The electric vehicle (EV) company Lucid Group (LCID +1.46%) went public through a special purpose acquisition company (SPAC) in 2021, a time when valuations were loose, capital was abundant, and high-profile SPAC merger announcements were occurring daily.
Unfortunately, many companies took advantage of the tremendous market conditions at the time and went public at big valuations before they were ready. Then the stock market took a big hit in 2022, wiping out many of the SPAC targets and sending their stocks into free fall. Lucid was part of this group and has seen its stock decline by over 87% in the past five years.
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Still, many see long-term potential in the EV market and appreciate Lucid's vehicles. In July, the ride-hailing giant Uber Technologies invested $300 million in Lucid as part of a partnership in which Lucid will help with the development of robotaxis for Uber, which plans to roll out over 20,000 robotaxis within the next six years.
Still, I wouldn't touch Lucid with a 10-foot pole. Here's why.
Poor financials in a struggling EV market
Lucid has faced numerous challenges outside of its control, similar to those faced by the broader EV market. President Donald Trump's tariffs have made creating its vehicles more expensive and hurt the company's margins. Furthermore, Trump's landmark spending bill eliminated a $7,500 electric vehicle tax credit, which is also expected to stymie demand.
Lucid also has concerning financials, with a high cash burn rate and a decent amount of debt. Through the first three quarters of 2025, Lucid reported a loss of $8.50 per diluted share.
NASDAQ: LCID
Key Data Points
Wall Street analysts also have significant concerns about Lucid's ability to meet its full-year guidance for around 18,000 vehicles produced. In the third quarter, Lucid delivered close to 4,100 vehicles, with an additional 1,000 vehicles produced for final assembly in Saudi Arabia. The company has delivered nearly 10,500 vehicles this year, meaning Lucid would need to deliver around 7,500 vehicles in the fourth quarter to hit its annual goal of 18,000.
Investors should also keep in mind that many consider the EV sector to have outperformed in the third quarter, as consumers rushed to take advantage of the EV tax credit before it expired.
With a $4 billion market cap, Lucid trades at a high valuation. While investors are obviously betting on strong growth and the EV market eventually picking back up, I would advise staying away from the stock until Lucid firms up its balance sheet and slows its cash burn.
