The EV market has evolved, and Lucid Group’s (NASDAQ:LCID) stock performance no longer relies solely on hype.
However, recent data indicates that Lucid hasn’t met expectations. With strong competition in the EV industry and what I’d suggest is only a “D” grade in stock performance, investors might find better opportunities elsewhere.
The EV stock faces hurdles as its CEO aims to compete with Tesla (NASDAQ:TSLA) in the higher-end EV category.
Despite a partnership announcement, LCID stock remains a risky investment, given uncertainties surrounding its expansion into China’s EV market and ongoing competitive concerns.
The question remains whether Lucid can challenge Tesla in the luxury EV sector. I’m thinking the jury is still out on this front.
Delivery Data Disappointments
July 12 was a tough day for Lucid Group, as its stock fell significantly. The drop was triggered by disappointing second-quarter 2023 vehicle production and delivery numbers.
Lucid produced 2,173 vehicles and delivered 1,404, resulting in a delivered-to-produced ratio of 64% to 65%.
Lucid Group’s situation is concerning as they are producing more electric vehicles than they are selling, with no noticeable improvement from the previous quarter.
The company delivered only 1,404 vehicles in Q2, falling short of Wall Street’s estimate of 1,873 deliveries, showing a disappointing performance on multiple fronts.
Lucid Group’s Q2 production of Air luxury sedans declined to 2,173 from 2,314 in Q1, leading to an 11% share drop. Despite the well-regarded Air’s long EV range and starting price of $92,900, demand concerns persist.
CEO Peter Rawlinson’s marketing focus indicates difficulties in converting reservations to orders, and the company’s previous production forecast raised eyebrows among analysts. The deal with Aston Martin and Saudi Arabia’s Public Investment Fund as an investor provides some positive news for the company.
Competition Heats Up with Other EV Companies
Lucid Group faces challenges in the competitive EV market because of its soft delivery numbers. However, an insider, Andrew Liveris, a board member, stated that the company isn’t intentionally targeting Tesla, despite Tesla being considered its biggest competitor.
Liveris stating that Lucid Group isn’t intentionally targeting Tesla is akin to a small fish claiming it’s not going after a giant whale. Despite their wishes, Lucid will have to compete with Tesla in the EV market.
Liveris emphasized the importance of scaling and generating positive cash flow, but Lucid’s current financials show negative free cash flow and operating cash flow.
Ford Motor Company, another LCID EV competitor, recently reported its second-quarter results. Ford raised projections for full-year earnings and free cash flow.
However, its EV division faced challenges as the timeline for ramping up EV production was delayed, benefiting stocks like Lucid. With Lucid shares rising over 20% in the past month, investors see potential advantages with lower EV volumes from Ford.
What Now
Lucid aims to launch its second vehicle model, giving it a chance to capitalize on Ford’s potential delays. This has driven up investor interest in Lucid’s Gravity SUV. However, the company must address its production and demand challenges before establishing itself as a successful business and investment.
The stark EV delivery data speaks for itself, and Lucid Group must compete against Tesla and other major EV manufacturers, regardless of its management’s stance.
This competition for market share will be challenging for Lucid. Thus, this is a stock I don’t think EV investors should bet big on just yet.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.