US startup Lucid Group has said it will start delivering luxury electric sedans with a Tesla-beating driving range in late October, posing a major challenge to the market leader whose sales of premium models have stagnated.

The California-based Lucid began production of its long-delayed Lucid Air cars at its Arizona factory this week.

It said it aims to ramp the plant's capacity up to 90,000 vehicles a year in the next two years.

The top-end Lucid Air Dream Edition will be available in late October, followed by less expensive models: Grand Touring, Touring and Air Pure.

The company said it has received more than 13,000 reservations for Lucid Air models, and it has increased the planned total production of the Lucid Air Dream Edition to 520 vehicles.

A version of the Lucid Air Dream Edition, priced at $169,000, received an official US government rating of a 520-mile driving range, over 100 miles more than its closest rival, Tesla's Model S, which is priced at $89,990.

The higher range helped lead to a 23% jump in Lucid's shares this month.

Speaking at the production site, Lucid chief executive Peter Rawlinson, a former chief engineer on the Tesla Model S, said his company's cars have an advantage in battery technology and costs over the Model S.

"We've ridden customers of the fear of range anxiety," he said. "The next big obstacle is cost effectiveness of electric cars. We've got to get the cost down."

He said the Air Pure, the least expensive version with a price tag of $77,400, will go into production late next year.

The company, founded in 2007, received funding from Saudi Arabia's Public Investment Fund in 2018 before going public via a shell company in July.

"2017 and 2018 were brutal. The company was in a parlous state. And then I've got to say, we met a perfect partner," the company's CEO said.

Rawlinson, who left Tesla in 2012, faces tasks similar to those of Tesla in its early days, including how to address manufacturing challenges and scale up production.

Tesla CEO Elon Musk said in June that Tesla has canceled its plan to launch a Model S Plaid+, with a target driving range of 520 miles, saying the Model S Plaid itself is "just so good".

Musk reiterated this month that "production is hard".

"Production with positive cash flow is extremely hard," he said, citing carmakers' razor-thin margins.