The number of electric vehicle (EV) manufacturers is quickly growing, and stock buyers are looking hard at which could ultimately become winning investments. Investment dollars have piled in, giving lofty valuations to companies that have yet to bring in any revenue, let alone profits.
Lucid Group (LCID -2.86%) has become one investor target, partly because it has potential and has yet to stumble at the starting line. Lucid came through with its promise to begin delivering products to customers before the end of 2021, and investors think there is plenty of potential for growth opportunities. While it already has a market cap of nearly $70 billion, 2022 could still be a true breakout year for the stock.
Image source: Getty Images.
Possible triggers coming
Lucid stock, like Tesla's, has been boosted by investors betting on its potential from what looks likely to become enormous market demand. Tesla, of course, is far ahead of Lucid and already profitable. But it is also now a company worth over $1 trillion, and Lucid has its own plans to move toward profitability.
In its 2021 mid-year update for investors, Lucid said it plans to expand production of its Air sedan beginning in 2023 and will launch a new SUV at the end of that year. It added that its cash on hand at the time is expected to fund its operations through 2022. But it has raised another $2 billion in capital since then, bringing its cash position to about $7 billion entering 2022.
The company may have had plans to accelerate its expansion plans when it raised that additional capital. Earlier this month, Lucid management replied to a Twitter user, stating: "Expansion to European markets will begin this year. Stay tuned for country-specific delivery information," according to CNBC. And there are reasons for shareholders to look forward to those expansion plans and more.
Expansion into Europe and beyond
In its 2021 global EV outlook, the International Energy Agency said Europe overtook China as the world's largest EV market in 2020. And that growth is expected to continue. In 2021, battery electric vehicle registrations in Germany alone soared 83% year over year, according to energy transition journal Clean Energy Wire. That surge in EV purchases has meant that EVs accounted for almost 14% of new vehicles in Germany last year.
If Lucid announces it is accelerating its planned expansion into that fast-growing market, investors might take notice. Another market that investors might not realize is on Lucid's radar is Saudi Arabia. Saudi Arabia's sovereign wealth fund invested more than $1 billion in Lucid in 2018, helping to fund the company's new Arizona manufacturing facility.
The Saudi kingdom still holds a large interest in Lucid, and that market might also help drive growth in 2022. Early in 2021, the Financial Times reported that Lucid was in talks to build a manufacturing facility in Saudi Arabia, citing an interview with the wealth fund's governor. That supported what Bloomberg had also reported.
A teaser look at the new Lucid Gravity SUV. Image source: Lucid Group.
Lucid is ramping up production and its stock valuation
Some of those growth expectations have already been built into Lucid's stock valuation. For now, Lucid is focused on the second phase of expansion of its Arizona facility, which it initiated in the third quarter of 2021. That expansion includes production capacity for its planned Gravity SUV.
Investors will be closely watching the progress Lucid reports of its production ramp as the year progresses. But the recent $2 billion capital raise might also be a signal that other investments might be coming this year, ahead of previously announced schedules. If its product is well received, and expansion plans are accelerated, Lucid stock could be a breakout in 2022.
