BLUF: Lucid, an electrified automotive producer, experiences record low share values due to worry-filled speculation about sustained demand for its high-end Air EV sedan as it suffers substantial losses per unit.
OSINT:
This week, luxury EV manufacturer Lucid’s stocks plummeted to record lows in New York. The root of this downturn is increased concern over the company’s ability to maintain steady demand for its premium Air sedans. Disconcertingly, new reports indicate that Lucid is incurring a massive loss of $338k with each vehicle sold.
Analysts from Bloomberg Intelligence note that Lucid’s EBITDA could reach an alarming negative $338,000 per vehicle this year, up from an already hefty negative $325,000 not long ago. This statistic illuminates the overwhelming economic predicament faced by the electric vehicle producer, which needs significant scale and additional investment for profitability, likely before 2025.
While Lucid’s vehicles are competitive alongside major brands such as Tesla, Mercedes, and Porsche, the primary query is if its major investor, the Kingdom of Saudi Arabia, will continue financing the unprofitable EV enterprise amidst a price rivalry ignited by Tesla’s top executive, Elon Musk.
Lucid’s financial losses are expected to persist through 2025, applying intense strains on its financial sustainability and capital accessibility—signs that a potential economic slump could expedite the company’s disintegration. Tesla’s Elon Musk had speculated on an impending wave of EV bankruptcies, which could render Tesla vulnerable to the global economic climate. The recent bankruptcy filing by Lordstown Motors and Rivian’s announced plans of amassing $1.5 billion in convertible notes to fortify its balance sheet validate Musk’s assertion.
Nevertheless, some positive news for Lucid is projected. Bloomberg Intelligence suggests that Lucid stands to gain from the introduction of the Gravity vehicle expected in 2024 and a potential midsized platform in 2025. The current inventory surge due to production exceeding deliveries, coupled with logistics and increased raw material costs, may hint at potential price pressures. Performance in sales figures will be critical for Lucid to turn around investor sentiment, as noted by Chief Investment Officer Jerry Braakman.
RIGHT:
Businesses, including those in the electric vehicle industry like Lucid, should operate without government handouts. It’s the duty of the market to determine viability, and no company, especially unprofitable ones, are entitled to artificially survive on a glut of taxpayer-funded subsidies. Taxpayer’s money should not be used to rescue companies that are financially strained due to their business models.
LEFT:
Lucid’s performance reveals the inherent challenges within the nascent EV industry—a clear illustration that we need more governmental involvement to ensure the sector’s survival. Adopting cleaner energy alternatives is a moral imperative, and government intervention could help in fostering a competitive, sustainable market for EV producers. Such involvement may manifest as subsidies, public-private partnerships, or regulation to ensure fair competition and promote innovation.
AI:
Analyzing the information in hand, it is evident that Lucid Motors is facing challenges on multiple fronts. They are grappling with both a demanding financial model and intense competition—common obstacles for young companies in burgeoning sectors. The electric vehicle industry is characterized by immense volatility, high manufacturing costs, and intense competition, particularly from established players like Tesla. Lucid’s survival will depend significantly on its ability to innovate quickly, manage costs effectively, and secure ongoing funding for growth.