So Lucid I Just Might Lose It

*Written September 14th, 2021

On August 5th President Biden held a meeting with some of the nation’s largest car manufacturers to discuss his plans for transitioning the US into an electric vehicle future. While this adjustment has been in the works for a long time, the executive order gave real impetus for achieving his ambitious national goal. An “all-out effort” to compete with China in the EV sector, Biden’s order mandates that 50% of all new car sales be for electric vehicles by 2030. 

But just 9 days before this meeting, Lucid Motors’ (NASDAQ: LCID) IPO began. This luxury, electric vehicle company has warranted the attention of many investors who are eagerly searching for the next Tesla. However, Lucid Motors is notably different from Tesla in terms of business model, target audience, and technology. 

While Lucid is a serious contender in the EV sphere, it has yet to deliver its first vehicle. In 2017 Saudi Arabia’s Public Investment Fund, rescued Lucid from financial difficulties by becoming a majority stockholder at the time. With a manufacturing facility in Casa Grande, Arizona, the company is on its way to becoming operational. But now that Lucid Motors must prove its viability on the stock market, many investors are questioning whether the company has what it takes to succeed. 

Lucid Motors was valued at $24 billion at its IPO compared to Tesla which was worth only $1.7 billion at its 2010 IPO. While many factors contributed to this valuation, it’s undeniable that electric vehicles were not taken as seriously eleven years ago as they are today. The compliance EV’s sold at the time allowed Tesla to enter a space almost devoid of serious competitors. In this way, Tesla was able to wield its business strategy and car design to capture an audience of consumers interested in EVs and comfort.  

Unlike Telsa, which made a name for itself by capitalizing on its early mover advantage, a company like Lucid Motors faces mounting pressure from other EV contenders. Notably, the President’s EV summit included General Motors Co., Ford Motor Co. and Stellantis NV – the country’s largest car manufacturers. As heavyweights like these begin devoting the R&D, capital, and time required to seriously compete in the EV space, the likelihood of Lucid Motors replicating Tesla’s success becomes much narrower. Furthermore, these companies have the production facilities and capital available to undercut Lucid’s products by a significant margin – potentially crippling the company before its gets its start. 

For this reason, it is important to note the difference in Lucid Motors’ approach. First, Lucid Motors prides itself on its electric motorsport racing background. Having proven its technology’s success on the racetrack, the company draws on a wealth of high performance data which informs its cars design. Breakthroughs from Lucid’s racing projects will likely continue revolutionizing its consumer models as well. 

These innovations are largely due to LCID’s technology branch – Atieva – which developed and continually improves the cars’ battery technology. According to LCID, its batteries are capable of covering more than 4.5 miles per kWh compared to Tesla’s Model S Long Range which reaches more than 4 miles per KWh. Planning for the long game, the company has even begun pitching the second-use benefits of its batteries.

EV batteries are typically unable to power vehicles once they retain only 70% of their charge. Rather than waste the technology, LCID has proposed repurposing its battery-cell modules which are almost identical to generic energy storage batteries. The company has already built a prototype 300-kilowatt hour stationary battery storage system, which illustrates one of the benefits of coming late to the EV game. Battery technology has progressed to the point that LCID and other latecomers can capitalize on earlier advancements while outpacing competitors using their own cutting edge technology. 

However, Lucid Motors CEO, Peter Rawlinson, likely learned from Tesla’s burdensome 2016 SolarCity acquisition during his time as chief engineer on the Tesla Model S. The company will devote its energy to producing their models using Tesla’s model of vertically integrated manufacturing. Unlike Volkswagen and Ford, Lucid produces its own battery technology, giving it a decisive edge. Yet, its important to keep in mind the class of car manufacturer LCID is trying to compete with.

Pitched as a luxury EV, LCID hopes to compete with internal combustion luxury cars like Mercedes, Lexus, and Jaguar with a price tag to match. With more than 10,000 pre-orders totaling $900 million in anticipated sales, the Lucid Air costs approximately $160 thousand including federal subsidies. The company’s elite “Dream” model will also roll out for a cool $169 thousand. Unlike a Tesla, these Lucid models include luxurious interior spaces and are designed for 1080 horsepower, 9.9 quarter-mile times, and 500+ miles of range on a single charge. While Lucid Air production is planned for this year, a less expensive 2022 version is expected to cost $70 thousand and by 2023 Lucid Motors hopes to produce its own SUV – “Project Gravity”. 

Highlighting the difference between Tesla and Lucid’s target audience, Lucid’s CEO explained that the company has plans to develop vehicles valued in the $40 to $45 thousand range but will not compete with Tesla for a $25 thousand model. LCID will also differ from Tesla in terms of charging systems. Opting for a less capital intensive system, LCID has partnered with VW Group’s Electrify America charging network. This open source system provides 1000 volts and up to 350 kilowatts for all Lucid models. 

By the end of this year, Electrify America is expected to have 800 total charging station sites with roughly 3,500 chargers in place to supplement Lucid’s home charging stations; whereas, Tesla has 20 thousand superchargers globally. However, Lucid offers bi-directional charging, which facilitates vehicle-to-vehicle charging as well as vehicle-to-grid charging. Likely intended for emergency situations where drivers cannot reach a charging station, this feature is a considerable asset to the model’s practicality. 

Clearly, Lucid is a serious contender in the EV sphere although it has yet to deliver its first vehicle. With a manufacturing facility in Casa Grande, Arizona, the company is on its way to becoming operational after receiving funding from Saudi Arabia’s Public Investment Fund since 2017. The fund rescued Lucid from financial difficulties by becoming a majority stockholder at the time. Now, that Lucid Motors must prove its viability on the stock market many investors are questioning whether the company has what it takes to succeed. 

Technical Analysis

In February’s initial excitement, LCID’s stock peaked at $68 before hitting $28 in July. After its initial overvaluation, the stock has since bled out putting it at a current PPS of $20.07. On September 1st, the stock dipped to $15.77 – its lowest since January. Now the stock has a support of 18.79 and a short-term resistance near 22.23 and a secondary resistance near 22.93. Accumulation has spiked up following the dip on September 1st and the RSI is currently holding at 53.7. Following a bearish crossover on September 10th, the MACD has downtrended but remains on the upside. While the stock’s value appears to be holding steady at the moment, based on these indicators it will likely continue downtrending before consolidating at a realistic PPS within the range of $29 to $16.

LCID Stock Forecast

Considering that the company has yet to deliver its product, investing now so soon after its IPO is a significant risk for investors who have no guaranteed ROI. The stock is also trading at extremely high valuations pre-revenue due to investor hype and FOMO. Without proven product and the recalls that inevitably follow car production, investors could be buying into the stock blindly. Meanwhile, competitors like NIO are already producing and expanding. Until LCID persuades investors that it has an edge in this transforming sector, investors may be reticent to take a leap of faith. 

For now the stock is overvalued and will likely fall until production determines its value based on real world restraints such as supply chain, market capture, market price, yearly sales, usability, and chip availability. As many manufacturers are already experiencing computer chip supply restraints, Lucid’s 2021 and early 2022 results may be determined by near-term operational risk resulting from deteriorating chip supply chains. Investors who believe in Lucid Motors’ potential may find a dip buying opportunity as the stock continues to lose value after its initial offering. 

For many investors, LCID is likely a long-term investment that should be taken seriously in light of the burgeoning competition in this sphere. In light of LCID’s potential, predictions for the next two years put LCID’s stock near $100. But until LCID’s long-term catalysts play out, the stock will continue consolidating which may offer opportunities for short-term plays. 


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