Will Ebiefung, The Motley Fool
4 min read
There are no guarantees in the investment world. If you bet on the wrong company at the wrong time, be prepared to potentially lose boatloads of money. Lucid Group‘s (NASDAQ: LCID) early backers learned this lesson well. Shares in the electric vehicle start-up are down by a blistering 99% from the all-time high they reached in early 2021.
The biggest loser is probably the Saudi Arabian government, which controls over 60% of the company’s equity through its Public Investment Fund (PIF). But plenty of regular investors have also gotten burned. Let’s dig deeper to see if the situation can turn around over the next few years.
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The war in Iran might be an underacknowledged bullish factor for the electric vehicle industry. The conflict has virtually choked off the Strait of Hormuz, through which 20% of the world’s oil shipment volumes pass. Many top Middle Eastern energy producers have been caught in the crosshairs, sending oil futures up by a whopping 53% year to date.
Electric vehicles allow people to bypass oil prices by getting electricity from the grid, which is typically less volatile. There are signs that consumers are already changing their behavior. Data from New Automotive indicates that EV registrations surged 51% year over year across 15 countries in the European Union. In the U.S., online marketplace Autotrader reports a 28% jump in inquiries about EVs.
The situation also has substantial political ramifications as governments around the world realize the importance of reducing their reliance on imported oil. This trend could encourage them to support the industry.
Favorable macroeconomic conditions don’t matter much if a company can’t convert them to profits. Lucid’s fourth-quarter earnings were a mixed bag. The good news is that top-line figures were phenomenal. Revenue surged 123% year over year to $522.7 million amid a huge surge in deliveries driven by the company’s new midsize SUV, the Gravity.
Generally, SUVs are a much more popular vehicle type than luxury sedans in the U.S. The launch of the Gravity last year has quickly expanded Lucid’s addressable market. That said, with a starting MSRP of $79,900, the car is a little pricey. Over the next few years, management could boost growth by pivoting to lower-priced offerings such as the Lucid Earth, expected to start at $50,000 when it becomes available next year.
