In Focus: Lucid Motors, it's the Next...
Updated: Oct 3, 2021
Without having to say it, I know that you want it to be. You want so badly for Lucid Motors (LCID) to be the next Tesla (TSLA), and you know who you are. You, who either missed out on Tesla when it was cheap or you, who didn't buy enough Tesla when it was cheap, you're looking at Lucid Motors to right your investment wrongs from the past, but watch out.
You, we, us, we've been burned before by alleged Tesla competitors. One company was going to revolutionize long-haul trucking with hydrogen fuel cell technology, another company was going to make electric pick-up trucks for companies that require a fleet of trucks, and another electric vehicle company was going to electrify the last-mile delivery industry. All of those companies have lost a CEO over the past 12 months, and have lost millions of investment dollars as well.
Lucid Motors is not too different from the failing EV companies alluded to above. Lucid Motors became a public company by way of a SPAC acquisition. Similar to the fuel cell company, and the fleet truck manufacturer. And similar to the fuel cell guy, Lucid's management has been making some very bold statements and big promises.
Lucid's EV tech was developed in house, and the company believes with the Lucid Air it has created the quickest, longest-range, fastest charging electric car in the world. The company also claims that the battery efficiency of the Lucid Air beats that of the Tesla Model S.
Although the company has yet to deliver a single vehicle it has put out some pretty aggressive targets, which includes generating positive gross profit in 2022, positive EBITDA in 2024, and positive net income in 2025. It took Tesla 18 years to post a profitable year, and that came with the help of pollution credit sales.
To Lucid's credit, they've built a $700 million factory to produce their first electric vehicle. The factory was built in a way that allows the company to expand capacity if needed. This a one-up on the fuel cell company that introduced a hydrogen pick-up truck, but had nowhere to build it, and was having it's semi-trucks manufactured in Germany. It's also has a one-up on the company that was so eager to produce electric trucks for fleets that it purchased an old GM factory, where the Chevy Cruz, a compact 4-cylinder car, was manufactured. Millions of dollars had to be spent to get the factory prepared to manufacture an electric truck at scale, and now this company is close to running out of money, and is in talks to lease some of the factory space.
Lucid's factory was completed in December 2020, and from that point the company started equipment testing and now it's producing vehicles, but not vehicles to be delivered, the current vehicles being manufactured are needed to test quality and safety. Once all tests are passed then production of vehicles to be sold will start. The company expects to deliver vehicles in the second half of 2021, which we're in, with less than five months left in H2 2021. The company initially had a spring 2021 delivery date that it missed due to supply challenges caused by the COVID-19 pandemic.
Lucid is going after the ultra luxury car buyer. The first car expected to roll off the assembly line for delivery is the company's Lucid Air Dream Edition, which starts at $170,000 before federal tax credits. That price puts the Air Dream Edition up there with the Mercedes AMG G63 (The AMG G-Wagon), and its price surpasses Tesla's Model S Plaid by nearly $40,000. Lucid has stated that the reservations for the Dream are full, and the plan is to manufacture 500 units. Overall, the company boasts 10,000 vehicle pre-orders, and Lucid pre-orders require a small deposit.
Not Ready to Bet it All
Lucid has done a lot right so far, even the management team looks good. The team has several people from Tesla, including Lucid's CEO. However, I'm not ready to bet money on this company being the next Tesla or even a serious Tesla competitor. Fool me once with Nikola (NKLA) the fuel cell guys, fool me twice with Workhorse (WKHS) the last mile delivery guys, fool me a third time with Lordstown Motors (RIDE), the electric truck for fleets guys, I, we, us, should not be fooled a fourth time.
It's likely that all of the milestones that Lucid has, like profitability in 2025, positive gross profit in 2022, and positive EBITDA in 2024 won't be met in the timeframes given. Lucid's plan to produce 20,000 vehicles in 2022, likely won't happen, all 10,000 pre-orders taking delivery of a vehicle, probably won't happen either. What Tesla's struggles and then rise, and the missteps by Nikola, Workhorse, and Lordstown Motors should remind us is that starting a car company is extremely difficult, it's a lot more than lines of code.
We the investor are looking for a company to build a factory, start manufacturing in a country that essentially has moved on from manufacturing, establish sales centers, try to sell a $170,000 product with zero history, sell that $170,000 product over more established names, figure out distribution, establish service centers, figure out parts and repairs, figure out sales and marketing, appease shareholders, appease regulators, appease local governments and eventually foreign governments, and do this as quick as possible so that the stock price can rise, and we can become millionaires.
If it's not obvious, my approach on Lucid Motors is to sit and wait and see how it all shakes out. The great thing about investing is that you don't have to be the first person at the party to make a ton of money.
There was a time back in 2014 through 2016 where I just traded in and out of Tesla, this was pre 5-for-1 split, when the stock was trading between $285 to $150 a share. I never held on to any Tesla from that time period, because I believed the big move had already happened. In 2010 Tesla was trading for less than $20 a share, so at $285 I didn't expect an electric car company that sold less cars than Ford and GM to ever eclipse Ford and GM's value, but boy was I wrong. Even at $285 pre-split or ~$58 post split, I would've still been early to the Tesla party, and Tesla now trades at $680.26 post split, 1,072% higher from where I had my hands on it.
For all the investors looking at Lucid, but dreaming of Tesla, stop it. Look at Lucid, and only invest when it proves it's not Nikola, Workhorse, or Lordstown Motors.