Accountants: How did my Lightning cost $200,000 to build?

[MrLoganRoss]

No new car company that sells very very expensive cars and nothing else will survive. The bottom line is that there are a limited number of people who can afford those cars, and that pool of potential buyers must be shared among a gazillion car companies wanting their business.

Rivian would be on its way to the grave if they didn’t have lower cost models coming out.

Tesla lived off of subsidies until its lower cost cars could let them scale up.

Companies like GM, Porsche/Audi/VW leverage platforms shared with cheaper cars.

Lucid is in Trouble
This thread is prompted, in part by the discouraging news that Lucid is not doing well, with their profit margin being -97% Apparently that is slightly better than Ford's, in the way that Ford accounts for the lightning. The EPA range on the Lucid is 5 miles per kWh. That it incredibly efficient. and the vehicles are by all accounts extremely nice to drive and well built. They are plenty expensive. How can they be losing that much money per vehicle unless their accounting write off on development costs is far too short to be realistic?

Isn't Lucid kind of everything that is good about America? New company builds fabulous car that can out compete (on a performance and features basis) the vehicles made by huge corporations. Did they just make mistakes in scaling the business, planning for far more sales that they are achieving?

Did Ford do the same, perhaps naively thinking the 200,000 refundable reservations meant that they would sell 200,000 Lightnings right off the bat? If those reservations were $10,000 and non refundable they could have seen a clearer picture, I would think. I was very interested in the Lightning, and having worked with Ford a little over the years, had some confidence that they , would deliver the Lightning. (And having built an EV, nothing they were doing seemed even remotely risky.) I would have given them $10,000 toward my $40,000 lightning. (When they did the bait and switch thing, however, I cancelled my reservation.)

Did they fail to plan for the end of tax credits?

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[bc1]

So how many Ford accountants does it take to screw in a light bulb? And what would it cost them to do it?

 

[MrLoganRoss]

Isn’t it the finance and marketing departments that helped steer towards high priced trims and focused advertising on the functionality the truck is least capable of (towing)?

 

[ZeusDriver]

Like I said, they must have come down on price.

I was not doubting you, I was simply quoting the current figure. Yes, obviously they have come down in price. You gat a great deal on yours.

 

[ZeusDriver]

but since they’re likely to become something like my gen 1 insight it probably won’t be my last.

Do you still have the Insight? That is just one step up in size from my prototype.

 

[RLXXI]

I was not doubting you, I was simply quoting the current figure. Yes, obviously they have come down in price. You gat a great deal on yours.

Honestly, everyone that bought one of these trucks got a good deal. imho

 

[22legit2quit]

Do you still have the Insight? That is just one step up in size from my prototype.

Yes I drive it everyday

 

[bc1]

I was not doubting you, I was simply quoting the current figure. Yes, obviously they have come down in price. You gat a great deal on yours.

From what I see here, Rxxli has an April model Flash. In June or July Ford added $2000 on to the price of the same equipped model. I did a lot of searching for vehicles last Nov and Dec with dealers within 500 miles of me on the Ford build your own vehicle site wanting a flash decked out a certain way and the limiting factor was always the white color I wanted. When I was out on the West coast in Marysville, Washington visiting my daughter and my Navy corpsman fleet marine force Son-in-law I did the same search out there over Christmas but the dealers there weren't as friendly. I always pulled the stickers for comparison. No one met my demand of 10,000 off msrp plus the ev credit of 7500 and then I got busy and didn't get to do any end of year nitty gritty dealing.

Fast forward to summer. In August I hear credit about to end start my search again. Went out to Washington to visit again and no luck out there within 500 miles. Start pulling stickers again and the summer newer ones have the 2,000 addition but same setup and ford info says they added it. Still no bites on 10,000 plus the 7500 ev credit. Get busy again and as Rod Stewart sang, it's late September and I wish I was back in school again.

Last week of credits I'm working 10 vehicles (white) with 10 dealers and 5 of which are pre-summer markup. None of them will come down that additional 2,000 for the post summer markup. That narrowed it down to the 5 pre summer vehicles. Sep 29 I was down to 2 dealers and hit the road and stayed at a motel in Kansas City to stop at the first one or get to the next one in St. Louis. The Bommarito St. Louis salesman and sales manager deceptively wouldn't give me a bottom dollar/bottom line cash payment price and the Blue Springs dealer had been all along and was dealing very honestly with me. However the White one was a summer model and he said he couldn't come off that extra 2 grand plus another 500 in other factory option (spare tire and jack I wasn't looking for. But they had a black one the way I wanted which was a Feb model with the extended 131 kwh battery for 2500 less. After an hour of weighing white color vs. black with extended battery, I went with the black one and the salesman drove it to the used truck lot and found a spare plus we took the jack out of the white one.

Sticker was 73,485 - 6,004 dealer discount = 67,481 - 7,500 ev credit = 59,981 + 519 admin fee = $60,500 cash/check I wrote to drive off the lot. $4000 less than the $10,000 I always wanted and maybe people got better deals and maybe they are getting them now, I don't know.

