What happened
Lucid Group (LCID 1.19%) is struggling to find a bottom. The electric vehicle (EV) stock crashed 29% in November, according to data provided by S&P Global Market Intelligence, and has dived another 10.6% in December so far. Its steep fall in recent weeks now means Lucid stock is -- hold your breath – down a staggering 77% in 2022.
A lot happened at Lucid in November, but some announcements from the company triggered panic selling as investors realized Lucid is, after all, still a speculative stock.
So what
To prove its viability, an EV company that's just starting out needs to show that there's demand for its vehicles, that its reservation numbers are growing, and that it is capable of increasing production accordingly. November proved vital insight into where Lucid stands on that front.
Image source: Lucid Group.
Lucid produced a record number of vehicles in its third quarter and reiterated its annual production guidance of 6,000 to 7,000 Lucid Air cars. There were no surprises there. However, Lucid reported reservations of only around 34,000 cars as of Nov. 7, down from 37,000 on Aug. 3.
It appears some customers canceled their Lucid orders, perhaps because they don't want to wait too long to get their Lucid car, especially when they have more options now that other companies are entering the luxury EV space. Whatever the reason, falling reservations is never a good sign.
Also, because Lucid didn't deliver as many cars as it produced, its costs zoomed in Q3. Lucid's loss from operation climbed almost 40% year over year to $687.5 million, and it ended the quarter with cash and cash equivalents of around $1.3 billion, down nearly 73% from Q3 2021.
The same day as its earnings release, Lucid also said it'll sell common stock worth nearly $1.5 billion for "general corporate purposes," which could include the day-to-day running of operations and capital expenditures.
The triple blow of falling reservations, rising losses, and a dilutive stock offering sent Lucid shares tumbling that week, with some analysts also slashing their price targets on the EV stock.
Later in the month, much to investors' chagrin, Barron's reported Lucid owners as flagging defects in their sedans that one owner reportedly even said could turn the luxury car into a "5,000-pound brick."
Now what
Lucid has several challenges at hand, but all's not lost.
After focusing exclusively on its first car -- the Lucid Air Dream edition -- so far, the company launched three lower-priced trim lines in November called Air Grand Touring, Air Touring, and Air Pure. While it already delivered its first Air Touring last month, Lucid expects to deliver Air Pure before 2022 ends. Lucid also recently unveiled a high-end super-sports electric sedan named Sapphire and expects to start production on it in 2023.
More importantly, Lucid is all set to open reservations for its luxury electric SUV, Gravity, in early 2023. Also, Lucid said last month it's on track to increase its total annual installed capacity to 90,000 units in 2023. The company can currently produce up to 34,000 EVs per year.
All of this also means that Lucid will need a lot more money, which should either mean more stock dilution or debt in the present high-interest rate environment. These are just some of the things that have made investors in the EV stock worried.
