Like many other electric vehicle start-ups right now, Lucid Group (LCID 5.12%) is trying to find its footing in an increasingly competitive market. The company's impressive Air sedan has caught the automotive world's attention, but its stock has failed to impress investors.
So, where is Lucid headed over the next year? I think the company is in for a bumpy ride and could face some of the same production and funding issues it's currently dealing with. Here's why.
What's happening with Lucid right now
Lucid recently announced that it was raising additional cash with a public offering of 262 million shares and a corresponding investment by Saudi Arabia's Public Investment Fund (PIF). The result is an additional $1.67 billion for the company to put toward its operations.
Extra money, especially for an EV start-up that's spending gobs of it to produce and create new vehicles, is good for the company's operations. The extra cash will help Lucid keep the lights on and build its vehicles through the end of 2025. But it's not exactly an encouraging sign that the company, which just went public in 2019, is selling more stock to raise money, the result of which was share dilution for existing shareholders.
NASDAQ: LCID
Key Data Points
The underlying problem is that Lucid's vehicle production is slow, and the company is hemorrhaging cash. In the third quarter (which ended Sept. 30), Lucid produced 1,805 vehicles -- an increase of just 16% from the year-ago quarter -- and generated $200 million from their sales, an increase of 45% year over year.
Of course, it follows that if production and sales are slow, then the company's losses are probably not great either, which they aren't. Lucid's net loss was $992 million in the quarter, far worse than its loss of $631 million in the year-ago quarter. While Lucid's adjusted loss per share of $0.28 was better than Wall Street's consensus estimate of $0.30, I think the company's widening losses are a red flag.
Where Lucid could be in one year
Lucid's management says it will produce just 9,000 vehicles in 2024 and hasn't given estimates for 2025 production. Considering that making 9,000 vehicles this year will essentially be the same production amount as last year, it's not exactly impressive.
Lucid just began taking orders for its new Gravity SUV, with production expected to begin later this year. Adding another vehicle to the lineup might help Lucid sell more vehicles, but I'm concerned Lucid's high-end pricing strategy could hinder sales.
The Gravity starts at $79,900, and the Air starts at $69,900. A lower-priced crossover SUV vehicle isn't slated to go on sale until late 2026. Selling premium vehicles to customers would be a good strategy if the company were able to make a large profit from those sales. Instead, the company's losses have widened significantly.
I think the company could continue to be in a financially precarious situation one year from now, even after its recent influx of cash. It might need another lifeline from its Saudi investors if they're willing.
The company's operating loss increased to $770 million in the most recent quarter, up from $750 million in the year-ago quarter, despite Lucid's management saying they implemented cost-cutting measures.
All of this means that Lucid's stock will likely continue its disappointing track record over the next year. Its share price is down more than 70% since its IPO in 2019. Lucid could eventually figure out how to produce its vehicles more efficiently, but until it does, investors would be better off putting their money elsewhere for next year or longer.