I still wish I got the white but I'm going to get the Adam's advanced graphene ceramic coating kit to see if I can shine it up a little better and keep the daily road grind off of it. I am refusing to run it through a robo wash and the brushless ones are a waste of money. Have to use the old fashioned DIY ones.

My apologies in advance for going off topic in case someone complains again. I don't suppose no one wants to know what the Amish use to wash and wax their buggies? (I just drove through Yoder yesterday/Sunday and saw 3 of them leaving their meetings.)(FYI, Nothing }

 

[RLXXI]

From what I see here, Rxxli has an April model Flash. In June or July Ford added $2000 on to the price of the same equipped model. I did a lot of searching for vehicles last Nov and Dec with dealers within 500 miles of me on the Ford build your own vehicle site wanting a flash decked out a certain way and the limiting factor was always the white color I wanted. When I was out on the West coast in Marysville, Washington visiting my daughter and my Navy corpsman fleet marine force Son-in-law I did the same search out there over Christmas but the dealers there weren't as friendly. I always pulled the stickers for comparison. No one met my demand of 10,000 off msrp plus the ev credit of 7500 and then I got busy and didn't get to do any end of year nitty gritty dealing.

Fast forward to summer. In August I hear credit about to end start my search again. Went out to Washington to visit again and no luck out there within 500 miles. Start pulling stickers again and the summer newer ones have the 2,000 addition but same setup and ford info says they added it. Still no bites on 10,000 plus the 7500 ev credit. Get busy again and as Rod Stewart sang, it's late September and I wish I was back in school again.

Last week of credits I'm working 10 vehicles (white) with 10 dealers and 5 of which are pre-summer markup. None of them will come down that additional 2,000 for the post summer markup. That narrowed it down to the 5 pre summer vehicles. Sep 29 I was down to 2 dealers and hit the road and stayed at a motel in Kansas City to stop at the first one or get to the next one in St. Louis. The Bommarito St. Louis salesman and sales manager deceptively wouldn't give me a bottom dollar/bottom line cash payment price and the Blue Springs dealer had been all along and was dealing very honestly with me. However the White one was a summer model and he said he couldn't come off that extra 2 grand plus another 500 in other factory option (spare tire and jack I wasn't looking for. But they had a black one the way I wanted which was a Feb model with the extended 131 kwh battery for 2500 less. After an hour of weighing white color vs. black with extended battery, I went with the black one and the salesman drove it to the used truck lot and found a spare plus we took the jack out of the white one.

Sticker was 73,485 - 6,004 dealer discount = 67,481 - 7,500 ev credit = 59,981 + 519 admin fee = $60,500 cash/check I wrote to drive off the lot. $4000 less than the $10,000 I always wanted and maybe people got better deals and maybe they are getting them now, I don't know.

I still wish I got the white but I'm going to get the Adam's advanced graphene ceramic coating kit to see if I can shine it up a little better and keep the daily road grind off of it. I am refusing to run it through a robo wash and the brushless ones are a waste of money. Have to use the old fashioned DIY ones.

My apologies in advance for going off topic in case someone complains again. I don't suppose no one wants to know what the Amish use to wash and wax their buggies? (I just drove through Yoder yesterday/Sunday and saw 3 of them leaving their meetings.)(FYI, Nothing }

Mine was a February build, purchased in June.

 

[Yellow Buddy]

How can they be losing that much money per vehicle unless their accounting write off on development costs is far too short to be realistic?

I'm no accountant, not even a finance guy but based on their Q3 results...

1) "Lucid delivered 4,078 vehicles during the same period."
2) "Q3 revenue of $336.6 million"
3) "Cost of revenue" (ie, cost to build the car) $670.20MM

It seems as simple as that. On average, each vehicle is selling for $82,540. Each vehicle costs $164,345 to build.

Under operating expenses they have development as a separate line item...
4) "Research and development" is $325.31MM
5) "Selling, general and administrative" is $283.10 million

I don't know how you can make money if you're selling the car for $83k and it costs you $69k in administrative costs to sell the car. Especially when you still have to build the thing. I'm no supply chain expert but it certainly seems as if the individual parts of a Lucid would cost more than $14,000 in materials. Based on that I would speculate they do indeed have a tough slog, they'd have to get their build cost down, their selling costs down, their R&D costs down to make it work. More volume without that would just seem to accelerate losses. But someone smarter than me probably has more to say on it..

*I have no interest in terms of stocks, investments in Lucid. I pulled Q3 purely because of curiosity on this question.

Source:
https://ir.lucidmotors.com/node/10361/pdf
https://ir.lucidmotors.com/static-files/cce9e7dd-7650-4647-9cab-8033676179de

 

[ZeusDriver]

It seems as simple as that. On average, each vehicle is selling for $82,540. Each vehicle costs $164,345 to build.

