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Lucid Motors: Still Walking on Air, but for How Much Longer?

The market expects a lot from the newest electric vehicle company on the block

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Sep 30, 2021
Summary
  • Lucid began volume production of its first electric vehicle, the Lucid Air luxury sedan.
  • The Lucid Air has received rave reviews from automotive industry press; the new EV has already garnered more than 13,000 reservations.
  • With a market capitalization in excess of $42.5 billion, years of aggressive growth have already been priced into the stock.
  • Simply to grow into its current valuation will require sustained long-term executional excellence.
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Lucid Group Inc. (

LCID, Financial) has come a long way since first opening for business in 2007. For the first few years of its existence, the company’s focus was on manufacturing batteries and drive trains for other electric vehicle (EV) companies. That changed in 2013, when the company hired Peter Rawlinson to serve as its chief technology officer, a move that coincided closely with its rebranding as Lucid Motors.

Rawlinson joined Lucid as an already well respected figure within the automotive industry, having made his name at Tesla Inc. (

TSLA, Financial) where he had been the driving force behind the development of the widely acclaimed Model S sedan. Evidently not satisfied with having put just one upstart EV player on the map, Rawlinson has spent the last eight years working to repeat the achievement with Lucid and its inaugural EV, the Lucid Air. With the first Lucid Air deliveries set to begin next month, the market may soon learn whether Rawlinson succeeded.

A bumpy takeoff

The development of Lucid’s EV business shifted into high gear in November 2016, when the company announced plans to build a $700 million manufacturing plant in Arizona. Less than a month later, the prototype Lucid Air made its first public appearance.

Lucid initially pegged the production capacity of its plant at 20,000 vehicles per year, which would then rapidly scale up to 130,000 vehicles per year. Originally, Lucid had planned for factory construction to begin in 2017, with the Lucid Air slated to enter production in early 2019. That timeline quickly proved to be overly optimistic, with construction of the factory not getting underway until early 2019––when production models of the Lucid Air were supposed to start rolling off the factory floor.

The delayed start to construction (and, consequently, to vehicle production) was due in no small part to funding limitations. Setting up an automotive manufacturing business is an expensive proposition at the best of times, and Lucid had to compete with a host of other upstart EV companies for investors’ attention. Salvation came from a rather unlikely source: In April 2019, Lucid inked a deal with the Public Investment Fund of Saudi Arabia, an investment vehicle controlled by the Saudi government, that added $1 billion to the cash-strapped EV maker’s balance sheet and elevated Rawlinson from the role of CTO to that of chief executive of the whole company.

Now, at long last, Lucid is gearing up for the full-scale launch of the Lucid Air.

Ready to soar

This year has already proven to be quite a momentous year for Lucid Motors. In February 2021, the company announced plans to go public via a merger with an existing special purpose acquisition company, or SPAC, in a deal valued at just under $11.8 billion. Lucid officially began trading on the public market on July 26, raking in a more than respectable $4.5 billion in the process.

Lucid’s factory is now in full swing, and the first production models of the all-electric luxury sedan were completed this week. Deliveries will begin in October. While more than two years behind schedule, the final product may prove to have been worth the wait, if the reviews coming out of the nation’s top automotive publications are to be believed. The reception of the newest luxury EV has been nigh universally positive thus far, a fact that has only helped to heighten anticipation among the investment community and general public alike.

With more than 13,000 reservations for the Lucid Air already on the books, Lucid has a substantial backlog of orders to work through. However, that reservation count will be a drop in the proverbial bucket if the company’s own growth projections are to be believed. According to its forecast released in May, Lucid expects to sell a total of 48,000 vehicles, including 36,000 Lucid Air sedans, in 2023. Lucid’s in-development SUV, known currently as Project Gravity, is expected to account for the remaining 12,000 vehicle sales in what would be its first year on the market. In 2026, Lucid projects that it will sell around 42,000 sedans and 134,000 SUVs, in addition to as many as 75,000 sales of a more affordable model––though this putative third model has yet to enter development.

Sky-high expectations

Based on the stratospheric valuation it has given to Lucid, the market’s expectations for the still-tiny EV maker can only be described as sky-high. The Sept. 28 announcement that production had commenced sent the stock higher still. At the close of trading on Sept. 29, Lucid had hit $26.28 a share, giving the company––which has yet to make a single delivery to a paying customer––a market capitalization in excess of $42.5 billion. The company will have to work very hard, and execute exceptionally well, over the next several years simply to grow into the lofty valuation it currently enjoys, in my assessment.

It is clear that the market expects an awful lot of growth from Lucid. Whether the company can actually live up to those lofty expectations is far less clear, in my opinion.

Trade carefully!

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