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5 Things Lucid Group Investors Should Watch in 2022

By Daniel Foelber – Oct 1, 2021 at 8:22AM

Key Points

  • Lucid has started mass production of its Lucid Air sedan.
  • Focus will shift to the company’s 2022 goal of delivering 20,000 vehicles.
  • Knowing what to watch should help investors ensure Lucid’s investment thesis remains intact.

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This electric vehicle company has hit major milestones, but there's more work to do.

Lucid Group (LCID 3.25%) has officially started mass production of its Lucid Air Dream Edition sedan at its Arizona manufacturing facility. The electric vehicle (EV) company expects to begin making deliveries later this month. The announcement comes as a big relief to investors who were wondering if Lucid could make good on its promise to begin delivering vehicles in the second half of 2021.

Now that Lucid has top range and horsepower ratings from the Environmental Protection Agency and has begun making cars, investors may be asking what's next. Here are five things Lucid investors should watch in 2022 as the company aspires to manufacture and deliver the world's best EVs.

A brown Lucid Air sedan parked in front of a modern home.

Image source: Lucid Group.

1. Lucid's reservation count

Lucid Air reservations increased from 9,000 in May to 13,000 in late September. Once Lucid starts delivering vehicles, the hope is that positive word-of-mouth reviews will help propel higher demand.

Lucid's quoted reservation number pertains to all four trims of the Lucid Air. But keep in mind it has yet to begin production of the lower-end trims. Therefore, investors should watch to see if Lucid can not only grow its reservations but also disclose more specific reservation numbers.

2. Store and service center growth

Lucid's marketing strategy is centered around establishing brand equity by letting its vehicles do the talking. However, it's also building in-person showrooms and service centers to give potential customers a tangible way to engage with its products. As of its July presentation, Lucid has eight stores but plans to open 20 retail and service locations by year's end

Lucid's service is entirely unproven considering the company has yet to deliver cars. Buggy software or malfunctioning components could be a disaster for Lucid if it lacks the service network to solve problems. Lucid spent an extended time in pre-production tweaking its car, so the hope is it won't have any serious problems. But given the vehicle's high price tag, customers will likely expect top-tier service should any issues arise. Positive customer responses to its showrooms and effective service centers would indicate the company is succeeding in aspects of its business outside of just building cars. 

3. Production and deliveries

Instead of traditional financial metrics, Wall Street's expectations for Lucid in 2022 will likely center around its ability to produce and deliver cars on time. Investors familiar with Netflix stock will remember that just about the only figure that Wall Street cared about was its subscriber growth. Only recently has the emphasis begun to shift to free cash flow and earnings.

In a Sept. 28 interview with CNBC, Lucid CEO Peter Rawlinson affirmed the company's goal to produce and deliver at least 20,000 Lucid Air sedans in 2022. Missing, meeting, or exceeding this target will set the pace for Lucid to hit its longer-term goals.

4. New trims and models

Another point to watch is the launch of Lucid's lower-end trims. After the Lucid Air Dream Edition and the Grand Touring comes the Touring, and then finally the Pure, which are both expected to cost less than $100,000. 

As mentioned, Lucid's 13,000 reservation number is opaque because we don't know the specific reservations by trim. Lucid's strategy is to start with the higher-margin Dream Edition before making the lower-end models as it grows volumes. Given that it's unlikely the company will be able to sell 20,000 Dream Editions alone, its success next year depends on making those lower-end trims.

Lucid's manufacturing facility is outfitted to produce both the Lucid Air sedan and the Lucid Gravity SUV. Lucid expects to begin producing the Gravity in late 2023. By 2023, the electric car company wants to expand its production facility to 2.7 million square feet, which would bring its annual capacity to 53,000 vehicles. 

5. Cash burn rate and funding

The final point of interest for investors is the company's cash burn. Lucid expects its existing cash to last through at least 2022. Making more cars costs money, and Lucid will probably need to raise additional cash to fund operations in 2023 and beyond given that it's unlikely to reach positive operating cash flow next year.

For a growth company like Lucid, the ability to demonstrate strong production and delivery figures (even if unprofitable) would help it raise money at an attractive interest rate, or issue more shares at a favorable price.

Early innings

Lucid investors are likely breathing a sigh of relief now that the company is making cars. But with a market capitalization of over $40 billion, Lucid will have to do a lot more to not only live up to its current valuation but prove it deserves to grow from here. Knowing what to watch in the year ahead should help investors ensure Lucid's investment thesis remains intact.

Daniel Foelber owns shares of Lucid Group, Inc. and has the following options: long January 2023 $25 calls on Lucid Group, Inc., short February 2022 $24 calls on Lucid Group, Inc., short January 2023 $30 calls on Lucid Group, Inc., and short January 2023 $7.50 puts on Lucid Group, Inc. The Motley Fool owns shares of and recommends Netflix. The Motley Fool has a disclosure policy.

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