Tesla's immense success opened the door for other electric vehicle companies. Among them is Lucid Group (LCID -4.48%), a high-end brand whose first model, the Lucid Air, garnered critical acclaim across the automotive space. So far, though, the stock hasn't been a winner. Despite financial backing from Saudi Arabia's Public Investment Fund, the stock has lost almost all of its value over the past several years.
Recently, Lucid announced Q1 2025 results. The company's deliveries increased 58% year over year, an impressive jump at a time when Tesla is seeing sales decline.
Is Lucid getting enough traction to jump-start the stock finally? If so, can Lucid's potential comeback make you a millionaire? Here is what you need to know.
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Lucid's product and growth are impressive, but there is one big problem
The automotive industry is brutally challenging, especially for electric vehicle manufacturers like Lucid, which are trying to carve out a piece of the market.
Yet Lucid has done some things right. Industry critics widely praised its first model, a high-end sedan called the Lucid Air. And while Tesla's sales are slipping for several potential reasons, Lucid's first quarter of 2025 marked its sixth consecutive quarter with record deliveries.
Now, Lucid has launched the Gravity, a high-end SUV. Lucid is essentially copying Tesla's playbook, starting with a premium sedan and SUV to establish its brand.
The one big problem with Lucid right now is that everything is still on such a small scale. Unfortunately, premium vehicles have a small addressable market. Lucid's delivery growth is fantastic, but the company's record-setting delivery number in Q1 was only 3,109 units.
Continued burn has been disastrous at low share prices
The biggest hurdle for new automotive companies is the high cost of factories, which can cost billions of dollars to build and operate. You need enough volume to produce vehicles at a competitive price profitably. Lucid's low volume has resulted in significant cash losses, including nearly $2.8 billion over the past four quarters.
The company currently has $3.6 billion in cash, which is sufficient to fund the business for approximately one year at its current pace. Management will need to raise money when its cash reserves run low, which they often do by issuing stock and convertible bonds.
Unfortunately, as Lucid's share price declines, it must offer more equity to raise the same amount of money. It has caused Lucid's diluted share count to rise by 80% over the past three years alone.
Data by YCharts.
The resulting share dilution diminishes the stock's investment upside, as revenue and eventual profits spread more thinly across a broader shareholder base.
Lucid may stick around, but investors probably shouldn't
Ideally, Lucid grows its volumes enough to turn its cash flow positive, but that could be a ways off.
Tesla got the volume it needed to sustain its factories with the more affordable Model 3. Today, the lower-priced Model 3 and Model Y account for most of Tesla's vehicle sales. Lucid has similar plans, with less expensive models in the works. But those are still years away from arriving and making an impact.
Saudi Arabia's Public Investment Fund owns nearly 60% of the company. Lucid even assembles vehicles in Saudi Arabia, which underlines the country's firm support. Those deep pockets could help Lucid see its plans through over the coming years. Unfortunately, that will probably come at the cost of individual shareholders if dilution continues at this pace.
Stocks that can generate a lifetime's worth of investment returns are scarce as it is. Lucid's current challenges don't have an obvious immediate solution, which makes it difficult to envision the stock heading in the right direction anytime soon.
Investors are likely better off looking for better stocks to pin their home-run hopes on.
