I tend to follow Aston Martin, but post the technology agreement with Lucid, decided to take a look at their business as well. Here's my analysis of Lucid's 2023 results.
Analysis of Lucid’s 2023 Results
This week, the two COVID EV darlings, Lucid and Rivian reported their 2023 full year results. I will cover Lucid in this article and come back to Rivian shortly. Lucid caught my attention due to the EV technology agreement it signed with Aston Martin Lagonda (AML) in 2023. Both Lucid & Rivian IPO’ed in 2021 and have been developing Electric Vehicles since the mid 2010’s. Lucid stock peaked at $55.21 in November 2021 and is currently trading at $3.00 per share. Over the same period, Rivian stock has crashed from a high of $129.95 to $11.16. Both have the very rare honor of making AML look like a better investment over the same period. The question is why, what has happened, and what does the future look like.I went through the transcript of Lucid’s earning call expecting to hear the CEO, Peter Rawlinson, talking about a company in crisis that’s taking urgent steps to turnaround the business. Instead, what I heard about was a lot about industry accolades, technical prowess, and the beginning of a transformational phase as they expand their vehicle line up. This was topped off with comments on growing brand awareness, coupled with confidence in the sales and marketing programs. Buried in the middle of Rawlinson’s opening monologue was one short paragraph on cost control and later a brief comment on a few challenges, most of which are blamed on either external factors, or were expected, and have been overcome. There was no comment on the fact that they lost nearly $3 billion in 2023 and missed the low end of their 2023 vehicle produced guidance by 16%.
According to Lucid, these are their 2023 highlights:
- Lucid Air continued to garner significant industry accolades with the Car and Driver’s10 Best list for 2024, following the previous 2023 World Luxury Car of the Year and 2022 MotorTrend Car of the Year awards
- Unveiled the Lucid Gravity at a special launch event at the LA Auto Show; Lucid Gravity is a transformational vehicle taking Lucid to its next critical stage of growth.
- Delivered Lucid Air Sapphire, the world’s first luxury electric super-sports sedan; extended technology lead with Pure achieving 4.74 mi/kWh.
- Opened Saudi Arabia’s first-ever car manufacturing facility (AMP-2) and invested in the next phase of growth with the initial AMP-1 Phase 2 expansion.
- Established Lucid Group’s technology arm with the signing of the first strategic technology arrangement with Aston Martin.
- Full Year Key Results: The key numbers for Lucid in 2023 were 8,428 cars produced, (up 17% vs. 2022), cars delivered 6,001 (up 37% vs. 2022). Net Revenues of $595 million (-2% vs. 2022), and net loss of $2,828 million (vs. loss of $1,305 million in 2022). Selling, Administrative, and General (SG&A) expenses were also up 13% in 2023 to $937 million. Free Cash Flow was negative $3,400 million vs. a negative $3,301 million in 2022. Net loss per car delivered rose in 2023 to $471,000 from $299,000 in 2022. In the earnings call, Rawlinson stated: “We are resolutely focused upon cost whilst continuing to prudently invest for the future.” Certainly, I am not sure the first half of that sentence is coming through very clearly here.
- Financial Viability: Cash and short-term investments were $3,860 million at year end 2023, basically flat vs, year end 2022. Long term debt is currently just under $2 billion, also flat vs. prior year. At its cash burn rate over the last 2 years, Lucid would appear to currently have enough liquidity to cover its needs into early 2025. However, Lucid is projectioning Capex of $1.5 billion in 2024, which is up $600 million vs. 2023. As Lucid’s net cash used in operating activities actually increased in 2023 vs. 2022 to $2,490 million, how they expect to cover the increase in Capex while not increasing the cash burn is unclear. If Lucid is unable to do this, they will run out of cash in Q4 2024 without a further injection of outside capital. However, as the Saudi Public Investment Fund (PIF) is Lucid’s controlling shareholder with a 60% stake, Lucid has a much higher degree of financial security than most in its current financial position. PIF has invested $5.4 billion into Lucid over the past several years. At the current share price, PIF is significantly underwater on its investment.
- Distribution: Lucid operates a direct to consumer sales approach currently operates 38 Studios (Sales showrooms) and service centers in North America, 5 in Europe, and 2 in Saudi Arabia. In 2022, Lucid produced 2,811 more vehicles than they delivered, and in 2023, the number was 2,427. The excess production vs. deliveries over the past two years now amounts to 85% of the actual cars delivered in 2023. How this excess stock is being managed was not covered in the earnings report.
