Lucid Group's (LCID 2.33%) stock plunged 12% on July 12 after the electric vehicle maker posted its production and delivery numbers for the second quarter. It produced 2,173 vehicles and delivered 1,404 vehicles, but both numbers shrank sequentially from the first quarter. It also missed the consensus forecast for 1,873 deliveries, and its year-to-date production of 4,487 vehicles casts some doubt on its goal of producing "over 10,000" vehicles in 2023.

That disappointing update sets a low bar for Lucid's upcoming second-quarter earnings report on Aug. 7. Yet its stock has already declined more than 60% over the past 12 months -- which suggests that most investors don't have much faith in the EV maker's ambitious plans to produce half a million vehicles annually by 2025. So is it too late to buy Lucid's stock?

Lucid's Air sedan.

Image source: Lucid Group.

Why is Lucid struggling to produce new vehicles?

Lucid has only launched one vehicle, the high-end Air sedan, so far. But it's repeatedly struggled with production issues ever since it went public by merging with a special purpose acquisition company (SPAC) in July 2021. Prior to its market debut, Lucid boldly claimed it could produce 20,000 vehicles in 2022 and 49,000 vehicles in 2023.

Yet Lucid only produced 7,180 vehicles in 2022 as it struggled with supply chain constraints and recalls. Those setbacks clearly curbed the market's interest in its vehicles: Lucid's reservations hit a peak of 37,000 vehicles in the second quarter of 2022, but dropped to 28,000 by the end of the year. It stopped disclosing that closely-followed metric in the first quarter of 2023. It also postponed the launch of its second vehicle, the Gravity SUV, from 2023 to early 2024.

Lucid's total number of vehicles produced and delivered has now declined sequentially for two consecutive quarters. Lucid admittedly isn't the only EV maker that faces supply chain constraints (especially for automotive chips), but its numbers look dismal compared to its peers. For example, Rivian plans to produce 50,000 vehicles this year while Polestar aims to produce 60,000-70,000 vehicles.

Lucid's main plant in Arizona has an annual production capacity of 34,000 vehicles, and it expects an expansion of that facility and the opening of its first overseas plant in Saudi Arabia to boost its annual capacity to half a million vehicles by 2025. But those are lofty goals for a company that might struggle to produce even 10,000 vehicles this year.

Can Saudi Arabia save Lucid?

On its own, Lucid's outlook seems bleak. For 2023, analysts expect its revenue to rise 53% to $928 million, but they also expect its net loss to widen from $2.59 billion to $2.65 billion. Its disappointing production numbers in the first half of the year suggest it could miss those targets.

Yet Lucid still had $4.1 billion in total liquidity at the end of the first quarter of 2023, which it insists can last through "at least" the second quarter of 2024. A lot of that cash came from its recent $3 billion capital raise, which enabled Saudi Arabia's Public Investment Fund (PIF) to boost its stake in the company to more than 60%. The Saudi Arabian government also agreed to buy 100,000 vehicles from Lucid over the following decade.

That support, along with the construction of its second plant in Saudi Arabia, indicates Lucid is banking heavily on the Saudis to drive its long-term growth. But Lucid isn't Saudi Arabia's only big EV bet. The PIF also launched Ceer, an EV joint venture with Apple and its manufacturing partner Foxconn, last November. The PIF might eventually try to take Lucid private and merge it with Ceer -- but it could also abandon Lucid if it fails to overcome its supply chain and production challenges.

Is it too late to buy Lucid?

With an enterprise value of $17.9 billion, Lucid still looks pricey at 19 times this year's sales. It might seem more reasonably valued at eight times next year's sales, but that valuation depends on its ability to nearly triple its sales in 2024. Considering how many times Lucid has overpromised and under-delivered, I wouldn't put too much faith in those long-term estimates.

By comparison, Rivian and Polestar -- which are already producing tens of thousands of vehicles -- trade at five and four times this year's sales, respectively. Lucid might be better than some other struggling SPAC-backed EV makers, but its stock could still be cut in half again if it posts more disappointing numbers on Aug. 7. Therefore, investors should avoid Lucid and wait for its full second-quarter report before deciding if it can ramp up its production and overcome its near-term challenges.