Known as one of the prospective “Tesla (NASDAQ:TSLA) killers” since its launch, Lucid Group (NASDAQ:LCID) has seen some significant volatility in recent years. Alongside other high-potential EV names, Lucid stock soared into 2021, more than quintupling from the company’s SPAC IPO price.
However, since then, Lucid stock has been on a downward trajectory, losing well over 95% of its value. The company has diluted existing investors with new share issuances, as Q1 2024 production dropped 25%.
Despite the promise behind this EV maker, Lucid’s steep share dilution makes it an overhyped sell, at least in my books.
Lucid Stock and the Genesis Deal
Genesis and Lucid Motors are in advanced talks for electric motor supply, potentially Lucid’s second major deal. Hyundai’s silence suggests ongoing negotiations, reflecting Genesis’ aim for efficient, high-performance motors for their luxury vehicles.
The report hints at broader implications beyond motor pricing and integration, suggesting deeper ties between Hyundai and Lucid. High-level visits hint at potential collaboration depth. Lucid sightings in South Korea raise questions about broader connections, and engagement with HL Group hints at a multifaceted partnership beyond electric motors.
While this may certainly be a development worth watching, it’s unclear how this deal will positively affect Lucid. I’m going to monitor these potential catalysts, but I’m just not sure it’s the kind of needle-mover investors have been looking for.
Lucid Announced More Layoffs
Lucid Motors CEO Peter Rawlinson recently announced a restructuring, cutting 400 jobs (6% of workforce) by the end of Q3.
This restructuring plan is expected to cost the company between $21 and $25 million, but will save the company much more over the medium-term.
Of course, with less personnel, the company’s growth picture has become murkier. So, what the company gains in efficiency, it may be giving up in terms of its growth potential.
That’s where I think the difficulty lies with investing in a company like Lucid. The company’s Lucid Air is its sole model, with the Gravity SUV announced as the next.
Production is also slated for late 2024. But without the people needed to make these vehicles successful, it’s going to be hard to argue Lucid will be able to grow into its existing valuation.
Disappointing Financial Results
To make matters worse, Lucid reported disappointing Q1 results on May 6. Despite revenue growing to $172.7 million, this number slightly missed forecasts. Challenges continue to persist, but increased vehicle deliveries and a $1 billion financing boost from Saudi Arabia’s PIF provided crucial liquidity.
However, Lucid Motors management stays hopeful, citing tech advancements and cost-saving measures. The high cost hinders Lucid EV sales, targeting a small luxury niche within a niche market. The industry slowdown prompts price cuts. Hybrids, with fallback gasoline engines, dominate.
All that said, Lucid faces tough competition in a market where most EV buyers are already in the market, and new buyers appear to be waiting for price cuts and interest rates to come down. For Lucid and its premium-priced vehicles, that’s not a great thing.
On the date of publication, Chris MacDonald did not hold (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.
