Luxury EV maker Lucid appears to have a demand problem

Luxury electrical conveyance shaper Lucid appears to person a request problem.

The institution said during its fourth-quarter net report connected Wednesday that it had "over 28,000" reservations for its Air sedan arsenic of Feb. 21. That was a surprise, fixed that the institution had claimed "over 34,000" reservations successful November and delivered fewer than 2,000 vehicles successful the 4th quarter.

Even much surprising: Lucid said it plans to physique conscionable 10,000 to 14,000 vehicles successful 2023, acold less than the astir 27,000 Wall Street analysts had expected — and than the astir 34,000 vehicles per twelvemonth that Lucid's mill is acceptable up to build.

Shares of the institution person sold disconnected astir 17% since the Wednesday report.

Lucid faced a unsmooth roadworthy getting the Air into production. The institution spent overmuch of the archetypal fractional of 2022 scrambling to unafraid cardinal components and untangling logistics snags. Now, with accumulation moving much oregon little smoothly, it seems to beryllium facing a caller problem: not capable of those reservations are converting to orders.

CEO Peter Rawlinson acknowledged arsenic overmuch during the net telephone erstwhile helium reminded listeners that reservations aren't binding.

"We've solved production. That is not the gating contented present now," Rawlinson said. "My absorption is connected sales. And here's the thing. We've got what I judge to beryllium the precise champion merchandise successful the world. ... Too fewer radical are alert of not conscionable the car, but adjacent the company."

Rawlinson went connected to accidental that helium believes that to beryllium an "entirely solvable problem" and plans to absorption connected "amplifying lawsuit awareness" successful 2023.

More selling mightiness help. But intelligibly request for Lucid's vehicles isn't materializing arsenic rapidly arsenic the institution expected, which raises immoderate pugnacious questions for investors.

First, however large is Lucid's imaginable market? Any estimation of however overmuch Lucid could turn has to commencement with an estimation of the "total addressable market," and it appears the company's estimates connected that beforehand whitethorn person been excessively rosy, fixed that its mill is acceptable up to nutrient galore much vehicles than it's gathering now.

Running an car mill good beneath capableness isn't precisely a way to profitability, arsenic CFO Sherry House conceded during Lucid's net call.

"As we nutrient vehicles astatine debased volumes connected accumulation lines designed for higher volumes, we person and we volition proceed to acquisition antagonistic gross nett related to labour and overhead costs," House said.

That leads to a second, related question: How agelong volition Lucid person to tally its mill astatine a loss? Or enactment different way, however agelong volition it instrumentality Lucid to get to profitability – and however overmuch wealth volition it person to rise betwixt present and then?

Bank of America expert John Murphy has agelong been bullish connected Lucid, but successful a enactment to investors pursuing Lucid's net report, helium chopped the bank's standing connected the banal to hold, from buy. Murphy wrote that helium present thinks Lucid won't interruption adjacent earlier 2027, and that the institution volition request to rise much superior sooner than helium had antecedently expected.

The bully quality is that Lucid has a deep-pocketed investor: Saudi Arabia's Public Investment Fund owns astir 62% of Lucid, and has shown – astir precocious successful December, erstwhile it invested an further $915 million – that it's inactive consenting to money the company. As agelong arsenic it has the Saudi fund's backing, Lucid should beryllium capable to support going.

But the roadworthy to profitability – and to a large payday for Lucid's investors – is present looking longer.