Lucid Group (LCID 2.17%) has disappointed lots of investors since it went public by merging with a special purpose acquisition company (SPAC) last July. The maker of luxury electric sedans initially claimed it could produce 20,000 vehicles in 2022. But it reduced that goal to 12,000-14,000 vehicles in February, then halved that target to 6,000-7,000 vehicles in August. As of the third quarter, it's only delivered 2,562 vehicles since it started its production last September.

As Lucid struggled to produce new vehicles, its potential customers started to cancel their reservations. It ended the third quarter with about 34,000 reservations, compared to 37,000 reservations in the second quarter, and that figure could easily shrink again in the fourth quarter. It also continued to drown in red ink: It generated $350 million in revenue in the first nine months of 2022, but it also racked up a net loss of $1.83 billion.

Lucid's Air sedans.

Image source: Lucid.

All those challenges have made Lucid a difficult stock to own as rising interest rates drive investors away from more speculative investments. However, four green flags suggest it's still too early to bet on its demise.

1. Its production deal in Saudi Arabia

Back in February, Lucid signed a deal to build its first overseas production plant in Saudi Arabia. In May, it revealed more details regarding that deal.

Lucid claims the Saudi Arabian plant will increase its annual production capacity by 155,000 vehicles. That expansion, along with an annual capacity of 365,000 vehicles at its upgraded Arizona plant, could enable the company to produce 500,000 vehicles annually by 2025 -- five years ahead of its original schedule of crossing the half-million mark by 2030.

Lucid expects to complete the construction of the Saudi Arabian plant in 2025, and it will receive $3.4 billion in financing and incentives from the Saudi government and other regional investors over the next 15 years. The Saudi government also reaffirmed its commitment to purchasing up to 100,000 vehicles from Lucid over the next 10 years.

2. $1.5 billion in fresh cash

At the end of the third quarter, Lucid was still sitting on $3.85 billion in cash, cash equivalents, and investments. It predicted that liquidity would last until "at least" the fourth quarter of 2023, but analysts still expect Lucid to post steep net losses of $1.7 billion in 2022 and $2.1 billion in 2023.

That's why investors breathed a sigh of relief on Dec. 19 when Lucid disclosed that it had raised $1.5 billion in a new stock offering. Some $915 million of that total came from a private sale of nearly 86 million shares to an affiliate of Saudi Arabia's Public Investment Fund. The remaining $600 million was raised through a secondary offering of 56 million new shares. Those sales will inevitably dilute the shares of Lucid's existing investors, but they'll also buy it more time to ramp up production.

3. A new battery deal with Panasonic

Lucid's vehicles are currently powered by batteries from Samsung and LG Chem. However, its supply of batteries from those two South Korean vendors has remained tight over the past year amid the global supply chain challenges.

That's why Lucid's stock popped on Dec. 13 after it signed a new lithium-ion battery supply deal with Panasonic. The initial supply of Panasonic batteries will come from Japan, but Lucid expects its subsequent orders to be fulfilled by Panasonic's new U.S. plant in De Soto, Kansas. That stateside shift could help Lucid satisfy the U.S. sourcing requirements for the new federal Clean Vehicle Credit for EV purchases.

Lucid believes that splitting its orders between Samsung, LG, and Panasonic will give it a sufficient supply of cells through 2022 and 2023. That diversification could help it avoid future supply chain issues, scale up its business, and achieve its goal of producing 500,000 vehicles a year.

4. Baby steps into Europe

Most conversations about Lucid revolve around the U.S. and Saudi Arabia. But over the past seven months, Lucid opened up three new retail locations in Germany, Switzerland, and the Netherlands. It also recently delivered its first Air sedans in Europe to its customers in Germany and the Netherlands. 

These baby steps could increase its brand presence in Europe, which remains one of the world's fastest-growing EV markets alongside China. It could also act as a test run for its planned expansion into China.

Do these green flags make Lucid a viable investment?

Lucid is in much better shape than other struggling SPAC-backed EV makers like Canoo and Nikola. But its future remains murky and its stock isn't cheap at 5 times next year's sales.

Lucid is taking some steps in the right direction, but I need to see it actually produce 6,000-7,000 vehicles this year before believing it can ramp up its production to deliver half a million vehicles annually by 2025. Therefore, I'm not turning bullish on this highly speculative EV stock until a few more green flags appear.