Lucid Group (LCID -2.99%) burst onto the electric vehicle (EV) scene in late 2021 with its technologically impressive Lucid Air sedan. The premium EV even won MotorTrend's Car of the Year award in 2022. The automotive magazine referred to the car as a game changer at the time. Roughly three years later, the company is poised to produce just 9,000 vehicles when it wraps up its 2024 numbers.
The agonizingly slow ramp-up has weighed on the stock. Lucid stock declined 28% in 2024 and is 94% off its early 2021 highs.
However, the company began initial deliveries of its second vehicle, a premium electric SUV called the Lucid Gravity, at the end of December. Should investors expect this development to kick-start Lucid's comeback? Or is the company's uphill climb still too steep to invest their hard-earned money?
Here is what you need to know.
The Gravity may struggle for the same reasons as the Air
It's a positive step forward that Lucid is rolling out its next vehicle, but investors should probably keep their expectations grounded. It's nothing against the vehicle itself, but rather the reality of its target market. Judging by its awards and industry recognition, the Air is a great product. However, Lucid will produce only about 9,000 vehicles this year because its $69,900 starting price tag only appeals to a small market niche.
Gravity, another premium product, will probably only appeal to the same high-end consumers, except those who prefer an SUV over a sedan. Lucid has begun deliveries for its more expensive Grand Touring version ($94,900). Customers can start ordering the Touring model ($79,900) later this year. That sounds like it will have a limited short-term impact on volumes.
If Gravity sells on par with the Air, you might double production volumes to around 18,000 units in 2025. That's not a trend for Lucid alone. Tesla produced approximately 1.77 million vehicles in 2024, but 95% were Model Y and Model 3s, lower-priced products aimed at the mainstream consumer.
Lucid's big break may not come until late 2026
The problem is that even 18,000 units wouldn't be enough to fix Lucid's financials.
Analysts estimate that Gravity sales should meaningfully boost Lucid's top line. The company should end the year at around $768 million in revenue, with sales potentially doubling in 2025:
LCID Revenue (TTM) data by YCharts
However, Lucid's gross losses are nearly $1 billion, and the companywide cash burn exceeds $2.8 billion. Remember, running automotive factories costs a lot, so you need them to run at almost full capacity to produce vehicles profitably. As with Tesla, Lucid probably won't have the sales it needs for those volumes until it launches a cheaper vehicle that will appeal to more buyers.
The good news is that it's on the way. Lucid is developing a mid-size SUV that it predicts will start at under $50,000. Unfortunately, assuming no delays, it won't enter production until late 2026. That means that Lucid's business is poised to burn through a lot of cash over the next several years, which is why the company continues raising funds.
Sorry, the stock is still expensive
Lucid continues to enjoy financial backing from Saudi Arabia. The Ayar Third Investment Co., an affiliate of the country's sovereign wealth fund, is a major investor. Given that, I think it's likely that Lucid will eventually deliver its vehicles to the market. Whether that translates to investment returns for the common shareholders is another matter.
Lucid's slow volume growth is costing investors significantly. The company's share count has nearly doubled since 2021, spreading Lucid's (eventual) per-share profits more thinly and reducing the stock's per-share upside.
The stock is also quite expensive despite falling over 90% from its peak value. Lucid trades at an enterprise value over five times its 2025 revenue estimates. Fellow emerging EV company Rivian trades at 3.0 times its revenue estimates, while incumbent automotive leaders, like Toyota, trade at just 1.4 times forward revenue.
Lucid stock could still be vulnerable to a significant downside if Wall Street grows tired of its current premium valuation. Therefore, I think it's unlikely the stock will rebound in 2025. I'd hesitate to own it until the business turns a gross profit, affirms strong volume guidance, and gets closer to launching its mid-size SUV product.
