Lucid reported Q2 earnings on Tuesday, and the results were rough. The company lost more than $850 million ($632 million on an adjusted basis) on revenue of about $260 million. It delivered a sort of respectable 3,309 vehicles in the quarter, but is also guided toward lower total 2025 production of 18,000-20,000 units, and in any case Lucid really needs to crank up manufacturing and overcome supply chain issues to hit that mark. The company said it has close to $5 billion in liquidity available, but of that less than $2 billion is actual cash.
The stock was hammered in post-market trading Tuesday and opened 7% down on Wednesday. Not exactly an ideal outcome because Lucid also wants to do a reverse stock split, turning ten shares into one and getting the company out of penny-stock territory, staving off a NASDAQ delisting if shares fall below $1. The company says it can sustain itself until mid-2026, but there’s no question that it needs to raise a lot more money to continue its current burn rate — probably as much as it raised in its 2021 public offering, a SPAC deal that brought in $4.4 billion. Oh, and Lucid still doesn’t have a true CEO, after Peter Rawlinson departed earlier this year.
What about the Saudis?
The book on Lucid has always been that PIF, the Saudi sovereign wealth fund, will forever backstop the startup. PIF owns about 60 percent of Lucid and has seemed content to pour billions into what has been an impressive cash-incinerating operation. PIF is estimated to have between $600-700 billion, so keeping Lucid going isn’t ruinously expensive. But at some point you have to ask yourself how much PIF is willing to let Lucid lose.
Because Lucid really does look structurally unprofitable, as it’s currently being operated (and there’s nothing newly named brand ambassador Timothée Chalamet can do about that). In three months, it spent over $850 million to bring in $260 million. That was mainly on sales of its pricey Air sedan, as the new Gravity SUV hasn’t yet ramped up to assume the sales burden. According to interim CEO Marc Winterhoff on the conference call with analysts after Q2 numbers were announced, the Gravity has also suffered delays due to difficulties obtaining enough magnets from China, which the SUV needs for its electric motors. But even if Lucid resolves that problem, it has to massively increase revenue to break even on a quarterly basis. And the cheaper, sub-$50,000 vehicle that could enable it to achieve more scale is slated to arrive until 2026.
A weak EV market and miserable fundraising prospects
Carrying its beleaguered balance sheet into an EV market that’s slowing and rapidly losing federal government incentives in the U.S. is terrifying. Lucid is also facing significantly more competition than Tesla ever did, when the latter was struggling to validate its business in the mid-2010s. Consumers have lots of options these days when it comes to buying all-electric SUVs, so Lucid can’t assume that it’s going to convert even the lower end of its 2025 production guidance to sales.
And even if it did, it’s uncertain that those sales would be even remotely profitable. Overall, Lucid has followed the pattern of many SPAC companies and basically become challenging as an investment (the stock has declined over 70 percent from its peak). You’d normally expect PIF to be thinking about taking the company private to escape what could be a death spiral, but the reverse split implies that Lucid will try to ride out this dismal period and attempt to get Gravity into a decent position.
Lucid will generate plenty of numbers between now and mid-2026, but the ones that matter are topline and cash-burn. Absent a major funding infusion or some epic deals with other automakers, that yawning gap has to narrow or Lucid could confront some dire scenarios.
