Reframing investing in Lucid Apr 26' - it's 0-0

[DreamTour]

So you know the saying that in Football / Basketball etc that mindset should be: the 2nd half starts 0-0?

I've been playing with this framing. If you as an investor could get in now with Lucid at a $2.5B Valuation - that seems like a steal given that:

1. They've already delivered products to customers who will buy them
2. They've already established technical leadership and clear tech differentiator
3. They are entering a sizable sector with a large enough world TAM

Of course, value is based on your future beliefs, but in many ways, this is much "less risky" than other $2.5B valuation companies in terms of what they have to still prove (being about to scale is no small feat)

Don't get me wrong, I'm on paper underwater on my lucid investments more than I spent on my Lucid - so it's not likely I'm oblivious to the past history of execution challenges. But if you just looked at going forward - would you come up with the same assessment?

 

[Sid432]

If they don't iron out production/software problems like Air and Gravity, then I am not sure. On the other hand, which I am very optimistic, Cosmos will do that. However, they need to speed things up without compromising anything. It has to be 100% perfect.

 

[illopp00]

Well new CEO has pay milestones tied to market cap, one of them is 17B, so giving him some benefit of the doubt that he wants to get paid in a long-term compensation structure we at getting a 5x from here. He stepped in at a good time, better than Jassy after Bezos and making the stock do nothing for 5 years.

 

[DreamTour]

Clearly they need to execute on Cosmos. I guess what I am saying is: If a company should valued on what it will be and not what it was, entering at 2.5B valuation as a "bet" the new management can get it together having already established that they can design / engineer a differentiated product and there are buyers for it. (e.g. competitive enough to win a significant share of sales within its class of vehicle.)

If we think - What needs to be true for Lucid to be a viable company / the risks? Here's what I think.

1.) Launch mid size on time (to me this is mostly is the software reasonably ironed out)

Risk: Fool me 3 times, they don't get the software kinks worked out / don't prioritize enough testing time here and launch without it being done.

2.) Scale production

Risk: After 2 goes at it, they still don't figure out how to work out their supply chain / quality.

3.) Build a "reasonable" service experience. They don't need to be best in class, just not the worst

Risk: They still don't devote the effort to solve the operational problem.

--

In this light, Hiring someone like Silvio at this phase makes a ton of sense.

If you read between the lines of his early interview here's what I heard.

1.) We have to decide what not to do.

Translation: Science projects like the "Augmented Reality HUD" are cool, but if that distracts from executing software fundamentals it's not going to be prioritized. Imagine if the software resources that were put against HUD were put against making the keys work?

2.) Already have technical leadership, need to make it a sustainable business

Translation / implied from his background: The "Boring Stuff" needs to be tended to: I.e. supply chain, execution, service. Elevators are today about as boring as they get, but we take for granted that they work almost completely without fail.

3.) What he'll do first? Listen to customers... etc.

Translation: It's not build it and they will come (old model). It's understanding customer wants and serving them. Because customers pay the bills long term.

--

Everything above is to me "run of the mill" business school type execution. In my experience, it's much easier to find a competent business operator than to build something from nothing. Peter Rawlinson took Lucid through that first messy phase - he may be the wrong guy for the phase to come, but one can look at this and say - the hardest part is over.

Not to say that the challenges ahead are "easy" but I view them as entirely surmountable. The challenge ahead is "running a known business model" well at this point.

 

[gaskiller]

Clearly they need to execute on Cosmos. I guess what I am saying is: If a company should valued on what it will be and not what it was, entering at 2.5B valuation as a "bet" the new management can get it together having already established that they can design / engineer a differentiated product and there are buyers for it. (e.g. competitive enough to win a significant share of sales within its class of vehicle.)

If we think - What needs to be true for Lucid to be a viable company / the risks? Here's what I think.

1.) Launch mid size on time (to me this is mostly is the software reasonably ironed out)

Risk: Fool me 3 times, they don't get the software kinks worked out / don't prioritize enough testing time here and launch without it being done.

2.) Scale production

Risk: After 2 goes at it, they still don't figure out how to work out their supply chain / quality.

3.) Build a "reasonable" service experience. They don't need to be best in class, just not the worst

Risk: They still don't devote the effort to solve the operational problem.

--

In this light, Hiring someone like Silvio at this phase makes a ton of sense.

If you read between the lines of his early interview here's what I heard.

1.) We have to decide what not to do.

Translation: Science projects like the "Augmented Reality HUD" are cool, but if that distracts from executing software fundamentals it's not going to be prioritized. Imagine if the software resources that were put against HUD were put against making the keys work?

