Lucid Group (LCID -2.24%) has surely caught the attention of electric vehicle (EV) investors. Among automakers that manufacture only EVs, Lucid Group's market capitalization, of nearly $37 billion, is behind only those of Tesla and Nio. Let's see if investors' excitement about this recently listed company is justified or not.
An exciting product range
Lucid hasn't delivered any cars yet, but its planned models have some of the best features and designs. To begin with, the company's first product, the Lucid Air, claims to have a battery efficiency of more than 4.5 miles per kilowatt-hour. That's higher than Tesla's Model S, which is the leader in battery efficiency right now. Moreover, it is projected to have a range of more than 517 miles, compared to 412 miles for the Model S. If delivered, this range would surely be very attractive for potential buyers. Notably, Lucid Air has shown these results in prototype testing.
The company plans to offer different models of the Lucid Air at different specifications and prices, and to start production of its SUV, the Lucid Gravity, in 2023. Over time, it intends to offer more affordable vehicles in higher volumes.
Lucid's growth plans
The company expects to start delivering the Lucid Air this year. It says it already has 11,000 reservations for various versions of the vehicle. It plans to deliver 20,000 of them in 2022, rising to 49,000 in 2023, and expects to generate $2.2 billion in revenue in 2022.
In the long term, Lucid anticipates run-rate production of more than 500,000 units a year by 2030. It expects to generate positive EBITDA by 2024 and become free cash flow positive by 2025.
Lucid plans a direct sales strategy. It has already opened eight showrooms in the U.S. and plans to open more, along with entering the European and Middle East markets in 2022.
The company has a portfolio of 321 patents on technology, including powertrain and batteries. It says it has more than 10 years of experience in designing and manufacturing battery packs and has millions of miles of data from real-world vehicle tests. The company's batteries power all teams in Formula E, the world's premier EV racing series.
Not an easy path
Lucid Group surely faces numerous risks. From production delays to technical difficulties in the product after its launch, the list is long. It has already delayed the launch of the Lucid Air from spring to the second half of this year primarily due to the pandemic. Semiconductor shortages could further affect the company's production plans. While investors should expect some delays and operational hiccups without it impacting the long-term thesis too much, significant delays and missed production targets could hamper Lucid's future profitability.
An interesting but risky stock
On the positive side, Lucid Group's experienced management team, interesting product line, and the growing market for EVs could bode well. Management sounds confident, and its systematic and well-thought-out approach gives a feeling that it is in it for the long haul.
Though the stock's market capitalization makes it look expensive, it might not be so if the company reaches anywhere near its target of $22.7 billion in sales by 2026. That means if you are willing to take the risks associated with Lucid stock and are looking to invest for the long term, now is as good a time as any to buy it. That said, risk-averse investors should look elsewhere for opportunities.