Lucid Group (NASDAQ:LCID) posted disappointing sales but said it has enough cash to last a year. LCID stock is down 9% this morning.
The Saudi-backed luxury electric vehicle producer said revenue was just $149.4 million, against $197.8 million expected, with a net loss of $780 million, 43 cents per share. The numbers sent LCID stock down 10% overnight to about $6.94 each. The market capitalization fell to about $12.6 billion.
Analysts were disappointed by lagging demand for the Air. The car has won awards for its design but costs $90,000 to start and can cost as much as $250,000.
The Limits of Demand
Saudi Arabia’s Public Investment Fund (PIF) owns about 61% of Lucid. The Kingdom wants the company to build a production facility there to employ the country’s significant population of young unemployed, mostly male, workers. Lucid still hopes to produce 10,000 cars this year and start its Saudi factory in 2024.
But the market is running away from the Air. Lucid also has problems with its supply chain for the existing factory in Arizona.
It’s increasingly clear that EVs are all about batteries, not whatever is on top of them. Lucid must compete for this technology with Tesla (NASDAQ:TSLA) and the entire car industry. The cost of batteries is too high for Lucid to turn a profit. The Air is also too expensive to earn tax credits under the Inflation Reduction Act.
The result is a turn toward Europe. Lucid’s three new directors are experts on both producing cars in Europe and selling luxury products there.
This is precisely what Tesla expected when it built its Nevada battery “gigafactory” and scaled production to cut costs. Some Tesla models are now priced below the median-priced American car. Those prices are inflated by Americans’ preference for high-end SUVs and giant pickup trucks.
LCID Stock: What Happens Next?
Expect follow-through on the downside for other American start-ups like Rivian (NASDAQ:RIVN), Fisker (NYSE:FSR), Nikola (NASDAQ:NKLA) and Lordstown Motors (NASDAQ:RIDE), which all report earnings around May 9.
A shakeout has begun, and smaller players are being shaken out.
On the date of publication, Dana Blankenhorn held no positions in any companies mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
