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With consumers moving away from fully electric vehicles in favor of gas/electric hybrids, now is not the time to invest in Lucid Group (NASDAQ:LCID). Lucid stock has steadily declined as the company struggles with waning demand and an ongoing series of production problems.
Since going public in 2021, Lucid stock has fallen over 70% and the share price is now below $3. That places the company on the penny stock league tables. While some people might be tempted to bottom fish the stock, any investment at this point is likely to end in tears.
Expensive Vehicles
At the end of May, Lucid announced that it is cutting 6% of its workforce, or about 400 employees, as its struggles with a sales decline and slowing growth.
The company said in a news release that it will incur $25 million in charges related to the workforce reduction, which it plans to complete by the end of this year’s third quarter. At the end of 2023, Lucid had 6,500 full-time employees worldwide.
While the company’s main electric vehicle, the Lucid Air sedan, has won critical praise from analysts and the automotive press, its high price has led to poor sales.
Currently, the base model Lucid Air costs just under $70,000 and the top model costs more than $250,000. The steep price has placed Lucid firmly in the luxury vehicle camp and put its EVs out of reach for most consumers.
Unprofitable Company
Lucid has announced plans to build a new mid-size electric sport utility vehicle with a starting price of around $48,000. But production on that cheaper vehicle won’t begin until late 2026, with the electric SUV not hitting the market until 2027, at the earliest. Compounding problems is the fact that Lucid remains unprofitable and is bleeding cash.
The company recently reported a loss per share of 30 cents, which was greater than estimates of a 25 cent loss. Slumping demand and continued production problems have led Lucid to produce fewer vehicles. In this year’s first quarter, the company produced 1,728 electric vehicles.
That was down 28% from 2,391 EVs produced in the previous fourth quarter of 2023. Lucid said that it has $4.62 billion of cash on hand, enough to last until the second quarter of next year.
Sector Issues
Beyond Lucid’s internal problems, the entire sector is facing challenges as a lack of infrastructure needed to support electric vehicles leads consumers to buy gas-electric hybrid vehicles instead.
While the federal government in Washington, D.C. has allocated $7.5 billion to build tens of thousands of electric vehicle chargers across the U.S., at the end of 2023, not a single charger had been installed.
A study by the Pew Research Center that was published in May of this year found that the distribution of EV chargers is uneven across the country.
While there are 61,000 publicly accessible electric vehicle charging stations in the U.S. today, most of them (60%) are located in urban centers compared to 41% in the suburbs and only 17% in rural communities. Plus, a quarter (25%) of all public EV chargers in the U.S. can be found in one state: California.
Analysts say that for there to be widespread adoption of electric vehicles, public EV charging stations need to become as ubiquitous as gas stations. The other big issue plaguing the industry is the time it takes to charge an electric vehicle battery.
It currently takes anywhere from 30 minutes to more than 12 hours to charge an EV battery, with the average time around eight hours. Compare that to less than two minutes to fill a tank with gas, and it’s no wonder that consumers have concluded that EVs are impractical to own.
Sell Lucid Stock
Lucid is now a penny stock. Since the company went public three years ago, its share price has steadily fallen. This is because of factors that include poor execution, a lack of profits, and expensive electric vehicles that are out of reach for most Americans.
Add in the fact that consumers appear to have thrown in the towel on electric vehicles amid a lack of infrastructure to support them and there really is no reason to risk money on this company. Lucid stock is not a buy.
On the date of publication, Joel Baglole did not have (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.comPublishing Guidelines.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.
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