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The bloodbath in startup electric vehicle (EV) stocks that began in 2021 has continued to worsen in 2024. Lucid Motors (LCID), for instance, is down almost 41% for the year, and is not far from its record lows.
The Peter Rawlinson-led company once looked like a formidable challenger to Tesla (TSLA). While Lucid Motors still keeps benchmarking itself against Tesla, and it's tough to find any Lucid earnings call where the word “Tesla” does not pop up, the company has largely disappointed.
Lucid Motors expects to produce 9,000 cars in 2024, and while Tesla hasn’t provided quantitative guidance, it produced 1.85 million cars last year. Tesla has warned that its delivery growth this year will be significantly below what it achieved in 2023, but CEO Elon Musk said that its 2024 deliveries should be higher than 2023, despite the dip in Q1.
As for Lucid Motors, despite its sagging stock price, tepid deliveries, and failure to live up to its promise, it is one EV name that we cannot yet write off. Here’s the 2025 forecast for LCID stock, and whether it's worth the risk.
Why Are EV Stocks Falling?
The EV industry is suffering from multiple headwinds. There is simply too much overcapacity, as automakers invested billions of dollars to ramp up their EV capacity, anticipating the demand to keep growing at a brisk pace. That, as we know, was not the case. Even Tesla, whose CEO Elon Musk famously touted a 50% delivery CAGR, is struggling to grow its deliveries.
The enthusiasm towards electric cars has been subdued, and now it seems automakers misread the craze among early adopters as an extrapolation of the entire market. Factors like the macroeconomic slowdown, higher inflation, and high interest rates could be blamed for the slowdown in EV sales - but these variables impact the sales of internal combustion engine (ICE) cars, as well. However, sales of ICE cars have been quite strong, and it seems they are not fading away and becoming the next “steam engine,” as Musk predicted, anytime soon.
The old demand-supply rule is at play in the EV market, and slowing demand coupled with spare capacity have prompted automakers to cut prices. This has meant a widening loss for startup EV players like Lucid Motors, who continue to grapple with negative operating leverage as they can’t run their plants to capacity amid slowing sales.
Why Does Lucid Motors Stand Out from the Crowd?
To survive the EV industry turmoil, companies need a combination of quality, differentiated products, along with a strong balance sheet, with backing from investors who are willing to fund the continued cash burn. As I have stated previously, Lucid has a combination of both.
During the Q1 2024 earnings call, Lucid Motors CEO Peter Rawlinson said that there are “two key factors that really set Lucid apart.” Namely, he said those are “our superior in-house technology and our partnership with the PIF, who have been steadfast investors and partners.”
Unlike many other startup EV companies that have, at best, “me-too” products - or worse, unviable and questionable products - Lucid Motors has a reasonably good offering. Luxury carmaker Aston Martin has also partnered with Lucid to buy electric motors and batteries, which provides credence to Lucid Motors’ claim that it offers a world-class product. The company’s batteries are also quite efficient, which helps it provide a much higher range in its vehicles.
During the Q1 earnings call, Rawlinson said that the “Aston Martin deal continues to generate more interest in our technology from other prospective partners.” He also called upon investors to “watch this space as we continue to discuss monetization opportunities across all aspects of our technology, including our world-class software.”
LCID also has the “Saudi backstop,” as the oil-rich kingdom has so far looked amenable to fund Lucid Motors’ cash burn. Lucid Group is a crucial moving part of Saudi Arabia’s green energy strategy as the kingdom tries to diversify itself from oil revenues.
Lucid has already built Saudi Arabia’s first-ever car manufacturing plant for semi-knockdown kits. It is now building a plant to manufacture completely built-up cars in the country.
Lucid Motors 2025 Forecast
During the Q1 earnings call, pointing to the nearly $5 billion in cash and cash equivalents, Rawlinson noted that the company has “enough financial runway to see us well into 2025.” However , he stressed the capital-intensive nature of the business, and said he would take a view on “raising capital when the time is right.”
That said, in all likelihood, Lucid might need to raise cash in 2025, or perhaps before as it continues to burn cash – both towards capex as well as operating losses.
The next key driver for Lucid will be the Gravity SUV, which is set to go into production later this year. This will be followed up with a midsize vehicle, which Rawlinson says will take on Tesla's Model 3 and Model Y. Rawlinson believes that by the next decade, the company can make a million units annually of that model – which might seem like a tall task, considering its 2024 production is expected to be below 10,000.
While Lucid Motors’ management has sounded quite exuberant about its plans to take on Tesla, and has a strong product lineup and financial backing from PIF, it’s a show-me story. The company might not get much help from the macro environment, as the competition might only intensify in the short term, further worsening the price war.
Overall, LCID looks like a risky name, and while the backing from PIF makes it immune to bankruptcy, the company's management has a lot on its table as it strives to compete in what looks like an oversupplied and overcrowded EV market.
On the date of publication, Mohit Oberoi had a position in: LCID , TSLA . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
