (used in) investing activities

1,478,429 

(1,294,454)

Cash provided by financing activities

887,344 

3,549,673 

Net increase (decrease) in cash, cash equivalents, and restricted cash

$

(566,139)

$

235,545 

Cash Used in Operating Activities

Our cash flows used in operating activities to date have been primarily comprised of cash outlays to support overall growth of the business, especially the costs related to inventory and sale of our vehicles, costs related to research and development, payroll and other general and administrative activities. As we continue to ramp up after starting commercial operations, we expect our cash used in operating activities to increase before it starts to generate any material cash flows from our business.

Net cash used in operating activities increased by $912.2 million to $2,931.9 million during the year ended December 31, 2025, as compared to the year ended December 31, 2024. The increase was primarily due to increases in net operating assets and liabilities of $762.1 million and net loss excluding non-cash expenses and gains of $150.1 million during the year ended December 31, 2025, as compared to the year ended December 31, 2024. The increase in net operating assets and liabilities was primarily attributable to higher inventory purchases driven by the Lucid Gravity production ramp-up.

Cash Provided by (Used in) Investing Activities

Our cash flows provided by (used in) investing activities primarily relate to proceeds from maturities of investments, net of purchases of investments and capital expenditures to support our growth.

Net cash provided by investing activities was $1,478.4 million during year ended December 31, 2025, compared to $1,294.5 million of net cash used in investing activities in the prior year. The change was primarily attributable to higher volume of investment maturities compared to investment purchases during the year ended December 31, 2025, as compared to the year ended December 31, 2024.

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Cash Provided by Financing Activities

We have financed our operations primarily from the issuances of equity and equity-linked securities and debt financings, the private placements to Ayar and SMB, convertible preferred stock, the proceeds of the Merger, the 2026 Notes, the 2030 Notes, and the 2031 Notes.

Net cash provided by financing activities decreased by $2,662.3 million to $887.3 million during the year ended December 31, 2025, as compared to the year ended December 31, 2024. We received net proceeds of $1,081.9 million from the issuance of the 2030 Notes, $962.2 million from the issuance of the 2031 Notes, $299.7 million from the 2025 Subscription Agreement, and repurchased a portion of the 2026 Notes using $1,679.6 million during the year ended December 31, 2025.

We also received net proceeds of $1,744.0 million from the issuance of common stock under the 2024 Subscription Agreement and Underwriting Agreement, $997.6 million from the issuance of Series A Redeemable Convertible Preferred Stock, and $749.4 million from the issuance of Series B Redeemable Convertible Preferred Stock during the year ended December 31, 2024.

Recently Issued Accounting Pronouncements Not Yet Adopted

In March 2024, the SEC issued its final rule that requires certain climate-related disclosures in annual reports, including governance, oversight, and risk management processes on material climate-related risks; material impact of climate risks on our strategy, business model, and outlook; material climate targets and goals; and material financial statements impacts due to severe weather events and other natural conditions. In April 2024, the SEC stayed implementation of the final rule pending completion of judicial review. In March 2025, the SEC stated that it has ended its defense of the rule. We continue to monitor the status of these rules.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires disclosure of specified information about certain costs and expenses (such as purchases of inventory, employee compensation, depreciation, and amortization) within the relevant expense captions presented on the face of the statements of operations and comprehensive loss. The guidance is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted, and should be applied either prospectively or retrospectively. We are evaluating the impact of this amendment to the related financial statement disclosures.

In September 2025, the FASB issued ASU 2025-06, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The ASU removed references to prescriptive and sequential software development stages. The ASU requires us to start capitalizing eligible software costs when management has authorized and committed to funding the software project, and it is probable that the project will be completed and the software will be used to perform the function intended. The ASU does not change the types of costs eligible for capitalization. The guidance is effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. Early adoption is permitted and may be applied using a prospective, retrospective or modified transition approach. We are evaluating the impact of this amendment to the financial statements.

In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities. The ASU requires us to recognize a government grant when it is probable that we will comply with the conditions attached to the grant and the grant will be received, and we meet the recognition guidance for a grant related to an asset or a grant related to income. The ASU requires a grant related to an asset to be recognized as we incur the related costs for which the grant is intended to compensate, either as deferred income or as an adjustment to the cost basis in determining the carrying amount of the asset. The ASU also requires a grant related to income and a grant related to an asset for which the deferred income approach is elected to be recognized in earnings on a systematic and rational basis. When we elect the cost accumulation approach for a grant related to an asset, there is no separate subsequent recognition of the government grant proceeds in earnings. We are required to continue providing disclosures on the nature of the government grant received, the accounting policies used to account for the grant, and significant terms and conditions of the grant. The guidance is effective for annual reporting periods beginning after December 15, 2028, and interim reporting periods within those annual reporting periods. Early adoption is permitted, and may be applied using a modified prospective, modified retrospective or retrospective approach. We are evaluating the impact of this amendment to the financial statements.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. The ASU provides clarity on the current interim reporting disclosures and introduces a disclosure principle which requires us to disclose events since the end of the last annual reporting period that have a material impact on us. The guidance is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted and may be applied using a prospective or retrospective approach. We are evaluating the impact of this amendment to the financial statements.

