Lucid: A Most Peculiar Investment

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Lucid Group (LCID 0.31%) presents a conundrum. Five years have elapsed since its debut on the exchanges, and the valuation has, shall we say, undergone a rather precipitous decline. Ninety-eight per cent of its initial worth has evaporated, leaving one to wonder if the initial enthusiasm was entirely… justified.

The company benefits, of course, from the deep pockets of the Saudi Arabian sovereign wealth fund, and plans are afoot to establish manufacturing facilities within the Kingdom. An investor day looms, promising further pronouncements on technological advancements and the impending arrival of a mid-size vehicle. One approaches these presentations with a certain… guarded optimism.

Is this, then, the moment to venture forth and acquire a stake in Lucid? The question, as with so many concerning speculative ventures, demands careful consideration.

A Return to Growth, Coupled with Familiar Deficits

Lucid’s fourth quarter concluded a year of moderately improved sales. Vehicle production increased by 104% to 18,378 units, with 15,841 actually delivered. A commendable performance, perhaps, though one must remember we are dealing with a product aimed at a rather rarefied segment of the market. The expiry of federal EV tax credits has not, apparently, dampened the enthusiasm of the well-heeled.

The mid-size SUV is intended to broaden the appeal, with a projected price tag of around $50,000. A tactic reminiscent of Tesla’s successful foray with the Model 3 – an attempt to lure the mainstream buyer. One suspects, however, that achieving such a transformation is rather more challenging in practice than it appears on a Powerpoint presentation.

The persistent issue, naturally, remains the alarming rate of cash consumption. Manufacturing automobiles is an expensive undertaking, and factories require substantial volume to achieve profitability. Lucid, as yet, falls considerably short of this requirement. The company has depleted $3.4 billion in the last four quarters, generating just over $1 billion in revenue. A ratio that would give even the most sanguine accountant cause for concern.

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The Illusion of Revitalization

Tesla, as we recall, flirted with insolvency during the launch of the Model 3. The automotive industry, it must be emphasized, is a merciless arena. Even the seemingly invincible Tesla has begun to diversify, venturing into the realms of autonomous Robotaxis and robotics. A tacit admission, perhaps, that the traditional electric vehicle market is not quite the panacea it was once believed to be.

The expenditure of $3.4 billion against $1 billion in sales suggests that Lucid will continue to hemorrhage cash as it pursues its growth ambitions. The company has resorted to issuing new shares, diluting existing shareholders and exerting downward pressure on the stock price. The share count has increased by a staggering 90% since its initial public offering.

An inflated valuation only exacerbates the situation. Lucid shares currently trade at over 15 times revenue, while established automotive manufacturers trade at a fraction of that – often less than one times sales. Therefore, it is difficult to recommend a purchase of Lucid stock at this juncture. However, its lofty valuation may, ironically, result in a further decline. A rather bleak prospect, but one that, alas, seems entirely plausible.

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2026-02-20 21:02