Is Lucid Stock a Millionaire-Maker?

Yahoo

8 hours ago

Lucid is trying to double its vehicle production this year.
Sales and deliveries are growing, but the company still faces significant headwinds.
Lucid is dealing with a long path to success and slowing demand for EVs.
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Electric vehicle (EV) maker Lucid (NASDAQ: LCID) experienced a share price surge after the company went public in 2021. But since about mid-2022, the stock has been on a steady decline and is down 96% from its all-time high of about $58.
The massive drop may have some investors hoping that if Lucid can just regain its momentum in the EV market, perhaps it can achieve its previous share price -- which would be more than a 2,500% increase from its current price.
The right amount of money, paired with those gains, could mint millionaires. But Lucid looks far from being able to achieve returns of that magnitude. Here's what you should know if you're hoping for big returns from Lucid's stock.
While Lucid has significant hurdles in its path to success, the company does have some positive momentum. For example, Lucid management says the company will double its vehicle production from last year and produce about 20,000 vehicles by 2025. It's a lofty goal, but if Lucid can achieve it, then it wouldn't be surprising to see its share price make some gains.
Lucid also made some strides in its first quarter for both revenue and vehicle deliveries. The company delivered 3,109 cars in the quarter -- a 58% jump from the year-ago quarter -- and sales increased 36% to $235 million.
Those are all good signs that Lucid is moving in the right direction, and the company could add to that momentum if Lucid's new Gravity SUV attracts customers. While expensive at a starting price of around $80,000, the Gravity is Lucid's first SUV and its second model. Lucid is hoping to tap into consumer demand for SUVs, which is the best-selling vehicle category in the U.S.
This vehicle sharing some parts with the Air sedan could eventually create economies of scale for the automaker. Lucid will also launch a midsize SUV, called the Lucid Earth, in either 2026 or 2027. The vehicle is rumored to start at $48,000. That's far cheaper than the Air and Gravity and would help Lucid attract more customers.
If all of the things I mentioned above were the end of the story, then I'd have a much more optimistic opinion about Lucid's stock. Unfortunately, the company is facing significant headwinds.
For one, American consumer interest in electric vehicles is at an all-time low. The interest has fallen from 23% in 2023 to 16% now, according to AAA. The decline is likely temporary and brought on by the rising cost of vehicles over the past few years, but it's hurting electric vehicle companies nonetheless.
With Lucid still only offering luxury vehicles, which start at around $70,000, many U.S. buyers simply can't afford Lucid's products. For comparison's sake, Lucid's lowest-priced Air sedan costs 43% more than the average transaction price for a new vehicle.
What's more, Lucid's management has said that the current automotive tariffs could hurt gross margins in the range between 8% to 15%. If the company continues to feel that pressure, it might have to raise prices to offset rising costs.
Making matters worse, the Trump administration appears eager to pull back on EV tax credits and EV charging infrastructure. While Lucid's vehicles were too expensive to qualify for the credits, the federal government's pivot away from helping the EV industry build infrastructure isn't good for mass adoption of electric vehicles.
Lucid is on a long, winding path on its way to success, and there are no guarantees it'll get there. The next few years will likely be critical for Lucid as it ramps up production, launches new models, and tries to increase sales and lower costs.
All those obstacles would be difficult on their own, but they're exacerbated by the fact that people appear to be cautious about buying EVs right now.
I think Lucid is making progress, but it's probably not enough to kick its share price into overdrive and make it a millionaire-maker. Still, I'll be keeping a close eye on what the company is doing as it carves out a niche in the EV market.
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Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Is Lucid Stock a Millionaire-Maker? was originally published by The Motley Fool