Company Overview

Lucid Group, Inc. (LUCID) is an American technology company that emerged from the merger of Churchill Capital Corp IV (Churchill) and Lucid Motors (formerly, Atieva, Inc.) in 2021. Atieva Inc. was formed in 2007 to produce electric vehicle batteries and powertrains for vehicle manufacturers. Churchill is a special-purpose acquisition company incorporated in Delaware in April 2020. LUCID produces electric vehicles, electric vehicle powertrains and battery systems. Currently, the company operates in the luxury segment of the electric vehicle market with two models, namely Lucid Air and Lucid Gravity.

LUCID has been spending on capacity upgrade in a bid to broaden its product portfolio and drive down its costs. Its manufacturing facilities in the US and Saudi Arabia have had their productive capacity increased in recent times. Even though it sells its product through its retail network, LUCID still engages in alliances to increase its sales and brand preference. For example, it signed an agreement with Tesla Inc. to enable its Lucid Air buyers use over 20,000 Tesla superchargers from July 31, 2025.

Marc Winterhoff, the chief operating officer, has been appointed interim chief executive officer following the resignation of Peter Rawlinson. Rawlinson now serves as the strategic technical advisor to Turqi Alnowaise, the board chairman of LUCID.

Investment Thesis

Currently, LUCID is relatively new in the electric vehicle market; at the moment, it has limited itself to the premium electric vehicle segment in which it offers two models. But the company has new models in the pipeline. It is committed to hitting the mass market with additional models of its cars, albeit at competitive prices. The mass market is promising as it can rake in billions of dollars in sales, and create opportunity for the company to enjoy cost savings.

The financial performance of LUCID has been poor but not unexpected. It has been accumulating losses, and as a result, profit margins are negative. The industry is characterised by high capital expenditure. Research and Development (R&D) expenses are also huge as the industry is heavily reliant on technology that is rapidly changing. Usually, it takes some time to break even and become profitable in this market.

The management has been taking measures to put the company on the path of profitability. The expansion to Saudi Arabia (Middle East) in 2023 seems to have started paying off. Revenue made from Saudi Arabia was US$191.1 million in 2024 compared to US$59 million in the preceding year. Besides, the government of Saudi Arabia has agreed to buy about 100,000 of LUCID’s vehicles over a ten-year period.

LUCID, Uber Technologies, and Nuro Inc. have joined forces to deploy at least 20,000 vehicles for driverless taxi (Robo-taxi) over six years. This is expected to increase capacity utilisation, reduce cost and improve the company’s fortunes.

LUCID’s technological capability is evidenced in the ability to produce a significant portion of its components (hardware and software) internally. It does not rely on external parties for its powertrains, battery systems and software. The company is harnessing the opportunity by supplying and licensing its technology to third parties. For instance, it signed an agreement to allow the use of its powertrain and battery system technology in Aston Martin’s battery electric vehicle chassis in 2023.

LUCID does not generate profit or positive cash flow, let alone pay dividends. It may only reward patient investors. Our recommendation is a hold on the company’s stock. But it may offer a speculative opportunity for some investors. We would like to keep tabs on the company to see how things pan out in the medium term.

Valuation

The fair value of a share of LUCID ranges from US$1.53 to US$3.07. The shares of the company are trading within our fair value estimate at the present time.

Financial Overview

In the 2024 fiscal year, LUCID’s revenue increased by US$212.6 million or 35.7% year-on-year. The revenue of US$807.8 million made in 2024 was tantamount to a 210% increment on a 3-year Compound Annual Growth Rate (CAGR) basis. In spite of this remarkable leap in revenue, the company has not been able to upscale its business to the level of achieving cost savings on its products. This is why the cost of sales has exceeded revenue since it rolled out its first model, Lucid Air, in 2021. Consequently, LUCID has been posting gross losses since it launched into the electric vehicle market. The gross loss, however, decreased from US$1.3 billion in 2023 to US$923.1 million in 2024. Overhead expenses added 19.3% year-on-year to close at US$2.1 billion for the 2024 fiscal while operating loss was US$3 billion. Profit Before Tax (PBT) and Profit After Tax (PAT) were -US$2.7 billion and -US$3.1 billion, respectively. Operating profit, PBT and PAT margins were negative. Likewise, Return on Equity and Return on Assets were negative.

Despite declaring losses over the years, LUCID’s spending on capital has not stopped. Capital expenditure was US$883.8 million in 2024, US$910.6 million in 2023 and US$1.1 billion in 2022. Its total assets of US$9.6 billion represents a CAGR of 7% over the past three years. Total debt stood at US$2.1 billion in 2024; total debt formed only 21.6% of total assets and 40.3% of total equity. LUCID does not have adequate operating profit to cover its interest payments. The company has been raising additional capital since there is lack of profits to plough back into the business.

Business Risk

There are hurdles to overcome as the company explores more foreign markets because of multiple regulations. In addition, the competition in the global electric vehicle market is heating up, thereby shrinking prices, the individual firm’s market share and profit margins. LUCID, in our opinion, cannot prevent competitors from undercutting it because of its weak economic moat. LUCID may fall behind the competition if it cannot raise the finance to keep pace with the rapidly changing technologies.

Recommendation: Hold