Stocks to sell

Why Lucid Stock Is a Losing Bet

Many investors believe in the clean energy movement. Does this mean they should bet their hard-earned capital on electric vehicle (EV) manufacturer Lucid Group (NASDAQ:LCID)? Not necessarily, as Lucid isn’t likely to sell many vehicles in 2023. Consequently, LCID stock just doesn’t offer a favorable risk-to-reward profile.

Like other EV makers, Lucid Group has to compete with Tesla (NASDAQ:TSLA), a much bigger and more famous company. To differentiate itself, Lucid emphasizes that its vehicles are luxurious.

That strategy might have made more sense when the economy was booming. Sensible investors must be realistic, however, and consider whether Lucid Group can succeed during these challenging times.

What’s Happening With LCID Stock?

LCID stock lost a lot of its value in 2022, and the January 2023 rally is fading fast. If the Lucid Group share price stays under $10 for the remainder of March, this wouldn’t bode well for 2023 in general.

What’s causing the persistent share-price decline? Lucid Group’s main problem — besides the fact that the company is still unprofitable — is that it doesn’t have a stellar track record of EV sales. As it turns out, Lucid only delivered 4,369 EVs in 2022, or approximately 60% of the 7,180 vehicles that Lucid Group had produced.

And by the way, Lucid Group previously predicted that it would produce 20,000 EVs last year. So the actual result of 7,180 produced vehicles is a major disappointment. For this year, Lucid provided production guidance of 10,000 to 14,000 vehicles, even though analysts expected Lucid to aim for 21,000 vehicles in 2023. Thus, it’s fair to conclude that Lucid Group’s management doesn’t anticipate blockbuster vehicle sales.

It’s Not the Right Time to Focus on Luxury

In the company’s quarterly earnings press release, Lucid Group CEO Peter Rawlinson proudly proclaimed that the Lucid Air “has it all.” He touted its “industry-leading range, exceptional driving dynamics, and superior performance all wrapped up in a truly elegant design with a spacious interior cabin.”

Rawlinson can brag about the Lucid Air’s elegance, but will this translate to robust sales in 2023? Probably not, as this isn’t a great time to emphasize luxury when inflation-saddled consumers are seeking affordability.

Reportedly, the base-level Lucid Air Pure model starts at $87,400; opting for a dual-motor all-wheel drivetrain would add $5,500 to the price tag. Meanwhile, the Air Touring starts at $107,400, and the Grand Touring starts at $138,000. Then there’s the Grand Touring Performance, which would set you back $179,000.

None of these models qualify for $7,500 federal tax credits because they’re too expensive. As you may be aware, Lucid Group announced its own $7,500 “EV credit” on the purchase of select vehicle models. However, the company will end up paying for this, not the government.

Unfortunately, LCID Stock Is a Losing Bet

By setting high price points for its vehicles, Lucid Group failed to qualify for $7,500 federal tax credits. At the same time, some competing EV manufacturers are gladly taking advantage of these tax credits.

While the competitors offer some affordable vehicle options to automotive shoppers, Lucid Group is stubbornly over-focusing on luxury. It’s an ill-timed strategy when consumers are dealing with inflation and recession fears.

Hence, it’s hard to envision Lucid Group posting robust vehicle sales figures in the upcoming quarters. All in all, LCID stock is a losing bet and prospective investors should steer clear of it.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

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