Lucid Motors plans to launch a luxury sedan that will give longer range and better performance than Tesla's (TSLA 0.15%) Model S. Lucid, that plans to go public through SPAC Churchill Capital IV (CCIV), believes that its electric cars offer luxury without compromising on performance, technology, or environment friendliness. So, its cars are better than the luxury vehicles of legacy automakers as well as electric cars of Tesla.
That sounds like the best of both worlds, if Lucid Motors can deliver what it is promising. Let's see where the company could be in a year from now, and beyond that.
A tall order
Lucid Motors expects to start commercial deliveries of its cars in this year itself. The company has launched its flagship product, Lucid Air, at a start price of $77,400. It will offer a range of more than 500 miles, compared to 412 miles offered by Tesla's Model S Long Range.
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While Lucid Motors plans to deliver less than 1,000 vehicles in 2021, it expects to deliver 20,000 cars in 2022. That means, in a year from now, the company would probably have sold around 10,000 cars. Lucid Motors has set its manufacturing plant in Casa Grande, Arizona, with a capacity of 34,000 units. The company has certain strengths that could help it in achieving its objectives.
Lucid Motors' key strengths
First and foremost, Lucid Motors' main strength is its management team. The company's CEO, Peter Rawlinson, is former Chief Engineer of Tesla's Model S. Lucid Motors' entire management team is full of ex-Tesla executives as well as professionals from top auto and technology companies. Having an experienced management team is crucial for a new company that is entering into a segment with high barriers to entry, which requires huge capital investments, has complex manufacturing process, and when the company is looking to produce better cars than the market leader.
Second, Lucid Motors' Air model is backed by more than 10 years of research and design work. It has also tested its technology and batteries for range and performance. Third, the company has secured more than 9,000 reservations for its first model, which shows customers' interest in its product.
Finally, Lucid Motors is focusing on in-house manufacturing and has a robust products pipeline for longer-term success.
Lucid Motors faces risks
The above pluses do not mean that Lucid Motors is set to succeed. Though the company's technology looks promising, car production is not an easy task. Nikola's troubles with General Motors and its Badger pickup trucks or Lordstown Motors' cash crisis -- examples of challenges to start-up EV makers abound. Tesla delayed on its delivery deadlines quite consistently and was close to bankruptcy while ramping up production of its Model 3 car. Numerous factors may delay Lucid Motors' planned commercial production. Moreover, unknown issues may come up during use after the cars are delivered to customers. In addition to technology, making cars require a lot more, including extensive testing of the product's safety features and real-world performance over years.
Customers' response to the company's products as well as products from competitors will play a key role in deciding Lucid Motors' success in the long-term. But there are several established players in the industry with far more experience and expertise in making cars. These legacy automakers are spending billions of dollars on their EV offerings, and it would be a herculean task for Lucid to make a place for itself in the competitive market.
Where could the company be in a year?
Looking at the many challenges in production process, Lucid Motors' target of 20,000 vehicles in 2022 looks ambitious. But, even if the company manages to deliver half of the number of cars it is guiding in next one year, it would be an accomplishment. Additionally, if Lucid Motors' cars turn out to be better than those in the market right now, as it is claiming to be the case, the company's stock will likely rise from its current levels. However, the stock's performance in the longer-term would depend on several other factors discussed above.
Lucid Motors stock looks attractive in terms of valuation too compared to Tesla. But it surely has a lot to prove before such a comparison looks valid. Till such time, it is a risky bet suitable only for investors with a high appetite for risk.
