Lucid has been steadily ramping up its deliveries over the past 18 months, and while there’s potential for further growth, there are still reasons it might fall short.
For example, if you had invested $10,000 in Tesla on its IPO day, your investment would now be worth around $2.9 million. In contrast, a similar investment in the broader S&P 500 would have only grown to about $66,000. This shows Tesla’s unique position, but it also highlights the allure for investors in other emerging electric vehicle (EV) companies like Lucid Motors—should they consider getting on board?
More records to come?
If you’ve kept an eye on Lucid lately, you’ve likely noticed a trend: their delivery reports have been largely encouraging. In the third quarter, Lucid delivered over 4,000 vehicles, achieving a record for the seventh consecutive quarter. That’s a hefty 23% increase from the previous quarter and a 46% jump year-over-year.
However, the company acknowledged that the production of its Gravity model was somewhat slower than expected, largely due to supply chain hurdles, like a scarcity of Chinese-made magnets that impacted the auto sector last spring. After navigating through a tough patch of supply chain setbacks, tariffs, and the expiration of the $7,500 federal electric vehicle tax credit, there’s some positive news: Gravity’s production is gaining ground. With this momentum, the company could keep breaking delivery records moving forward.
Additionally, it’s interesting to note that the market for Gravity is projected to be six times larger than that for Lucid’s Air sedan, hinting at substantial growth potential in the near future as production scales up.
Getting involved in the ride
It’s not uncommon for auto manufacturers to first launch premium versions of their vehicles to ensure production profitability, and that’s the path Lucid took with Gravity. Currently, the Gravity Grand Touring starts at $96,550, including shipping, although Lucid had initially aimed for an under-$80,000 price. Now, they are finally offering a base version—the Touring trim—which meets that promise. This new variant boasts 560 horsepower and can reach 60 mph in about four seconds. Interim CEO Mark Winterhoff noted that, “Lucid Gravity Touring opens up a new customer base for the Lucid brand,” pointing out that this SUV segment uniquely combines range, interior space, and performance.
Now that the base trim of Gravity is in mass production, it’s reasonable to expect an uptick in deliveries across the EV sector. Still, one might wonder why Lucid’s stock price has dropped about 52% over the last three months.
What’s the issue?
The core of the problem for Lucid investors doesn’t stem from the company’s growth in deliveries or supporting sales. Instead, it’s tighter cash flow and unexpected outcomes that have pressured stock prices. After revising its annual production forecast down to between 18,000 and 20,000 units over the summer, Lucid ended up hitting the lower limit, missing Wall Street’s expectations for the third quarter while continuing to face cash constraints.
To address this, Lucid is expanding its existing loan credit facility from $750 million to $2 billion, which should bolster its business operations. They’ve also raised around $975 million through a private placement of convertible notes due in 2031, intending to use a significant portion of those funds to buy back existing senior notes maturing in 2026. These steps have enhanced Lucid’s financial flexibility for now but likely won’t resolve its long-term capital requirements.
As Lucid continues to break quarterly delivery records, it’s crucial to acknowledge the hurdles it faces in scaling production and deliveries while also working to cut costs and boost profitability. For many investors, despite the possibility of more record-breaking quarters, Lucid still appears too risky to invest in.
