Lucid Group (LCID -2.57%) makes all-electric vehicles, including both a sedan and an SUV. That said, it is really just a start-up in what is a highly competitive and capital-intensive industry. It is hitting important milestones and increasingly looks like it may be an industry survivor. But is it worth buying?
What does Lucid do?
In some ways there's nothing particularly differentiating about Lucid. When Tesla (TSLA 4.06%) started making electric vehicles (EVs) it was really the only player in the space. Tesla effectively proved that EVs were a viable consumer product. Now every major automaker is making EVs and so are a large number of upstarts, like Lucid, that are trying to follow in Tesla's footsteps.
Image source: Getty Images.
So, Lucid is really just one of many companies trying to catch a little bit of Tesla's lightning. That said, there have been many upstarts in the space that have flamed out. Lucid has managed to keep moving forward. Today it has a lineup of sedans and SUVs. It has super-high-end EVs and vehicles that are relatively more affordable.
Technology is one of the key focus points for Lucid. It has industry-leading batteries, which are basically the gas tank for an EV. So it isn't just a me-too company; it is adding materially to the industry's technology. There's a good reason to believe it can keep doing that and use that as a lever to build a sustainably profitable business.
Where is Lucid today?
The end goal is to become a sustainably profitable EV maker, but that's not where Lucid is right now. It is losing money on every single car it sells. That's not shocking, however, since Tesla had to go through this early stage of development, as well. But now that Wall Street isn't quite as excited about EVs as it once was, Lucid's stock price has been under material pressure. Notably, the shares have fallen over 90% from the all-time highs reached just after it became public.
Essentially, investors are saying this is a high-risk investment. And it is a high-risk investment that most investors should probably watch from the sidelines. But for more aggressive investors, the low price could also be an opportunity to get in on the ground floor of a company that is steadily hitting important goals.
The big goal right now is production. In the first quarter of 2025, Lucid made around 2,200 vehicles and sold roughly 3,100. Those are tiny figures in the auto sector but represent big year-over-year improvements. What's important here is that the more cars the company makes and sells, the wider its cost gets spread. And that, in turn, gets the business closer to turning a profit.
To put a number on that, the company's gross profit margin in the first quarter was negative 97%. That's terrible, but it is also a huge improvement over the gross profit margin of negative 134% in the same quarter of 2024. The more cars it makes and sells, the closer it gets to a gross profit. The next step after that is attempting to achieve positive earnings. And if it does that, Lucid will have successfully followed Tesla's lead.
Execution will be the key to Lucid's success
As noted, this is not a great investment option for most investors. Only aggressive types should be looking at Lucid. It is nowhere near being a sustainably profitable business at this point, and it could be years before it gets there. Moreover, success here depends heavily on management's ability to continue executing well on its goals.
And yet, given the fairly steady progress so far, it looks increasingly like Lucid could reach the key milestone that most investors want, a sustainably profitable business. If you believe the company can eventually get to that destination, it could be worth buying now, while the stock remains deeply unloved.
