Individuals check drive Dream Version P and Dream Version R electrical automobiles on the Lucid Motors plant in Casa Grande, Arizona, September 28, 2021.
Caitlin O’Hara | Reuters
Luxurious electrical car maker Lucid seems to have a requirement drawback.
The corporate mentioned throughout its fourth-quarter earnings report Wednesday that it had “over 28,000” reservations for its Air sedan as of Feb. 21. That was a shock, provided that the corporate had claimed “over 34,000” reservations in November and delivered fewer than 2,000 vehicles within the fourth quarter.
Much more shocking: Lucid mentioned it plans to construct simply 10,000 to 14,000 automobiles in 2023, far fewer than the roughly 27,000 Wall Road analysts had anticipated — and than the roughly 34,000 automobiles per 12 months that Lucid’s manufacturing facility is ready as much as construct.
Shares of the corporate have bought off virtually 17% for the reason that Wednesday report.
Lucid confronted a tough highway getting the Air into manufacturing. The corporate spent a lot of the primary half of 2022 scrambling to secure key components and untangling logistics snags. Now, with manufacturing operating kind of easily, it appears to be going through a brand new drawback: Not sufficient of its reservations are changing to orders.
CEO Peter Rawlinson acknowledged as a lot throughout the earnings name when he reminded listeners that reservations aren’t binding.
“We have solved manufacturing. That isn’t the gating subject right here now,” Rawlinson mentioned. “My focus is on gross sales. And this is the factor: We have what I consider to be the perfect product on this planet. … Too few individuals are conscious of not simply the automobile, however even the corporate.”
Rawlinson went on to say he believes that to be an “solely solvable drawback” and plans to give attention to “amplifying buyer consciousness” in 2023.
Extra advertising may assist. However clearly, demand for Lucid’s automobiles is not materializing as rapidly as the corporate anticipated, which raises some powerful questions for buyers.
First, how huge is Lucid’s potential market? Any estimate of how a lot Lucid may develop has to start out with an estimate of the “whole addressable market,” and it seems the corporate’s estimates on that entrance might have been too rosy, provided that its manufacturing facility is ready as much as produce many extra automobiles than it is constructing now.
Operating an auto manufacturing facility properly under capability is not precisely a path to profitability, as Chief Monetary Officer Sherry Home conceded throughout Lucid’s earnings name.
“As we produce automobiles at low volumes on manufacturing traces designed for greater volumes, now we have and we’ll proceed to expertise destructive gross revenue associated to labor and overhead prices,” Home mentioned.
That results in a second, associated query: How lengthy will Lucid should run its manufacturing facility at a loss? Or, put one other approach, how lengthy will it take Lucid to get to profitability — and the way a lot cash will it have to boost between from time to time?
Financial institution of America analyst John Murphy has lengthy been bullish on Lucid, however in a word to buyers following Lucid’s earnings report, he reduce the financial institution’s score on the inventory to carry, from purchase. Murphy wrote that he now thinks Lucid will not break even earlier than 2027, and that the corporate might want to elevate extra capital prior to he had beforehand anticipated.
The excellent news is that Lucid has a deep-pocketed investor. Saudi Arabia’s Public Funding Fund owns about 62% of Lucid, and has proven — most just lately in December, when it invested an additional $915 million — that it is nonetheless keen to fund the corporate. So long as it has the Saudi fund’s backing, Lucid ought to be capable to hold going.
However the highway to profitability — and to an enormous payday for Lucid’s buyers — is now trying longer.
