Is It Time To Break Up With Lucid?

It has been a bad move for electric vehicle (EV) startups lately, Lucid Motors (LCID -1.51%) together. The company has cut production forecasts multiple times, cut prices on its only car, reported a big loss in the fourth quarter, and barely produced 6,000 cars in 2023.

Combine those factors with a general economic environment of high interest rates and reduced demand for EVs, and you’ll get a fall in EV startups like Fisker. But is it time to give up on Lucid, or should investors hold on to this bad time?

Setting the location

No matter which way Lucid turns, it faces challenges. At first the company’s supply chain caused disruptions in production, and then when those issues were fixed, demand decreased and supply was measured.

Lucid’s net loss for the fourth quarter of 2023 came in at $654 million, wider than the prior year’s loss of $474 million, and production is expected to hit just 9,000 vehicles in 2024 after reaching around 8,500 in 2023 — certainly not impressive growth. .

The bigger picture is more eye-opening, with Lucid’s 2023 net loss coming in at $2.8 billion compared to 2022’s loss of $1.3 billion. For context, the total liquidity of EV startups was $4.78 billion at the end of 2023.

Time to give up?

Investors watched just how quickly things could go south for Fisker, as its stock price fell 99% year-to-date and the New York Stock Exchange delisted the stock. That said, Lucid likely has the liquidity needed to survive a year or so before things go as bad as Fisker, as Fisker couldn’t even pay accounts payable recently.

Additionally, the industry is approaching a point where EVs will be more price competitive with gasoline vehicles. In fact, Pedro Pacheco, vice president of research at a technology analysis company Gartnerhe said that EVs are predicted to be more expensive to build than internal combustion vehicles by 2027, thanks to innovative manufacturing methods and declining battery costs.

Attractive and low-cost platform

Another reason Lucid hasn’t given up yet: Its product pipeline.

One could argue that Lucid’s biggest hurdle so far has been selling its only vehicle, its Air sedan. Part of the difficulty in selling the car is certainly its starting price of around $170,000. That price tag makes it the only Lucid product to sell in a high-end market — one that quickly became saturated.

But later in 2024, the company is scheduled to launch its second vehicle, the Gravity crossover. The new version starts under $80,000, which gives the company access to a wider user base. However, it’s fair to note that this is still a high price point, and may not provide the necessary demand at a time when other EV companies are trying to push prices down into the $30,000 range to appeal to mainstream consumers.

Moreover, after the company launches Gravity, it plans to dive into the luxury and affordable car market. The mid-size platform is targeting a price tag of around $50,000, and it’s thought the first vehicle on the platform will be a crossover designed to compete toe-to-toe. Tesla‘s Model Y. Investors shouldn’t expect this next-generation car to enter consumers’ garages until early 2026, but it’s a near future that Lucid can sell investors sooner, rather than later.

Wait

Finally, 2024 is set to be a troubled year for EV startups, including Lucid. Much anticipation is riding on the company’s upcoming launch of the Gravity, and demand for the vehicle will greatly influence how investors feel about the company’s ability to achieve its long-term vision as a long-term EV player in the industry.

It’s certainly not time to give up on Lucid, and its situation isn’t much worse than Fisker’s, but investors willing to take the big risk of owning a young EV startup in this big environment should realize that it’s highly speculative and volatile.