2.) Already have technical leadership, need to make it a sustainable business

Translation / implied from his background: The "Boring Stuff" needs to be tended to: I.e. supply chain, execution, service. Elevators are today about as boring as they get, but we take for granted that they work almost completely without fail.

3.) What he'll do first? Listen to customers... etc.

Translation: It's not build it and they will come (old model). It's understanding customer wants and serving them. Because customers pay the bills long term.

--

Everything above is to me "run of the mill" business school type execution. In my experience, it's much easier to find a competent business operator than to build something from nothing. Peter Rawlinson took Lucid through that first messy phase - he may be the wrong guy for the phase to come, but one can look at this and say - the hardest part is over.

Not to say that the challenges ahead are "easy" but I view them as entirely surmountable. The challenge ahead is "running a known business model" well at this point.

Agree

Now it’s all about sales/ service/ supply chain as they get the Cosmos ready. They know if get burned again with software, they will all be without jobs.

No need to rush Cosmos, but they should speed up validation in case a last minute hiccup occurs. Be ready for production in Q4. And no monkey business like the dozen gravities they “ sold” in 2024, right Rawlinson?

 

[illopp00]

Agree

Now it’s all about sales/ service/ supply chain as they get the Cosmos ready. They know if get burned again with software, they will all be without jobs.

No need to rush Cosmos, but they should speed up validation in case a last minute hiccup occurs. Be ready for production in Q4. And no monkey business like the dozen gravities they “ sold” in 2024, right Rawlinson?

I will gladly take a prototypy Cosmos and try to break it for them to help validate and test

 

[socktucker]

The problem is their “clear differentiatior” is…what? Some efficiency engineering that most consumers don’t care about?

I think they made a car that appealed to a very narrow set of customers, and those customers now have the car they wanted.

I think Lucid knows this too, hence the Cosmos having three variants targeted at a much wider audience that the Air and Gravity. I feel like they are now in the spot where “if” they survive the Air and Gravity launch, they can capitalize on the Cosmos. The problem is they are not 0-0, they are 0-2. They have probably learned their lesson, but they need the capital and process to scale. Today, they still can’t produce a reliable key fob or fix their software. Their service network is not enough to even support their current vehicles.

They need to move fast and smart and also hope the economy doesn’t implode. The upside is that their stock is now so cheap that you won’t lose much buying it, and if it does take off you could do well.

 

[Dolphins4ever]

25Q4 production and revs were about half of rivian, but valuation is 1/10th. Rivian has garnered way more lucrative partnerships and had less snafus than Lucid’s (my perception, so it could be wrong). Ramp gravity and get midsize unveiled and in production, truly ready for public use and this gap should close over this year and into 27.

 

[nashvillelucid]

The problem is their “clear differentiatior” is…what? Some efficiency engineering that most consumers don’t care about?

I think they made a car that appealed to a very narrow set of customers, and those customers now have the car they wanted.

I think Lucid knows this too, hence the Cosmos having three variants targeted at a much wider audience that the Air and Gravity. I feel like they are now in the spot where “if” they survive the Air and Gravity launch, they can capitalize on the Cosmos. The problem is they are not 0-0, they are 0-2. They have probably learned their lesson, but they need the capital and process to scale. Today, they still can’t produce a reliable key fob or fix their software. Their service network is not enough to even support their current vehicles.

They need to move fast and smart and also hope the economy doesn’t implode. The upside is that their stock is now so cheap that you won’t lose much buying it, and if it does take off you could do well.

The market for the Gravity is still pretty wide. My neighborhood is filled with minivans people bought to haul the kids around for $55k. Getting those people to upgrade to a $70k nicer car that’s electric is pretty doable.

Mid size is a big market, but they don’t have the capacity to service a big market. The company would literally die if the had to deal with gravity or air scale issues on a larger scale. The mid size is a nice dream, but I expect this quarter to be a “baby with the bathwater” report where they delay the mid size release for very good reasons.s

 

[DreamTour]

The problem is their “clear differentiatior” is…what? Some efficiency engineering that most consumers don’t care about?

I think they made a car that appealed to a very narrow set of customers, and those customers now have the car they wanted.

I think Lucid knows this too, hence the Cosmos having three variants targeted at a much wider audience that the Air and Gravity. I feel like they are now in the spot where “if” they survive the Air and Gravity launch, they can capitalize on the Cosmos. The problem is they are not 0-0, then are 0-2. They have probably landed their lesson, but they need the capital and process the scale. Today, they still can’t produce a reliable key fob or fix their software. Their service network is not enough to even support their current vehicles.

