The Impact of the Top 3 Strategic Imperatives on Lucid Motors

Internal Challenges

Why:

• Rising raw material, sourcing, logistics, and manufacturing-related operational costs are affecting Lucid's pricing strategies and efforts to scale up vehicle production capabilities, contributing to adverse profit margins for the company.

Frost Perspective:

• In the next 1-3 years, Lucid should prioritize cost-cutting initiatives in manufacturing and materials sourcing to build a tangible and sustainable business model for the future.
• The company must strategically acquire existing businesses or leverage shared manufacturing facilities in multiple key locations to reduce material sourcing, lead times, and export costs.

Industry Convergence

Why:

• Industry convergence or collaborations should be prioritized to capitalize on Lucid's technological strengths and deploy new business models.
• It is also critical to forge partnerships with other OEMs and automotive tech companies to gain capabilities in car building and strengthen itself as an EV automaker.

Frost Perspective:

• Digital-powered ecosystems can help Lucid expand its revenue streams by introducing new business models that allow it to build stronger end-user relationships.
• Lucid is already in the process of bringing its technology platform to the market ecosystem and plans to leverage in-house expertise in battery pack design to produce stationary energy storage system (ESS) solutions for residential and commercial applications.

Competitive Intensity

Why:

• The EV market is becoming increasingly competitive with a wide range of options, such as pickups, sedans, SUVs, lifestyle vehicles, and multi-utility vehicles at different price points, catering to multiple consumer needs.

Frost Perspective:

• Lucid must rethink its vehicle design strategies and develop a broad portfolio to cater to a larger audience to establish its position in the competitive market.
• Lucid should also prioritize lowering its pricing strategies to sustain the Tesla price war and increase consumer demand for its vehicles.

Scope of Analysis

• This study investigates Lucid’s journey as an EV automaker, its management, and key investors; it also offers a funding and partner analysis.
• The study explores Lucid’s key business models, revenue streams, technology and growth partnerships, and key regions of operation, such as the United States, Europe, Saudi Arabia, and China.
• The study examines Lucid’s product portfolio, connected features, and autonomous platform capabilities; it also provides a vehicle specification and comparative pricing analysis as well as a detailed specification of the company’s EV platform.
• The study offers an in-depth analysis of Lucid’s financials, production and delivery numbers, geographic expansion plans, and plans to overcome challenges.
• The study also analyzes potential opportunities to achieve growth. For revenue, stock, and financial analysis, data points from 2020 and 2021 are included.

Growth Drivers

Strong Technological Know-how

Lucid’s experience as a battery manufacturer and its technological know-how in power train, charging technology, and battery packs are key growth drivers for the company, allowing it to establish itself in the competitive EV market.

Financial Backing

Lucid receives most of its financial support from the Saudi Arabian Public Investment Fund (PIF), enabling it to accelerate R&D efforts, increase production capabilities, and support geographic expansion initiatives.

Upcoming Product Launches

Lucid aims to release a 7-seater SUV in 2025, followed by mid-sized EV cars in 2026. These launches are expected to strengthen the company’s position in the EV market.

Expansion into Saudi Arabia

The recent opening of a vehicle assembly/manufacturing facility in Saudi Arabia will boost the company’s production and address the growing demand in Saudi Arabia and the Middle East.

Growth Restraints

Manufacturing Complexities

Vehicles are more complex to design and manufacture than electronic components, and start-ups, such as Lucid, lack this experience.

Aftersales Support

Though Lucid offers a direct-to-consumer sales approach, it does not have an established value chain for aftersales assistance (servicing, parts replacement), which customers consider an important decision-making criterion for vehicle purchase.

Tough Competition

Lucid's portfolio includes only sedans, while companies such as Volkswagen, Ford, and Tesla are investing heavily in electrification strategies and expanding their EV portfolios, which could hinder market demand and threaten Lucid in the EV market.

Expensive Vehicle Portfolio

Lucid's vehicles are priced between $77,000 and $250,000, which is more expensive than competing offerings. Targeting only the high-end luxury sedan segment is not enough to sustain in a highly competitive EV market.

Lack of Automotive Design Experience

New entrants in the mobility space do not have prior experience in vehicle design, assembly, and testing; hence, start-ups, such as Lucid, have to spend more time on vehicle development, prototyping, and testing, which could be expensive and time-consuming.

Key Findings

1 At present, Lucid’s product portfolio includes Air, an electric sedan designed to compete with Tesla’s Model S and other high-end electric sedans from German automakers in terms of comfort, speed, miles driven, and engine performance. Lucid’s roadmap includes Gravity, a 7-seater SUV, which is expected to be on the road by 2025.

2 Lucid’s expertise in developing battery packs, power train components, and chargers and its design innovation related to EV technology have facilitated the initiation of EV production. Currently, the company holds 179 US patents and 203 foreign patents in EV technology.

3 The Saudi Arabian PIF is Lucid’s financial backbone, accounting for about a 60% stake in the company and investing about $5.4 billion in it until 2023. Saudi Arabia is in the EV transition phase, led by initiatives such as Saudi Vision 2030 and Saudi Green Initiative, leading to significant investment in EV start-ups such as Lucid.

4 The United States is Lucid’s primary market. It is also present in Europe (Germany, the Netherlands, Switzerland, and Norway) and Canada, but it sells only a limited number of vehicles in these regions. Currently, the company is assessing local production plans and entry strategy into the highly competitive Chinese market, but the timeline is not known.

5 In 2023, Lucid’s stock prices hit an all-time low due to poor demand, low delivery numbers, and unmet production targets over the last 2 years, disappointing investors. Losing CFO Sherry House and the Nasdaq 100 removal in December 2023 further weakened the company’s standing with investors.

6 While Lucid’s Air boasts power and luxury, it comes with a high price tag of $77,400-$249,000. Though the company slashed prices in mid-2023 to sustain Tesla’s competitive price cuts, its vehicle models were unable to generate demand in 2023. A total of 6,001 Lucid vehicles were delivered in 2023.

7 With Lucid’s vehicle business struggling to combat ongoing operational losses, the company intends to boost revenue by licensing its technology to multiple OEMs in the upcoming years. Its recent partnership with Aston Martin is testament to its efforts to diversify business and revenue.