Is It Time to Give Up on Lucid?

It's been a rough go for electric vehicle (EV) start-ups lately, Lucid Motors (LCID 1.63%) included. The company has cut production forecasts numerous times, slashed prices on its only vehicle, reported a widening net loss during the fourth quarter, and barely delivered 6,000 vehicles in 2023.

Combine those factors with a macroeconomic environment of high interest rates and slowing EV demand, and you get the collapse of an EV start-up such as Fisker. But is it time to also give up on Lucid, or should investors hang on during this rough patch?

Setting the scene

No matter which way Lucid turns, it faces challenges. At first the company's supply chain caused disruptions in production, and then once those issues were rectified, demand slowed and weighed on deliveries.

Lucid's fourth-quarter 2023 net loss checked in at $654 million, wider than the prior year's loss of $474 million, and production is expected to hit just 9,000 vehicles in 2024 after reaching nearly 8,500 in 2023 -- certainly not tantalizing growth.

The bigger picture is even more eye-opening, with Lucid's total 2023 net loss checking in at $2.8 billion compared to 2022's $1.3 billion loss. For context, the EV start-up's total liquidity was $4.78 billion at the end of 2023.

Time to give up?

Investors watched how quickly things can turn south with Fisker, as its stock price plunged 99% year to date and the New York Stock Exchange has delisted the stock. That said, Lucid likely has the liquidity needed to survive a year or longer before things get as dire as Fisker, since the latter couldn't even cover accounts payable recently.

Further, the industry is getting closer to the point when EVs will be much more price competitive with gasoline vehicles. In fact, Pedro Pacheco, vice president of research at technology analysis firm Gartner, said that EVs are predicted to be less expensive to build than internal combustion cars by 2027, thanks to innovative manufacturing techniques and declining battery costs.

The Gravity and low-cost platform

Another reason not to give up on Lucid just yet: Its product pipeline.

One could argue the biggest hurdle for Lucid so far has been selling its only vehicle, its Air sedan. Part of the difficulty in selling the vehicle is certainly its starting price tag of around $170,000. That price tag puts Lucid's only sellable product in a very high-end niche market -- one that was quickly saturated.

But later in 2024, the company is scheduled to launch its second vehicle, the Gravity crossover. The new offering starts under $80,000, which gives the company access to a broader consumer base. However, it's fair to note that this is still a fairly high price point, and it might not generate the demand needed at a time when other EV companies are trying to push prices down into the $30,000 range to tap into the mainstream consumer.

Further, after the company launches the Gravity, it plans to dive into a more mainstream luxury market with less expensive vehicles. The midsize platform is targeting a price tag around $50,000, and it's thought the first vehicle on the platform will be a crossover designed to compete toe to toe with Tesla's Model Y. Investors shouldn't expect this next platform vehicle to drive into consumers' garages until early 2026, but it's a future that Lucid can sell investors on sooner, rather than later.

Hang on

Ultimately, 2024 is set up to be a bumpy year for EV start-ups, including Lucid. Much anticipation rides on the company's upcoming Gravity launch, and the demand for that vehicle will heavily influence how investors feel about the company's ability to reach its long-term vision as a big-time EV player in the industry.

It's definitely not time to give up on Lucid, and its situation is far less dire than Fisker's, but investors willing to take on heavy risk owning a young start-up EV company in this macro environment should recognize it is highly speculative and volatile.