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In December 2025, the FASB issued ASU 2025-12, Codification Improvements. The ASU represents changes to the Codification that clarify, correct errors, or make minor improvements. The guidance is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. Early adoption is permitted and we may elect the transition method on an issue-by-issue basis. We are evaluating the impact of this amendment to the financial statements.

We have considered all other recently issued accounting pronouncements and do not believe the adoption of such pronouncements will have a material impact on our financial statements or notes thereto.

Recently Adopted Accounting Pronouncements

See Note 2 “Summary of Significant Accounting Policies” to our consolidated financial statements included elsewhere in this Annual Report for more information.

Critical Accounting Estimates

The consolidated financial statements and the related notes thereto included elsewhere in this Annual Report are prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts and related disclosures in our financial statements and accompanying notes. We base our estimates on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions due to the inherent uncertainty involved in making those estimates and any such differences may be material.

We believe that the following accounting policies involve a high degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of our operations. For more information about our accounting policies, see Note 2 “Summary of Significant Accounting Policies” to the consolidated financial statements included elsewhere in this Annual Report.

Revenue Recognition

We follow a five-step process in which we identify the contract, identify the related performance obligations, determine the transaction price, allocate the transaction price to the identified performance obligations, and recognize revenue when (or as) the performance obligations are satisfied.

Vehicle Sales

Vehicle sales revenue is generated from the sale of EVs to customers. The performance obligations identified in vehicle sale arrangements include delivery of the vehicle equipped with an onboard ADAS, the provision of maintenance services, the remarketing activities, and the right to unspecified OTA software updates as they become available over the term of the basic vehicle warranty, which is generally four years. Shipping and handling provided by us is considered a fulfillment activity.

Payment is typically received at the time of delivery or shortly after delivery of the vehicle to the customer, except for vehicle sales under the EV Purchase Agreement. Generally, control transfers to the customer at the time of delivery when the customer takes physical possession of the vehicle, which may be at a Lucid studio or other destination chosen by the customer. Our vehicle contracts do not contain a significant financing component. We have elected to exclude sales taxes from the measurement of the transaction price. We estimate the standalone selling price of all performance obligations by considering costs used to develop and deliver the good or service, third-party pricing of similar goods or services and other information that may be available. The transaction price is allocated among the performance obligations in proportion to the standalone selling price of our performance obligations.

We recognize revenue related to the vehicle when the customer obtains control of the vehicle which occurs at a point in time either upon completion of delivery to the agreed upon delivery location or upon pick up of the vehicle by the customer. As the unspecified OTA software updates are provided when-and-if they become available, revenue related to OTA software updates is recognized ratably over the basic vehicle warranty term, commencing when control of the vehicle is transferred to the customer. Payments received before the customer obtains control of the vehicle are recorded within other current liabilities in the consolidated balance sheets.

At the time of revenue recognition, we reduce the transaction price and record a sales return reserve against revenue for estimated variable consideration related to future returns. Such return rate estimates are based on historical experience.

We provide a manufacturer’s warranty on all vehicles sold. The warranty covers the rectification of reported defects via repair, replacement, or adjustment of faulty parts or components. The warranty does not cover any item where failure is due to normal wear and tear. This assurance-

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type warranty does not create a performance obligation separate from the vehicle. The estimated cost of the assurance-type warranty is accrued at the time of vehicle sale.

We provide a residual value guarantee (“RVG”) to our commercial banking partners in connection with their vehicle leasing programs. Under the vehicle leasing program, we do not bear casualty and credit risks during the lease term, and are contractually obligated (or entitled) to share a portion of the shortfall (or excess) between the resale value realized by the commercial banking partners and a predetermined resale value. At the lease inception, we are required to deposit cash collateral equal to a contractual percentage of the residual value of the leased vehicles with the commercial banking partners. The cash collateral is held in a restricted bank account owned by the commercial banking partner until it is used, as applicable, in settlement of the RVG at the end of the lease term. Cash collateral is recorded in other noncurrent assets, subject to an asset impairment review at each reporting period.

We account for the vehicle leasing program in accordance with ASC 842, Leases, ASC 460, Guarantees and ASC 606, Revenue from Contracts with Customers. We are the lessor at inception of a lease and immediately transfer the lease as well as the underlying vehicle to our commercial banking partners, with the transaction being accounted for as a sale under ASC 606. We recognize revenue when control transfers upon delivery when the consumer-lessee takes physical possession of the vehicle, and bifurcate the RVG at fair value and account for it as a reduction to revenue and a guarantee liability. The remaining amount of the transaction price is allocated among the performance obligations. Any fees or incentives that are paid or payable by us to commercial banking partners are recognized as a reduction to vehicle sales revenue.

The guarantee liability represents the estimated amount we expect to pay at the end of the lease term. We are released from residual risk upon either expiration or settlement of the RVG. We evaluate variables such as third-party residual value publications, risk of future price deterioration due to changes in market conditions and reconditioning costs to determine the estimated residual value guarantee liability. RVG liability is assessed subsequently for any changes on a quarterly basis. As we accumulate more data related to the resale value of our vehicles or as market conditions change, there could be material changes to the estimated guarantee liabilities. The maximum potential amount of future payments (in excess of RVG liabilities recorded) that we could be required to make was $705.9 million and $401.1 million as of December 31, 2025 and 2024, respectively.

