What happened

Some investors have pegged Lucid Group (LCID -1.39%) as the most likely potential domestic competition to electric vehicle leader Tesla (TSLA 1.50%). There are several good reasons for that, but before comparisons truly begin, Lucid needed to actually have a product on the market. The EV company announced at its Arizona facility open house last week that production of its $169,000 Air Dream Edition luxury sedan has now begun. That helped cap the month of September, which saw shares of Lucid soar 27.2%, according to data provided by S&P Global Market Intelligence.

So what

It wasn't just the start of manufacturing its first vehicle alone that helped push Lucid shares higher, though. There were two other developments from the company that investors focused on earlier in September, too. These three news items all contributed to investor bullishness on Lucid stock:

  • On Sept. 8, Lucid announced the cashless redemption of its public warrants.
  • On Sept. 16, the U.S. Environmental Protection Agency officially gave Lucid a record 520-mile battery range rating.
  • On Sept. 28, Lucid began production on its Air Dream Edition luxury sedan.
A white Lucid Air sedan in a Lucid studio.

Lucid Air electric sedan in Lucid studio. Image source: Lucid Group.

Now what

The cashless redemption of warrants showed investors the company has a solid balance sheet. It also showed management's confidence in the future of the company and potentially limited dilution to existing shareholders from the warrants. The warrants were issued as part of the process for the company to go public earlier this year. This action enabled warrant holders, which include retail investors, to hold shares in Lucid without cash exercise.

Instead, holders surrender a fraction of a share they would have been entitled to receive. Lucid can withstand the lack of added capital the warrants would have brought thanks to its solid balance sheet. Lucid has been raising money for years prior to going public. Saudi Arabia's sovereign wealth fund invested more than $1 billion in Lucid in 2018, helping to fund the company's Arizona manufacturing facility. 

The range rating for the long range Air Dream Edition model was also a significant development that showcased the company's technologies. Lucid CEO and chief technology officer Peter Rawlinson came from Tesla, where he was the chief engineer for the Model S development project. He has been touting Lucid's technology as an advantage against competition. In a statement after the EPA rating was announced, Rawlinson said, "I'm delighted that our Lucid Air Dream Edition Range has been officially accredited with a range of 520 miles by the EPA, a number I believe to be a new record for any EV." 

With the technology in place, and production now beginning, investors are starting to bet that Lucid will become a worthy Tesla competitor. The company said reservations for the Lucid Air have exceeded 13,000, and deliveries will begin this month. Investors who believe in the future of Lucid should know to remain patient, however. After the recent rise in the stock, the company has a market cap exceeding $40 billion. The story may be a good one, but it could take some time to play out. There will be bumps along the way, and as with any investment, patience will be needed.