Lucid's slow deliveries, cancelled orders, and increasing competition are 'red flags,' experts say

Lucid Air
Lucid said Wednesday that it plans to build 10,000 to 14,000 vehicles in 2023, short of Wall Street expectations.Lucid Motors
  • Lucid reported full year 2022 results on Wednesday and fell short of estimates.

  • The startup says it is going to build 10,000 to 14,000 EVs this year.

  • Industry analysts say the company has a lot to prove.

Lucid fell short of Wall Street's quarterly expectations on Wednesday, alarming investors and leaving experts concerned about continued demand for its expensive cars.

The EV startup surpassed its own production goals in 2022, making 7,180 cars and delivering 4,369, but those forecasts had already been reduced twice. Meanwhile, deliveries have lagged, and only 61% of cars built made it to customers.

Lucid now plans to build 10,000 to 14,000 vehicles in 2023 — far lower than the 21,000 that some expected the company to go after. With shares already down some 58% in the last year, the stock slid another 18% Thursday following the bad quarterly news.

"There are certainly some red flags surrounding the story, and the release did nothing to alleviate a lot of the investor concerns," Garrett Nelson, senior equity research analyst at CFRA, said. "They really haven't shown any signs of turning the corner yet."

Lucid's recent moves indicate a lot of cars are sitting

In the final three months of 2022, Lucid's reservations fell from 34,000 to 28,000, a decline the company attributed to cancellations, delivered vehicles, those stuck in transit, and others waiting on pre-delivery inspection. The exact mix is unclear, but accounting for delivered vehicles, Bank of America estimated that indicates a decline of 4,100 orders.

At current rates, the company is suggesting wait times could be up to two years, analysts at Evercore ISI estimated in a note to clients Thursday — but that doesn't add up.

"That is not the case for Lucid where new deliveries show wait times within 3-5 months," the note said. "Even assuming 6+ months wait time, LCID likely has as few as ~7-10k "active" order conversions."

The company outlined its focus on sales and marketing efforts during its call with investors.

"Last year, my focus was on manufacturing," CEO Peter Rawlinson said. "My focus now is on amplifying the message, attracting a broader audience, and ramping up our sales."

Lucid has been trying to do exactly that for some time. It announced an internal purchase program late last year, for which employees would receive a stipend if they bought a Lucid Grand Touring by the end of 2022.

To crack down on cancellations, Lucid initiated an internal cancellation protocol via email to save the "failure" that is any customer order cancellation, Insider previously reported in December.

It also sent emails to customers offering to reinstate their orders for Grand Tourings at the vehicle's original price, $139,000, instead of its increased price of $154,000, Barron's reported.

Lucid recently encouraged customers via email to lease its vehicles in order to qualify for the commercial EV tax credit, as Lucid vehicles do not qualify for the new EV purchase credit.

Because it does not qualify, Lucid announced earlier this month "credits" for its customers in the form of a $7,500 price cut on certain trims.

"Fundamentally, it was a pretty big reset for the business last night," Ronald Jewsikow, vice president of equity research at Guggenheim, said of the results. "The reality is, the price point here is tough in the current macro.

"Without explicitly saying it, he is saying the bottleneck is demand," Jewsikow added.

Are you a current or former Lucid employee? Do you own a Lucid vehicle or have a Lucid vehicle reservation? Do you have a news tip or opinion you'd like to share? Contact this reporter from a non-work device and account at astjohn@insider.com or on Signal at 313-570-6709.

Read the original article on Business Insider