Lucid Group's (LCID -4.50%) car deliveries aren't growing as fast as investors would like. In 2021, the company delivered just 125 vehicles, which clearly upset investors. But what was more disturbing was the company's reduced delivery target for 2022. Lucid now expects to deliver 12,000 to 14,000 electric vehicles in 2022, down from its earlier expectations of 20,000 deliveries for the year.
Despite the seemingly bleak outlook, there are still key signs of progress that Lucid investors may be missing in a hurry to press the sell button. Here are three reasons why you should hold onto your Lucid holdings for now.
1. Growing reservations
Reservations for various versions of the company's Air sedan have risen to more than 25,000 from 17,000 in mid-November. That represents a 47% increase. If converted into orders, these reservations reflect potential sales of more than $2.4 billion.
Image source: Lucid Group.
Lucid managed to attract loads of attention for its first electric car -- Lucid Air Dream Edition. Targeting the premium segment of the car market, the model combines high performance, long range, and a sleek design.
Lucid is taking reservations for its Grand Touring, Touring, and Pure versions of Lucid Air. The Pure version is targeted at a much lower price point of less than $70,000 compared to $139,000 for Grand Touring and $169,000 for Dream Edition. As the company starts deliveries of the lower-priced Pure model, the reservations could climb higher.
2. Expansion in Saudi Arabia
Though the U.S. is the top market for Lucid Group right now, the company sees huge potential in Saudi Arabia and its neighboring countries. A couple of key factors make Saudi Arabia an appealing market for Lucid. To begin with, Saudi Arabia is looking to reduce its economy's dependence on oil while also developing its manufacturing sector under the 'Saudi Vision 2030.' Though the country is rich, it lacks on technology front.
Not many electric vehicle (EV) companies are targeting the middle eastern market by establishing a production plant there. Lucid could have an edge over other companies, who would be importing cars to the Kingdom. Additionally, Lucid will gain access in the markets of neighboring countries. The company estimates financial benefits of up to $3.4 billion over 15 years from this planned manufacturing facility.
Lucid has entered into agreements with Saudi government's agencies to establish a plant with a peak capacity of 150,000 vehicles per year. Notably, Ayar, an affiliate of Saudi Arabia's Public Investment Fund, holds a nearly 62% stake in Lucid Group.
3. Focus on ramping-up production
Lucid has revised down the production outlook for 2022. As a new EV maker, such delays in ramping-up production are expected. The company is struggling with supply chain issues. Interestingly, those are not related to chip or batteries, which Lucid says it was able to procure. The company is facing challenges with supplies of rather routine parts and is working on streamlining its supplies.
At the same time, Lucid is expanding its facility in Arizona to 90,000 units from 34,000 units. The additional capacity is expected to come online by the end of 2023.
"We continue to invest in our business; we met our target of opening 20 Studio and Service locations in North America; in 2022 we will expand our footprint in Europe and the Middle East while laying the foundation for a later expansion into the Asia Pacific, noted Sherry House, Lucid's CFO, in the company's fourth quarter earnings release.
After Air, Lucid plans to launch an SUV, Lucid Gravity. Due to the ongoing challenges and delays in deliveries of current reservations backlog, Lucid has pushed back the launch of Gravity to 2024 from 2023.
Overall, climbing reservations, concrete expansion plans, and a focus on production ramp-up mean that investors will do well by taking a long-term view on Lucid stock.