Vehicle Operating Lease Revenue

We account for sales of vehicles with repurchase obligations as operating leases. We sell vehicles primarily to rental companies with an obligation to repurchase the vehicles at an agreed upon repurchase price. We record the difference between the proceeds received and the agreed upon repurchase price as vehicle leasing revenue on a straight-line basis over the term of the lease. Deferred leasing revenue and repurchase obligation were recorded in other current liabilities and other long-term liabilities in the consolidated balance sheets.

Sale and Leaseback Transactions

We enter into sale and leaseback transactions in which we transfer control of vehicles to rental companies and simultaneously lease them back as operating leases. We recognize revenue related to the vehicles under the arrangement when the rental companies obtain control of the vehicles and separately recognizes the leaseback obligations based on the present value of the future payments to the rental companies within other current liabilities and other long-term liabilities. We also record right-of-use assets which are amortized over the term of the leaseback. Operating lease expense is recognized on a straight-line basis over the term of the leaseback.

Inventory Valuation

Inventories are stated at the lower of cost or net realizable value. Cost is computed using standard cost for vehicles, which approximates actual cost on a first-in, first-out basis. We record inventory write-downs for excess or obsolete inventories based upon assumptions about current and future demand forecasts. If inventory on-hand is in excess of future demand forecast and market conditions, the excess amounts are written-off.

Inventory is also reviewed to determine whether its carrying value exceeds the net amount realizable upon the ultimate sale of the inventory. This requires an assessment to determine the selling price of the vehicles less the estimated cost to convert the inventory on-hand into a finished product. Once inventory is written down, a new lower cost basis for that inventory is established and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis.

In the event there are changes in our estimates of future selling prices or production costs, we might be required to record additional and potentially material write-downs. A small change in our estimates may result in a material change in our reported financial results.

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We periodically review and record write-downs for excess or obsolete inventories based upon assumptions about current and future demand forecasts, considering shelf-life and technological obsolescence of certain inventories. Our current and future demand forecasts are based on our historical sales, market share performance, macroeconomic factors and trends in quantities or prices of orders for our products. We evaluate whether raw materials are approaching the end of their shelf-lives or becoming technologically obsolete, and the likelihood that we will be able to use the raw materials in production. If our inventory on-hand is in excess of future demand forecast and market conditions, the excess amounts are provisioned or written-down.

Redeemable Convertible Preferred Stock

Accounting for the redeemable convertible preferred stock requires an evaluation to determine if liability classification is required under ASC 480-10. Liability classification is required for freestanding financial instruments that are (1) subject to an unconditional obligation requiring the issuer to redeem the instrument by transferring assets, such as those that are mandatorily redeemable, (2) instruments other than equity shares that embody an obligation of the issuer to repurchase its equity shares, or (3) certain types of instruments that obligate the issuer to issue a variable number of equity shares.

Securities that do not meet the scoping criteria to be classified as a liability under ASC 480 are subject to redeemable equity guidance, which prescribes securities that may be subject to redemption upon an event not solely within the control of the issuer to be classified as temporary equity. Securities classified in temporary equity are initially measured at the proceeds received, net of issuance costs and excluding the fair value of bifurcated embedded derivatives, if any. Subsequent measurement of the carrying value of the redeemable convertible preferred stock is required as the instrument is probable of becoming redeemable. We accrete the redeemable convertible preferred stock to its redemption value. In certain circumstances, the redemption price may vary based on changes in stock price, in which case we will recognize changes in the redemption value immediately as they occur and adjust the carrying value of the security to equal the then current maximum redemption value at the end of each reporting period.

Derivative Liabilities

In connection with the issuance of the redeemable convertible preferred stock, we evaluated the instruments for any features that must be bifurcated and separately accounted for as embedded derivatives. We concluded that the conversion features, inclusive of all settlement outcomes where the pay-off is indexed to the if-converted value, meets all the requirements to be separately accounted for as a bifurcated derivative. As a result, we bifurcated the redeemable convertible preferred stock between (i) the host contracts which are accounted for within mezzanine equity, and (ii) the bifurcated derivative liabilities. The proceeds from issuance are first allocated to the fair value of the bifurcated derivatives with the residual being allocated to the host contracts. The bifurcated derivatives are remeasured to fair value each reporting period with changes in fair value recorded in earnings. We estimated the fair value of the derivative liabilities using a binomial lattice model. Inherent in a binomial lattice model are unobservable inputs and assumptions. The inputs for the valuation of the derivative liabilities included the volatility, credit spread, and term. Assumptions used in the valuation also consider the contractual terms as well as the quoted price of our common stock in an active market. Significant changes in any of those inputs in isolation would result in significant changes to the fair value measurement. We remeasure the derivative liabilities at each reporting period and recognize the changes in fair value in the consolidated statement of operations and comprehensive loss.