Lucid Group (LCID 2.97%) has disappointed a lot of investors since its public debut. The luxury electric vehicle (EV) maker went public by merging with a special purpose acquisition company (SPAC), and it started trading at $25.24 on July 29, 2021.

But today, Lucid trades at about $5 a share. The bulls rushed for the exits as it slashed its production targets, recalled some of its vehicles, and racked up steep losses. It initially claimed it could produce 20,000 vehicles in 2022 and 49,000 vehicles in 2023, but it only produced 7,180 vehicles in 2022 and aims to produce just 10,000 vehicles in 2023.

Lucid's Air sedan.

Image source: Lucid Group.

Does Lucid have a shot at a comeback over the next few quarters? Let's review two recent developments -- which can be considered a green flag and a red flag -- to see where this volatile EV stock might be headed.

The green flag: It opened its Saudi Arabian plant

Saudi Arabia's Public Investment Fund (PIF) owns more than 60% of Lucid's shares. Last year, Lucid CEO Peter Rawlinson boldly declared that Saudi Arabia's financial backing would enable his company to produce more than 500,000 vehicles annually by 2025 -- compared to its original target of reaching that milestone by 2030.

To achieve that lofty goal, Lucid started building its first overseas plant, AMP-2, in Saudi Arabia. The Saudi Arabian government also pledged to buy 100,000 vehicles from Lucid over the following decade.

Lucid officially opened the first phase of AMP-2 in late September. The plant can only produce 5,000 vehicles annually at the moment, but it expects the opening of its complete manufacturing facility in King Abdullah Economic City (KAEC) by the "middle of the decade" to boost the combined facility's annual production capacity to 155,000 vehicles.

That's a green flag that suggests Lucid can scale up its production, but it also implies it won't produce 500,000 vehicles annually by 2025. Its AMP-1 plant in Arizona has an annual production capacity of 34,000 vehicles, and it's in the process of expanding its capacity to 90,000 vehicles ahead of its launch of the Gravity SUV in 2024. So even in a best-case scenario, Lucid would likely only produce about 245,000 vehicles annually by 2025 if both AMP plants are operating at full capacity.

A jump from 10,000 vehicles in 2023 to 245,000 vehicles in 2025 would still represent a compound annual growth rate (CAGR) of 395%, but Lucid's track record of overpromising and underdelivering suggests it could easily drop the ball again.

The red flag: Price cuts for its Lucid Air sedans

It's a red flag when a luxury brand slashes its prices, since it implies it doesn't have the brand appeal or pricing power to attract its target customers. Yet that's what Lucid did in early August, with price cuts across all of its Air sedan models.

Lucid reduced the starting price of its Air Pure by $5,000 to $82,400, its Air Touring by $12,400 to $95,000, and its Air Grand Touring by $28,400 to $125,600. It initially claimed those price cuts would only last through the end of August, but it recently extended those discounts through the end of October.

Those deep discounts tell us three things. First, Lucid is likely struggling to sell new vehicles even as it desperately tries to ramp up its production. Second, Lucid isn't immune to the pricing war across the EV market, which was largely driven by Tesla's (TSLA 5.93%) aggressive price cuts over the past year. Lastly, Lucid will probably continue to lose more than $500,000 for each vehicle it actually sells (as it did in its most recent quarter) for the foreseeable future.

For 2023, analysts expect Lucid to generate just $794 million in sales while racking up a net loss of $3.07 billion. It claims its $6.25 billion in total liquidity at the end of the second quarter will last through at least 2025, but it could hit a dead end that year if it continues to cut its prices and fails to ramp up its production.

Investors should steer clear of Lucid

Lucid's stock was crushed over the past two years, but it still doesn't seem like a bargain at 13 times this year's sales. Tesla, which has already scaled up its production and is firmly profitable, trades at just 8 times this year's sales.

I also don't have much faith in Lucid's management after all of its recent blunders. Rawlinson notably became the auto industry's highest-paid CEO, with a $379 million compensation package (which mainly consisted of stock awards) last year, but he's repeatedly exaggerated Lucid's growth potential while betting that Saudi Arabia's support will save it from becoming another failed SPAC-backed EV maker.

Unless Lucid gets its act together, I'd rather stick with EV makers that have already ramped up their production -- like Rivian, Polestar, or Tesla -- as my long-term plays on the secular expansion of the EV market.