The electric vehicle (EV) market is forecast to climb at a compound annual growth rate (CAGR) of 18.2% from 2021 through 2030, up to an astonishing $824 billion. By 2040, EVs are projected to represent two-thirds of car sales globally, equal to 66 million units, indicating a dramatic increase from the 3 million units sold in 2020. Those growth forecasts are mind-boggling, but investors will still need to successfully distinguish between the secular winners and losers moving forward.
Lucid Group (LCID 0.83%) is a budding pure-play electric car maker tapping into the luxury EV market. The company currently has four car models, with its cheapest edition, the Lucid Air Pure, carrying a price tag of $87,400. Its most expensive vehicle, the Lucid Air Dream Edition, costs $169,000 to purchase. On Aug. 3, the young EV company posted a second-quarter earnings report that didn't exactly please investors.
But with its stock down 55% since the start of 2022, is now a good moment to place a long-term bet on the company?
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A tough, long ride ahead
In its second quarter of 2022, the company generated $97.3 million in revenue, notably up from its $174,000 a year ago, but falling short of analysts' $157.1 million expectation. Management cited supply chain woes as the key driver behind its disappointing second-quarter performance. Though it claims to have 37,000 customer reservations, equal to $3.5 billion in potential sales, the company has only produced 1,405 cars in the first half of 2022 and delivered just 679 vehicles in Q2.
To add fuel to the fire, management slashed its original fiscal 2022 production guidance of 12,000 to 14,000 vehicles in half to 6,000 to 7,000. The company has $4.6 billion in cash, cash equivalents, and investments, and has assured investors that it has sufficient liquidity well into 2023, despite its plan to spend roughly $2 billion in capital expenditures in 2022. Even if that's the case, management's lack of visibility around the business is alarming from an investor's standpoint.
Competition is only rising as well -- pure-play EV rival Tesla has delivered 1.1 million cars over the past year, and traditional automakers like Ford Motor Company and General Motors have begun to make aggressive investments into the EV arena. That's not to say Lucid Group can't grab a piece of the pie, but the clock is certainly ticking. The next few quarters will be vital in determining the long-term trajectory of the luxury EV maker's business.
Should investors take a chance on Lucid Group?
The long-term picture isn't looking great for Lucid Group at the moment. It's one thing to cut production forecasts, but it's another thing to do so by 50%. That shows me that management has little to no visibility of its business at this point, which surely shouldn't sit well with prudent investors. Combine that with intense competition from powerhouses like Tesla, Ford, and General Motors, and I don't see how the business will move ahead smoothly. So with these realities in mind, it'd prudent to put your hard-earned money into a better company today.