They need to move fast and smart and also hope the economy doesn’t implode. The upside is that their stock is now so cheap that you won’t lose much buying it, and if it does take off you could do well.

If you buy the story - which seems reasonably grounded in facts.

They have the tech to produce EVs with high utility with a lower BOM than competitors.

The differentiation to me is the same as the original vision - packaging. Smaller form factor + more usable capacity inside class leading EV ranges / charging.

You can argue that "Performance is something the masses don't care about". - ok sure - let's say only gear heads care about it. Can it beat a Model Y's performance? I believe so, so it checks that box as better than the alternative.

You can argue that efficiency is something the masses don't care about - ok sure I can buy that, but I'm sure cost is, and efficiency leads to more competitive costs in smaller batteries. And pound for pound, Lucid's batteries are smaller for the same level of utility. Gravity's equivalent utility needs a LOT more batteries.

The fact that they have not yet sold a model that is accessible to the masses / take advantage of these differentiators can be debated from a product launch perspective. But they have the bones to build something different.

 

[gaskiller]

The market for the Gravity is still pretty wide. My neighborhood is filled with minivans people bought to haul the kids around for $55k. Getting those people to upgrade to a $70k nicer car that’s electric is pretty doable.

Mid size is a big market, but they don’t have the capacity to service a big market. The company would literally die if the had to deal with gravity or air scale issues on a larger scale. The mid size is a nice dream, but I expect this quarter to be a “baby with the bathwater” report where they delay the mid size release for very good reasons.s

You would think they would announce massive increase in service centers on prep for midsize

 

[illopp00]

I mean realistically all cars are getting bigger and bigger and more bloated. My house and single family car garages, parking spaces are NOT. The Gravity IS the only legit 3-row I can actually fit in my garage with another car and my other stuff. The packaging of exterior being small and sleek with a huge interior is very desirable across any customer market.

 

[socktucker]

The market for the Gravity is still pretty wide. My neighborhood is filled with minivans people bought to haul the kids around for $55k. Getting those people to upgrade to a $70k nicer car that’s electric is pretty doable.

Mid size is a big market, but they don’t have the capacity to service a big market. The company would literally die if the had to deal with gravity or air scale issues on a larger scale. The mid size is a nice dream, but I expect this quarter to be a “baby with the bathwater” report where they delay the mid size release for very good reasons.s

This is a very reasonable take I think.

 

[illopp00]

You would think they would announce massive increase in service centers on prep for midsize

They might have to go against the grain of current automotive and enable a 3rd party partner who can attract EV techs to do the work and actually make cars that are easy to fix and replace components. Lucid doesn't make any money on service right now anyways, what is the benefit of even building it other than to currently 'poorly' control that experience?

 

[sri]

What happened now, another 5% drop. Is Lucid planning to get to 6’s now?

 

[socktucker]

What happened now, another 5% drop. Is Lucid planning to get to 6’s now?

5% on way or the other doesn’t matter when the stock is $7

 

[DreamTour]

What happened now, another 5% drop. Is Lucid planning to get to 6’s now?

Trading, not investing going on. Basically Lucid makes it or it doesn't. Everything else now is noise.

Maybe the additional shares hit the market and got loaned out to short?

 

[DreamTour]

You would think they would announce massive increase in service centers on prep for midsize

Maybe Silvio has something else in mind for service model, but can't implement anything until he's in. At the very minimum, he needs to win over Lucid's employees first - and even if he know what he wants to do: There's going to be the first 30 days "listening tour" to make sure everyone feels heard and buys into the new vision.

I'm going to guess that they were talking to Silvio about a year ago after Rawlinson was out and that they've already got a new playbook they want to install. They didn't just "find Silvio" last week. The last year was wrapping things up gracefully as he changed roles.

 

[gaskiller]

They might have to go against the grain of current automotive and enable a 3rd party partner who can attract EV techs to do the work and actually make cars that are easy to fix and replace components. Lucid doesn't make any money on service right now anyways, what is the benefit of even building it other than to currently 'poorly' control that experience?

That is actually a very good idea! Good one to start with would be Carmax….they are struggling right now. Why not go into some sort of partnership for servicing and even for trade ins? Who cares if Carmax doesn’t give you a luxury vibe, it’s not like Lucid are killing it in their service department. Most people just want efficient service, not champagne

 

[DreamTour]

That is actually a very good idea! Good one to start with would be Carmax….they are struggling right now. Why not go into some sort of partnership for servicing and even for trade ins? Who cares if Carmax doesn’t give you a luxury vibe, it’s not like Lucid are killing it in their service department. Most people just want efficient service, not champagne

I want champagne