Despite holding a high-ranking position among luxury electric vehicle (EV) manufacturers, Lucid Group’s stock struggled to reach any new pinnacles in May. The month concluded with a downward slide, revealing more than an 11% loss for the company. This drop transpired even in the face of a quarterly earnings report that impressed a number of investors. However, certain occurrences made Mr. Market uneasy.
Unfortunately for Lucid, red has not proved to be a favourable colour. Rather, the company had a strong start to May. A few days into the month, they released their first quarter results, showcasing a significant increase in revenue – amounting to over $235 million – representing a growth of 36% year-on-year.
In the course of daily operations, Lucid manufactured 2,212 vehicles and dispatched 3,109 of them. This latter figure, narrating a robust 58% increase compared to the same quarter in 2024, proved rather sturdy. Despite these impressive figures, analysts monitoring Lucid’s stock anticipated more. A collective prediction envisaged slightly over $246 million in top-line figures.
As was reflected in the earnings report, though revenue growth was impressive, Lucid continued to dwell in a critical financial position – deep within the red zone. According to GAAP standards, the net loss for the quarter was over $366 million. While this was substantial, it was far less severe than the nearly $685 million deficit encountered during the first quarter of 2024.
On a per share basis, measured with non-GAAP standards, the company reported a net loss of $0.20 per share, contrasting the $0.27 of the previous year’s same period. However, this $0.20 loss-per-share outperformed the anticipated net loss of $0.23 per share. This small victory over expectations was one of the reasons investors reacted positively to the earnings report.
But the market sentiment was clouded by other uncertainties and worries. As May progressed, rumblings about a potential policy shift impacting Lucid and other EV manufacturers became louder. Throughout the month, President Trump’s ‘One, Big, Beautiful Bill’ was vigorously debated in Congress, stirring discussions that simmered with apprehension.
One particular section of the bill that provoked trepidation was the proposition to nix the government’s EV tax credit of up to $7,500 on the purchase of an EV. This tax credit has bolstered the EV industry considerably, almost serving as an understatement. Manufacturers had been relying on the tax credits’ longevity up to its scheduled expiration date in the closing days of 2031.
However, under the proposed changes of Trump’s bill, the EV tax credit would terminate much earlier, on the 31st of December, 2025. The premature curtailment of this financial incentive has caused unease for companies such as Lucid, which would be particularly susceptible to any adverse business impacts.
A potential cessation of the EV tax credits could present significant risks for Lucid. The company’s ongoing losses, reaching into the hundreds of millions, are untenable, despite the company’s boasting of a wealth of liquidity to the tune of $5.76 billion available at the end of the quarter.
While I personally support Lucid – admiring the aesthetic appeal and apparent high quality of its models that, in my view, validate their pricing structure – it’s clear the management team is striving to invigorate the business and stimulate revenue growth.
However, the financial picture is marred by the daunting volume of red ink in the company’s financial statements. This unfortunate situation cannot be overlooked and raises deep concerns about the company’s long-term future.
As an invested observer, I find that Lucid’s position is currently fragile, which adds an additional layer of worry. Its continued losses could potentially place the company’s very existence in jeopardy. A promising entity like Lucid caught in such a predicament is lamentable.
The possible demise of the EV tax credit and the associated financial pressure could hasten the company’s descent. Continued sustainability is needed for a firm like Lucid to continue contributing to the vibrant electric vehicle industry.
Finally, while I am strongly rooting for Lucid, this optimism must be tempered by the uncomfortable reality of their financial situation. The red ink presently splattered across their financial statements invites a sobering concern for Lucid’s future towards their role in the expansive EV market.