Lucid Motors (NYSE: LCID) released its Q2 earnings after the close of markets yesterday. The stock is trading higher in US premarkets today despite the company missing Q2 revenue estimates.
Lucid Motors posted revenues of $150.9 million in the quarter which was significantly below the $175 million that analysts expected. The company’s net loss however widened to $764.2 million as compared to $555.3 million in the corresponding quarter last year.
The company delivered a mere 1,404 cars in the second quarter which was lower than the 2,000 that analysts expected.
Rawlinson said Lucid is making progress in marketing
In the past, Lucid Motors’ CEO Peter Rawlinson rued the fact that while the company has a compelling product, it hasn’t been able to market its cars well which has hurt its sales.
During the Q2 earnings call, Rawlinson said, “We saw another strong increase in the number of test drives sequentially through Q2, and the third-party data shows that our brand awareness in the luxury and premium segment is growing to a much stronger place. And as our fleet size grows, so does the number of Lucid Air sightings.”
He added, “We believe that there is a marketing and demand benefit when we achieve a critical mass of vehicles on the road, and we’re making headway here.”
Rawlinson also emphasized that the Lucid Air sedan was ranked the best luxury electric car by MotorTrend.
The company also touted its partnership with luxury carmaker Aston Martin and its CFO Sherry House said during the Q2 earnings call that “Aston Martin will pay Lucid a technology access fee of $232 million, comprising $100 million in ordinary shares of Aston Martin and aggregate cash payments of $132 million phased over a period of 3 years, with the ordinary shares and $33 million of the cash payable to Lucid following deal closing, which is expected later this year.”
She added, “Aston Martin will also commit to an effective minimum spend with Lucid on powertrain components of $225 million in addition to engineering integration fees.”
Lucid Motors is considering a referral scheme
In order to boost sales, Lucid is also considering a referral program. The company is also delivering cars to Saudi Arabia now and Rawlinson said that in September it is planning the opening ceremony for its plant in Saudi Arabia.
Notably, Saudi Arabia’s PIF (public investment trust) is Lucid Motors’ biggest stockholder and invested another $1.8 billion in the company in its recent $3 billion capital raise. Saudi Arabia has also placed an order for upto 100,000 cars with Lucid Motors. During the earnings call, Lucid said that it has signed an agreement with Saudi Arabia for a commitment to buy 50,000 cars with an option to purchase another 50,000 cars.
Separately, the company also announced a massive price cut and reverted back to the price levels that it announced in March 2022.
Talking of the price adjustment, House said, “The early reception has been very strong with a 3x increase in orders in the first full day of the program as compared to the end of July. The return on investment that we’re now seeing gives us more confidence in the next steps of our plan to further improve brand awareness and importantly, conversion.”
EV price war
The EV price war which Tesla initiated has worsened and even Ford lowered the price of its F-150 Lightning by as much as $10,000. However, during the Q2 earnings call the company said that despite the price cut, the model’s prices are above what they were at the time of the launch.
It said, “While EV adoption is still growing, the paradigm has shifted. EV price premiums over internal combustion vehicles fell more than $3,000 in the second quarter and nearly $5,000 in first half. We expect the EV market to remain volatile until the winners and losers shake out.”
Alluding to the EV price war, Ford said, “Contribution margin and EBIT margin were both negative with pricing and volume pressures intensified, and that’s impacting all OEMs. Given the rapid and dynamic gain on the pricing environment, we no longer expect to see contribution margin breakeven for our Gen 1 products this year.”
LCID maintained its 2023 production guidance
Lucid Motors maintained its 2023 production guidance and still expects to produce over 10,000 vehicles in the year. It added that deliveries would rise gradually during the year and it expects the fourth quarter to be its largest.
The company has a total liquidity of $6.25 billion after the $3 billion equity raise and expects the cash to fund its operations until 2025.
EV startups face the heat
Almost all the startup EV companies including Lucid Motors have failed to live upto the hype. Looking at other EV names, Lordstown Motors has filed for bankruptcy after Foxconn walked out from the funding deal. Arrival too flagged bankruptcy risks before it went for a second SPAC merger which gave it a second life of sorts.
Rivian’s market cap is now a fraction of what it was at the peak. Nikola too has received a delisting notice from Nasdaq for failing to comply with the minimum listing conditions.
After the initial hype, EV companies are now facing demand headwinds. Notably, Lucid Motors as well as Rivian have stopped providing reservation numbers in a sign that the demand is probably not as strong. Incidentally, Lucid reported a fall in reservation numbers for two quarters before it announced that it won’t provide the metric going forward.
During the Q2 earnings call also Lucid reiterated that “production is not our bottleneck but we’re being prudent in managing vehicle inventory.”
Meanwhile, despite the topline miss, LCID stock is trading higher in US premarkets today as the company reassured markets by maintaining its 2023 guidance and the commentary on deliveries to Saudi Arabia.
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