I appreciate your response. It all makes sense, but nevertheless makes me think that development costs and capital expenses are being amortized and depreciated too quickly, both with Ford and Lucid (with Ford "loosing" even more per vehicle sold than Lucid.) There is a lot of latitude allowed in those rates, without incurring accusations of fraud.

The allocation of R&D costs at Ford does not strike me as reasonable, with all of the skateboard development being charged against the Lightning (or at least Farley makes it sound that way). The Lightning is so much simpler as a development project than the GM varieties or the Cybertruck or the Lucid or Rivian. The rear suspension is new, but the frame, many body panels, interior pieces, and even the electronics and weird shifter are from the F150. All that makes tremendous sense in my view -- why reinvent the wheel? It worked; The Lightning outsells the GM varieties... but GM is not bailing out.

There was an F150 with wheel motors back in 2008 or 2009 (I'd considered wheel motors for my little prototype too -- they are just too heavy and far too expensive.) The next most obvious and simple solution to keep the motors reasonably small is to put them front and back, and in so doing, make the base truck 4wd: good bang for the buck. Getting rid of the drive shaft allows more space for the battery pack. There. Done. All the R&D in one paragraph.

Munro used to be a cheapening guy at Ford (IIRC). Now, he makes his income as a YouTuber, giving long, tedious yet somewhat hyperbolic descriptions of new vehicles. I don't have anywhere near the free time that it would take for me to watch a whole presentation, but as far as I have seen re the Tesla and Lightning and a VW, (which I have scanned through) there is nothing "there", "there". (And, in fact, there is nothing as interesting in those cars as there was in the second generation Prius -- which was just full of clever and thorough engineering). I doubt that any of the college students who have built solar challenge cars would say "wow" at anything in the F150, or the VW, and they might say "hmmm, kind of clever" at one or two Tesla engineering designs.

So.... $20B in development??? For the Lightning?? ...the simplest development project of any electric car since their Rangers from the 1990s?? (Those were crushed, like the GM EV1's) Lucid development: a fraction of ONE billion, but a new car in absolutely every respect. It takes far more to develop a vehicle from scratch, (without already having any R&D infrastructure in place) than to just throw some electric motors in an F150.

I just traded my 2022 Lightning on a 2025 lease deal I could not pass up. I think it is a great product, and think that its sales record was somewhat better than I would have expected. Ford could not have been so stupid, I'd hope, that they would think that 200,000 reservation holders at $100 each would be any indication of sales. Could they??? Even without the bait and switch that turned off so many possible customers (that is what drove me to Tesla, for example.) Planning for 50,000 purchasers based on such a tiny and refundable deposit would seem stunningly optimistic. I don't recall having read anything about how they came up with projections for 150,000 Lightnings per year: it seems like the meanderings of a crazy person to me.

The EREV: Unless they can produce it for $50,000, I can't see it doing any better than the first Lightning trajectory. It would have been a really cool truck back when I bought my Chevy Volt. Now with the world's best selling car being the Tesla Model Y, it seems that BEVs may be the way to go.

With stocks, I am a buy and hold kinda guy. Why put myself through the stress that some people do? If I were a car company CEO, I would be looking out to the future, and planning to see the gains of todays R&D show up in 10 years, not next quarter. If Tesla goes belly up next week, then maybe I will have learned a lesson, that being, that if you see some unfavorable quarters, BAIL OUT!!! BAIL OUT!!!

 

[Thunder240]

I want to add two more factors that haven’t been mentioned. (Both factors are small peas compared to the amortization of R&D and a new production line.)

1. Traditional warranty math doesn’t really work with the battery because there isn’t enough historical data to establish accurate battery mortality tables. The solution is to use probability distributions that are wider than on their other parts, and that means for future years they’ll “book” a much larger up-front loss on their batteries than they’ll actually incur. In time they’ll collect more data, their tables will get better, and the losses that they book with each vehicle sold will come down.

2. Older cars cost whatever it cost to build them (parts + labor + overhead + amortized R&D/production). These costs are incurred once per vehicle. Now we have connected services, which are ongoing costs! Ford pays Amazon (or whichever cloud provider it uses) every month for all of the data they collect, process, and store for each vehicle. They try to offset it with subscription fees, but my guess is they are only offsetting a tiny fraction of what it costs them (because only a fraction of their connected services are driver-facing). Worse, these costs are growing as Ford does more with the data. I’m guessing they have some sort of planning factor that they are using to anticipate the future data costs for each vehicle.

 

[ZeusDriver]

Yes I drive it everyday

I have been on a simplicity kick, so am now down to one vehicle (and my wife has another). But if I found an Insight around here, I'd be tempted to buy one. Such cool little cars.

 

[22legit2quit]

I have been on a simplicity kick, so am now down to one vehicle (and my wife has another). But if I found an Insight around here, I'd be tempted to buy one. Such cool little cars.

If there’s a DM feature here hit me up. They’re far more niche than a lightning, although the lightning may be there before long. All in all I’d say that it’s very rewarding to own it.

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