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HomeMarketLucid’s EV Discounts Are a Bad Omen for Demand

Lucid’s EV Discounts Are a Bad Omen for Demand

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Lucid Group
stock has skidded 37% in the month since the electric-car maker said that its order backlog shrank in the September quarter. So investors will be laser-focused on whether Lucid’s order book shrinks again in the current quarter. 

At a recent stock price of $8.70, investors value Lucid (ticker: LCID) at $16.5 billion, including $2 billion in debt. Analysts surveyed by VisibleAlpha.com estimate that the company is likely to burn through $3.4 billion cash while producing its goal of 7,000 cars this year.

Lucid reported a September backlog of 34,000 orders, down from 37,000 in June. After satisfying fewer than 4,000 of those orders through the end of September, Lucid is offering large discounts on its $150,000 sedan—to its employees and to customers who abandoned their orders as far back as the spring. Fourteen completed cars were offered by the company on its website this week, with subsidized financing terms.

The used-car market is another barometer of demand. Buyers are so eager to get their hands on the electric pickups from
Rivian Automotive
(RIVN)—where orders rose sequentially from 98,000 to 144,000 in September—that a used Rivian sells at a premium to list price. The opposite is true for Lucid: Barely used cars are selling at discounts to list price.

Lucid spokeswoman Nat Lingo said the company won’t comment on demand, outside of its earnings calls. On the last call of Nov. 8, Chief Financial Officer Sherry House said Lucid’s 34,000 orders showed “strong demand.”

Some car shoppers received invitations from Lucid to revive orders they had let lapse. The company also offered a 10% discount.

“We would like to offer an opportunity to reinstate your order for a Lucid Air Grand Touring at your original legacy price of $139,000. Lucid Air GT are now starting at $154,000,” said an email viewed by Barron’s. “Depending on your configuration, you could expect to have a vehicle in the next few weeks.”

Lucid’s Lingo confirmed that the offer went out to customers who hadn’t converted their reservations into firm orders. “[S]ome customers who just missed the deadline and told us they regretted it were reinvited to purchase,” she said.

On Dec. 1, Business Insider reported that Lucid was offering $18,000 discounts to employees who took delivery of the luxury car before December’s end. The announcement to employees said the discount will be credited to employee paychecks at the rate of $1,000 a month.

“We have always wanted to find the right time to help reward our employees who were interested in driving a Lucid Air every day,” Lingo told Barron’s. “With our recent ramp up, we have been able to honor this request from our team.”

A few weeks ago, the company began to display fully configured cars “ready to deliver” on its website. There were 14 shown on Dec. 5. With thousands of units on back-order, immediate availability seems like a good deal. Lucid will finance the purchase at a 2.81% annual rate for 72 months. Rates for a car loan these days exceed 7% for borrowers with good credit scores—so Lucid’s lower rate is like a $15,000 discount on the $154,000 car.

“We offer customers the ability to custom configure Lucid Air online or select ‘available now’ with ready to deliver inventory configured with our customers’ favorite options,” Lingo said. “These selections are ideal for those who are ready to realize the dream of driving Lucid Air right now.”

Another good estimator of demand is the used car market. My colleague Al Root reports that the average asking price for a used Rivian on Cars.com is 132% of new-car pricing. The asking price for a used Lucid is 92% of list price.

Those are asking prices. Actual transactions reported on auction sites for near-new Lucids have sunk below $125,000. A recent example: A 2022 Lucid Air Grand Touring model with 477 miles was auctioned online Dec. 1 at Bring A Trailer. It sold for $118,000, or 16% below the original list price. Lucid wouldn’t comment on used-car prices.

Lucid has worked hard to scale-up production at its Casa Grande, Ariz., factory. Online postings by owners show that many are delighted with the car’s leading-edge design, while others report software and electronics glitches. Now the company is placing ads on CNBC and Instagram. EV leader
Tesla
(TSLA) hasn’t run ads for its vehicles.

In its last earnings release, Lucid estimated that its backlog of 34,000 cars could lead to more than sales of $3.2 billion. The next few earnings releases will allow investors to better estimate how much of that backlog will become revenue.

Write to Bill Alpert at william.alpert@barrons.com

Credit: marketwatch.com

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