Lucid Group Inc.: At the helm of the EV start-ups’ battle

written on December 1, 2021

It is the EV (electric vehicle) maker on everyone’s radar at the moment and since it went public by merging with a special purpose acquisition company (SPAC) earlier this year, it has become one of the most talked-about stocks high and low. Admittedly it faces stiff competition in the luxury market from the likes of Tesla (TSLA), Mercedes-Benz (DAI) and others, but so far, it appears to have shrugged this off, while its extremely powerful yet serenely luxurious Lucid Air has been well received, going so far as to win the coveted 2022 MotorTrend Car award of the year.

Meanwhile, with major climate initiatives coming out of the recent COP26 conference, the 2021 United Nations climate change conference and global leaders’ plans against climate change, such as Joe Biden’s infrastructure package, there are even more reasons to be confident about EVs going forward. And Lucid Group’s stock might be just the name worth adding to your portfolio.

A brief history of Lucid Group

Founded in 2007 under the name Atieva, the company’s small team of Silicon Valley engineers originally focused their attention on battery systems - the very core of EV technology - to address challenges such as achieving high performance and safety, as well as manufacturing a battery that would be durable and would stand the test of time.

By 2013, the company had become a leading capable producer of connected premium electric battery packs and powertrains, however, Lucid sought to achieve more. In fact, it wasn’t until 2014 when it began developing its first car, initially using a Mercedes Metris van named Edna to craft its prototype after securing capital from a 9-digit funding round. Its highly anticipated Lucid Air was first unveiled in December of 2016, with production expected to start in the spring of 2021. With an approximate range of 520 mile (840 km) on a single charge, that’s over 100 miles more than its closest rival, Tesla’s Model S. The four-door saloon car was designed by Derek Jenkins, the designer of Mazda’s MX-5 and it aims to rival against leading luxury sports brands like the likes of BMW (BMW), Mercedes-Benz, Audi, Porche (PAH3) and, of course, Tesla.

On the other hand, the company has also announced that its Lucid Air Pure had 406 miles (653 km) of projected range and 480 horsepower (hp) (360kW) with a price tag of $77,400, while the full range of models consists of Lucid Air Touring, Grand Touring and Dream Edition versions, with the top spec cars reaching over 1000hp.

Operating in a competitive market, Lucid has ensured that its cars are jammed packed with features, inking an agreement with Mobileye to use its EyeQ4 chips and cameras for diver assist features, while it is collaborating with Amazon (AMZN) to render its cars compatible with Amazon’s Alexa, a feature that will power drivers to use the voice assistant for a series of things ranging from navigation and phone calls to media streaming, smart home control and other activities.

And as proof of how serious it is to become a top-notch EV maker, in December of 2019, Lucid broke ground on a factory in Arizona, touted as the first greenfield facility for EV manufacturing in the U.S. The $700 million facility dubbed AMP-1 aims to produce up to 400,000 electric cars per year once all its phases have been completed.

Fun fact

The Lucid Air may not have officially hit the streets yet, however, that sleek futuristic car that the character Samantha Margolis drives in several episodes of Amazon Studios TV’s series Goliath is none other than a Lucid Air.

When did Lucid Group go public?

Lucid’s debut on the Nasdaq took place in July of 2021 after it merged with Churchill Capital Corp. IV in a highly anticipated initial public offering that saw it fetch an eye-watering $4.5 billion in new capital. Shares rose as much as 19% on the first day of trading, while the merger with Churchill Capital Corp IV gave the combined company a pro-forma equity value of $24 billion. Its stock also skyrocketed from about $10 to an all-time high of almost $65 particularly during the Reddit-fuelled rally later that same month it went public.

Is Lucid Group a buy?

Even prior to becoming a public company, Lucid attracted strong investor interest. Its listing was a huge dividend for Saudi Arabia’s Public Investment Fund, which had invested more than $1 billion in the company back in 2018 for a substantial stake, while BlackRock and others had also invested an additional $2.5 billion in Lucid as part of the merger.

Despite this interest, some analysts have raised questions about the steep valuation the company has obtained when considering that it has virtually no revenue as yet. As recently as November 16, Lucid’s market value reached $89.9 billion, following a 24% runup in its stock price, blowing past rival’s Ford Motors (F) market value. The surge in the stock price also brought the EV start-up close to eclipsing General Motors’ (GM), which currently stands at $93.01 billion. Although its market cap is still far below that of Tesla, which surged to more than $1 trillion this year, Lucid’s stock price has soared by more than 80%, while the largest daily increase was that of 31% which occurred late last month when the company confirmed customer deliveries of the Lucid Air Dream Edition were about to begin. As a result, investors who are bullish on the stock claim that Lucid certainly has potential.

And the fact remains that Lucid has arguably a better business model than many of the market’s other SPCA-backed EV makers. This, together with the fact that it is producing vehicles has helped it avoid federal probes into potentially misleading statements to investors, such as those faced by Nikola (NKLA) or Lordstown Motors (RIDE). It also has an experienced individual at its helm, an operating factory and a growing customer base.

As a relatively young company, however, Lucid is not as yet profitable, while it’s still in the early days of generating revenue. For the third quarter, its revenue was $232,000, which was largely generated from a battery deal with the Formula E electric racing league. In addition, the company bolstered its balance sheet to close Q3 with approximately $4.8 billion in cash. In July, it announced that it expects to produce 20,000 Lucid Air sedans in 2022, with the potential to generate more than $2.2 billion in revenue.

There is also the growth potential of the market it operates in. Prior to the onset of the COVID-19 pandemic, the combined annual sales of battery electric vehicles and plug-in hybrid models tipped over the 2 million vehicle mark for the first time in 2019. A year later, more than 10 million electric cars were on the world’s roads in 2020, with battery electric models driving the expansion, whereas electric car registrations increased in major markets throughout 2020. Meanwhile, in 2021, EV sales have surged further, with growth in all three top auto markets, namely China, the U.S. and Europe.

What’s next for Lucid Group?

Despite the critics, Lucid has managed to stay true to its word, spending much of the first half of the year tweaking its manufacturing process, growing its reservations and opening showrooms, as well as service centres. And for its efforts, the company has managed to live up to the hype, not only getting the EPA (U.S. Environmental Protection Agency) stamp of approval but also receiving favourable reviews by a range of publications, such as MotorTrend, Car and Drive, as well as Road & Track.

The company has said that it has more than 17,000 reservations of its Air sedan, up from 13,000 through the third quarter, with these reservations representing an order book of $1.3 billion. At the same time, it also confirmed its 20,000-vehicle production target for next year, albeit acknowledging that hurdles remain.

Its ambitious growth plans and attractive manufacturing edge has certainly made investors take notice, but as it is vying with Tesla and other EV maker in its aim for EV dominance, it is becoming more apparent that Lucid wants to be more than a car manufacturer, seeking to leverage its market-leading battery technology to potentially sell energy storage system.

For now, the question remains whether it will be able to scale its productivity effectively, a major headache and hurdle for rival Tesla. Should the company manage to produce as many cars as the demand in an efficient manner, it should face no trouble making a profit.

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