Can Lucid Win While Tesla Loses?

Despite a sharp drop in sales in the United States, Tesla Inc. (NASDAQ: TSLA | TSLA Price Prediction) still has about 43% of the U.S. electric vehicle (EV) market. The next closest companies in terms of EV market share are Ford, GM, and Hyundai/Kia, but they have billions of dollars in legacy gasoline engine manufacturing costs. Two small EV companies in the US hope to take share from Tesla. In the car business, the sedan competitor is Lucid Group Inc. (NASDAQ: LCID). Tesla’s trouble may be the only chance to get a foot in the door. (The other small company is Rivian.)

Lucid says it is already “capturing” Tesla customers, although that is hard for outsiders to prove. Interim CEO Marc Winterhoff said, “We see a clear uptick of interest in Lucid from Tesla buyers because they’re looking for another option.” However, Lucid needs to solve two problems if this is to be of substance.

First, Lucid makes expensive cars during a period when the theory is that EV adoption will happen when MSRP drops below $25,000. Lucids are, by any measure, at the high end of the U.S. car price range. The base model Air Pure starts at $67,000, and the Grand Pure price starts at $111,000. At those levels, it competes with EV models from BMW, Mercedes, Audi, and Lexus. Each of these has dealer networks and vast marketing budgets. (Lucid does have an advantage, which is that most of its manufacturing is in the United States, which means it only has modest tariff problems.)

Lucid’s other problem is survival. To start, its sales are minuscule. It produced 2,212 cars in the first quarter and delivered 3,109. In the most recently reported quarter, Lucid had revenue of $243 million and a loss from operations of $733,000. It is extremely exposed to any downturn in the economy. (This raises the related problem of who will repair Lucid vehicles if the company disappears.)

Lucid does have financial support from an investment arm of the Saudi Arabian government. However, even that patience could be tested if Lucid’s results do not improve.

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