Anecdotal Evidence Suggests Demand for High-Priced Lucid Vehicles May be Waning

Investors may be growing more skeptical that Lucid Group, Inc. (NASDAQ: LCID) will achieve its full-year 2022 production target of 6,000-7,000 vehicles given recently reported actions.  Furthermore, and even worse, there may be evidence that demand is waning for the company’s high-priced (but beautiful and well-made, by most accounts) electric vehicles.

Lucid produced 3,687 vehicles over the first nine months of 2022, so to meet its production goal, it will have to manufacture at least 2,313 cars in 4Q 2022.  The company produced 2,282 Lucid Airs in 3Q 2022.

Interestingly, Lucid has delivered only about two-thirds of the vehicles it produced (2,437 divided by 3,687) in the first three quarters of 2022.  Investors have generally chalked that large differential up to delivery logistics issues, but declining demand may be part of that equation as well.  Lucid Air reservations dropped to about 34,000 as of November 7 from around 37,000 on August 3.

2024 Lucid Air

Recent media reports suggest that according to internal Lucid emails, if a customer tries to cancel a Lucid Air reservation, extraordinary efforts must be made to convince the customer otherwise.  Indeed, the emails imply that various Lucid employees may be required to place up to 14 pleading calls to the prospective customer.  Keep in mind that the Reservation Agreement on Lucid’s website reads: “The Reservation Payment is fully refundable to you should you choose to abandon your reservation at any point prior to placing an order.” 

Other media reports say that Lucid has offered up to a 10% discount to at least one retreating customer in hopes of saving the reservation.  Furthermore, that car could be delivered in just a “few weeks.”  In addition, Lucid is apparently offering US$18,000 discounts to employees which take delivery of a car by year-end 2022.  The discount will be credited to the employee’s paycheck over an 18-month period.

These pieces of anecdotal evidence do not suggest tremendous demand for Lucid vehicles.  Certainly, such discounting actions are unusual for a manufacturer of any luxury product.

Separately, Lucid’s recent share price declines may create much more dilution than investors expect.  On November 8, Lucid announced an “at-the-market” (ATM) stock issuance program whereby the company may over time sell up to US$600 million of stock, equivalent to just under 50 million new shares at the stock’s trading price on that day, but around 70 million shares based on current prices.

Furthermore, Lucid’s core investor, a Saudi Arabian investment fund that owns a 60%+ stake in Lucid, has agreed to purchase US$915 million of Lucid stock in one or more private placements over the period ending March 31, 2023.  The Saudi fund will pay a price equal to the volume-weighted average price in a given quarter of the ATM program discussed just above.  Given Lucid’s current share, it suggests the issuance of about 105 million new shares, not the 75 million implied on the date of the early November announcement. 

Based on these stock issuance plans, Lucid may be issuing about 175 million new shares over the next 6 months which would bring its shares outstanding to just over 1.85 billion shares from the current 1.68 billion.

Lucid Share Price is down 76.2% Over the Last Year (12/9/2022)

Lucid shares are down 85% over the last 13 months, but its enterprise value is still around US$13 billion.  That valuation continues to seem robust in light of the issues raised above, plus the company’s extremely high cash burn rate.  Just in the first three quarters of 2022, Lucid’s operating losses plus capital expenditures total a combined US$2.4 billion.

Lucid Group, Inc. last traded at US$8.68 on the NASDAQ.


Information for this briefing was found via the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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