Just when you thought the news couldn’t get any worse for electric vehicle manufacturer Lucid Group (NASDAQ:LCID), it seems like there are always more negative surprises around the corner. In a time when the EV industry is rife with challenges, the last thing you need to do is risk your hard-earned capital on LCID stock.
Lucid only produced 8,428 vehicles in 2023 after previously guiding for “more than 10,000” vehicles. It only expects to produce “approximately 9,000” vehicles this year. Are recent developments positive for Lucid’s future? Let’s see what we find under the hood, but don’t expect too much from Lucid Group.
Lucid Group’s Risky Expansion in Europe
As I just explained, Lucid Group isn’t producing a lot of vehicles. It’s reasonable to conclude that the automaker isn’t delivering many vehicles, either (6,001 units in all of 2023, to be exact).
In what might be considered an act of desperation, Lucid Group slashed the prices of its EVs. Those vehicles are still difficult for many Americans to afford, though. Specifically, the Lucid Air Pure is “now priced from $69,900; Air Touring from $77,900;” and “Air Grand Touring from $109,900.”
Yet, even though Lucid Group is burning cash and not selling a whole lot of EVs, the company still plans expansion in Europe this year.
Lucid Group plans to open new sales locations in Europe while also introducing three vehicle models there. The company tried to put a positive spin on this risky venture.
There’s no guarantee that Lucid will sell many vehicles abroad, though. The only guarantee I can think of is that Lucid Group will have to spend money to expand its presence in Europe.
Lucid Group CEO Admits a Capital Raise Is ‘Inevitable’
Like I said, the not-so-great news just keeps on coming for Lucid Group and its shareholders. In case you’re not convinced that LCID stock is dead money, consider what Lucid’s chief executive recently said about the company’s financial situation.
First, Lucid Group CEO Peter Rawlinson admitted that the company is burning cash to the tune of around $1 billion per quarter. That’s not much of a cash runway. Remember, Lucid only had $4.78 billion in cash at the end of last year, according to The Financial Times.
Rawlinson acknowledged, “It’s inevitable we need to raise in the future, it’s just a question of when.” Presumably, the Lucid Group CEO was talking about the company’s need to raise capital.
By the way, the Financial Times also reported a startling statistic. In particular, Lucid Group’s Arizona factory has the has capacity to produce 90,000 vehicles per year. That’s an odd mismatch, considering Lucid only expects to produce around 9,000 EVs in 2024.
Don’t be too surprised if Lucid Group borrows a large amount of money soon. Of course, the automaker would have to pay it all back with interest, and interest rates are high nowadays.
It’s also possible that Lucid might print and sell stock shares to raise capital. This could have the effect of diluting the value of Lucid Group’s existing shares.
Don’t Go for Broke With LCID Stock
Lucid Group’s European expansion will certainly cost money to implement. Yet, there’s no assurance that the company will sell many vehicles there.
Rawlinson’s aforementioned remarks should dissuade anyone who’s think about investing in Lucid Group. Therefore, now’s not the time to “go for broke” with LCID stock, as you might just end up going broke.
On the date of publication, David Moadel 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.com Publishing Guidelines.
