What happened

The S&P 500 index has dropped 18% since peaking on Jan. 3, 2022. Lucid Group (LCID -0.48%) stock, meanwhile, has lost a staggering 81% in value since, according to data provided by S&P Global Market Intelligence. The electric vehicle (EV) stock was so brutally hammered in 2022 that investors are now left wondering whether it has any chances of a recovery in 2023.

So what

Lucid gave investors a rude shock right at the beginning of 2022 when it slashed its full-year production outlook to only 12,000 to 14,000 Lucid Air cars, citing supply chain challenges. Through Feb. 28, 2022, Lucid had received 25,000 reservations.

The worst was yet to come though: In August, Lucid said it would be able to produce only 6,000 to 7,000 EVs in 2022 as challenges continued to mount. As the company had secured more than 37,000 reservations until the end of the second quarter, the low annual production volumes meant much longer wait times for customers to get deliveries of their cars.

That, of course, didn't go down well with EV enthusiasts, and Lucid's third quarter confirmed the market's worst fears: Customers were apparently canceling orders as Lucid reported only around 34,000 reservations as of Nov. 7, 2022. In short, Lucid's reservations had fallen by almost 10% in three months.

Soon enough, reports emerged that Lucid was doling out huge discounts and incentives to prevent further cancellations, and the stock plunged as investors started to realize the company's problems run deeper and go beyond industrywide supply chain constraints. Costs of key parts, batteries, and labor remain high, interest expenses are rising, and Lucid's operating costs are surging as well as its production volumes remain significantly below its manufacturing capacity.

With fears of a recession looming large, it created the perfect storm of challenges for Lucid and triggered panic-selling in the EV stock.

Now what

Lucid generated a decent $350 million in revenue in the first nine months of 2022 versus almost nothing in 2021, but it also suffered a net loss of $1.83 billion during the period. At this pace, Lucid's critics now fear the company may run out of cash, but that appears far-fetched.

Lucid had $3.85 billion worth of cash, cash equivalents, and investments as of Sept. 30, 2022, and raised another 1.5 billion later through a stock sale. Also, Lucid has the backing of Saudi Arabia since an affiliate of the sovereign wealth fund of the Kingdom of Saudi Arabia is a major stakeholder in the EV company. In 2022, the government of Saudi Arabia signed an agreement with Lucid to purchase up to 100,000 EVs over the next 10 years.

As for growth, Lucid is expanding its production capacity and is all set to open reservations for its flagship SUV, Gravity, in the coming weeks.

However, none of this can reinstate investors' faith in Lucid until it can grow its order book and scale up production and deliveries aggressively. Until the EV start-up gives out surefire signals in 2023 that it's back on the growth track, it's hard to see why anyone would want to bet on a slow-growing EV stock still trading at a steep price-to-sales ratio of 32. If the stock still rises in between, it could just be a speculation-driven dead cat bounce.