Lucid Group (LCID -1.48%) stock is tumbling after the company reported disappointing fourth-quarter and full-year 2021 results on Feb. 28. Aside from lower-than-expected production and delivery numbers, reduced guidance, and delays, Lucid failed to address some major concerns that could damage its long-term thesis.
Leaving investors in the dark creates more uncertainty. And the stock market hates uncertainty. Here are five key questions that the electric vehicle (EV) company either flat out didn't answer or sidestepped on its earnings call.
Image source: Lucid Group.
1. How serious is the SEC Subpoena?
In early December, the electric car stock sold off in response to a U.S. Securities and Exchange Commission (SEC) probe. The investigation isn't too surprising given that regulators have been taking a closer look at the merger process for special-purpose-acquisition companies (SPACs) and if forward-looking statements provide a disservice to retail investors.
Lucid is certainly guilty of presenting misleading medium- and long-term targets in its investor presentations leading up to its merger with a SPAC called Churchill Capital IV last July. These speculative projections were based on little more than hope and lacked material backing given Lucid wasn't even producing and delivering cars at the time of the forecast.
Lucid failed to update investors on the extent of the SEC subpoena. Even if it doesn't know much, the very least Lucid should have done is address the topic so that investors have a more up-to-date reading on what's going on instead of relying on news that is now three months old.
2. What is the extent of the Lucid Air recall?
A little over two weeks ago, Lucid issued its first recall of 203 vehicles due to a minor defect. It sounds like a small number of vehicles, but it actually represents roughly 70% of the total number of vehicles Lucid has delivered so far.
Lucid had previously provided reasons for the recall and its process for fixing the problem for customers. What Lucid didn't provide was the expected cost of the recall and the extent the issue could apply to the cars it is currently rolling off the assembly line. Lucid did mention on its earnings call that it has yet to complete deliveries of the Lucid Air Dream Edition and that it is currently delivering the Lucid Air Grand Touring, which could mean that the recall applies exclusively to the Dream Edition. Instead of leaving the guesswork up to investors, Lucid should have discussed the recall and whether it expects further issues to persist for parts it relies on suppliers to provide.
Image source: Lucid Group.
3. Is Lucid adjusting its 2023 production and delivery guidance?
Going into the earnings call, Lucid was guiding for 2022 production and deliveries of 20,000 units and 2023 production of 50,000 units. Lucid is now guiding for 2022 deliveries of 12,000 to 14,000 units, even though it has only delivered 300 units over the last four months.
Given the revised estimates, investors may have hoped for an update on Lucid's medium-term production guidance.
4. What is Lucid's current manufacturing output and estimated year-end capacity?
Lucid did, however, provide some updates to its manufacturing capacity. The current capacity is 34,000 units per year. Phase 2 of its AMP-1 expansion will increase the capacity to 90,000 units per year. Lucid previously said phase 2 would be complete by 2023, but the company failed to update investors on whether that is still true.
It did, however, say that tooling installations are coming along nicely and capacity should be increased to 53,000 units per year by the end of 2023. Investors are left wondering when the full 90,000-unit expansion will be complete. Lucid previously said that AMP-1 has potential room to expand capacity up to 350,000 units per year.
5. How does Lucid stack up to the competition?
Lucid CEO and CTO Peter Rawlinson was rather dismissive when asked how Lucid stacked up against Tesla.
Well, in fact, we really don't see ourselves competing directly with any particular car companies. Our goal and my goal is straight out to make the very best cars. We want to make the very best electric cars in the world. Our mission is to inspire the adoption of sustainable energy. I actually believe that Lucid Air is the best product in the world already. I believe we're at the forefront of that technology and the proof points are that we have the most efficient TV with the highest range certified by the EPA. We have a high voltage, the fastest charging.
Rawlinson's answer is concerning for a couple of reasons. First of all, Lucid has often compared itself to Tesla, so shrugging off threats from the industry-leading EV company shows hubris.
Second, while Lucid may have Tesla beat in charging capacity, voltage, and speed, that's only for its very expensive Dream Edition package. As Lucid's lesser premium package models have lower range and smaller price tags. It remains to be seen how the Lucid Pure, at an estimated price tag of $77,400 and an expected release in late 2022, will compare to similarly priced luxury vehicles. Making the assumption that Lucid has bar-none the best EV out there in terms of quality and price hasn't been proven yet, and it's a mistake to not take the competition seriously, especially considering Tesla's torrid growth rate and high operating margin.
Teetering between fortune and a falling star
Rawlinson's silver-tongue rhetoric exudes confidence and excitement when times are good. But when Lucid is slashing estimates and facing delays, maintaining that same borderline arrogance is not a good look. Lucid has developed incredible technology and has some killer products in the works. It would be a shame if Lucid's blind optimism leads it to fall short of its potential.
