Lucid Group (NASDAQ: LCID) is one of a small number of electric vehicle (EV) start-ups that have actually managed to produce a material number of vehicles for sale. It is nowhere near the scale of industry heavyweight Tesla or the legacy automakers, but it has achieved a great deal in a short period of time.
So where will Lucid be in one year? There are actually two answers to that question that are important to consider.
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What has Lucid done?
Making cars is an incredibly capital-intensive affair. That’s important to keep in mind as you consider Lucid’s progress. What started as a mere idea has turned into a factory that is producing thousands of EVs a year. That’s a huge achievement, and it was a very costly one to pull off. What Lucid has done is, without question, impressive. But it isn’t enough.
Image source: Getty Images.
To put a number on that, Lucid produced just over 9,000 EVs in 2024, roughly in line with management guidance. The goal for 2025 is to more than double that number to around 20,000. That’s a pretty audacious plan that will require very strong execution by the company. But here’s the thing: Tesla produced nearly 1.8 million vehicles in 2024.
Even if Lucid hits its 2025 target, it will still be a rounding error compared to the industry’s most important players, since the legacy automakers produce even more vehicles than Tesla. So, assuming the company meets its production goals, in one year Lucid will be a much bigger car maker. But it will still be a small upstart. That’s where a look at the company’s financial statements comes into play.
Lucid will still be losing money a year from now
In 2024, Lucid spent $1.7 billion building cars and only brought in around $800 million from the sale of its cars. The company needs to ramp up production so it can start to benefit from economies of scale. However, there are more costs to contend with than just the building of a car as you look down the income statement. Lucid spent nearly $1.2 billion on research and development and $900 million on selling, general, and administrative expenses. Those are both items that come after the gross profit line.
One year and the doubling of production will not be enough to turn Lucid into a sustainably profitable business. In total, the company’s expenses came in at a touch over $3.8 billion. Since it only brought in $800 million, it clearly lost a massive amount of money in 2024. That’s where the balance sheet comes into play.
At the start of 2024, Lucid had around $3.8 billion in cash and short-term investments. It ended the year with roughly $4 billion. That sounds great, but as the chart below highlights, it used a lot of cash during the year. It topped up its coffers at the end of the year thanks to the issuance of shares. That means that shareholder dilution is an issue to monitor closely.
LCID Cash and Short Term Investments (Quarterly) data by YCharts.
But there’s a longer-term problem here that investors need to consider. Given the heavy use of cash to support Lucid’s money-losing business, it is likely to need even more cash in the future. Dilution would be the best possible outcome. The worst possible outcome would be that the company finds it can’t get the money it needs to keep operating. Considering the number of bankruptcies in the EV space, that’s a consideration which investors need to keep in mind with Lucid, even as it makes material progress on its business goals.
Lucid won’t be that much further along in one year’s time
You can’t build a capital-intensive business from scratch overnight, especially in an industry that is highly competitive. So while Lucid has done a lot in its short existence, it still has a lot more to get done, and it probably won’t be sustainably profitable in one year’s time. This is a stock that only aggressive investors will likely find attractive, given the still-early stage of the company’s development.
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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
